-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VLuv4pBSjN3B7lJ2HuB0xvLsROPzuBJeIyDXpJ94zrri66B0f4lndNa+FHXozzBv VWPS56RjHsOcGmqG+yVvtA== 0000904280-02-000159.txt : 20020515 0000904280-02-000159.hdr.sgml : 20020515 20020515160427 ACCESSION NUMBER: 0000904280-02-000159 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLONDER TONGUE LABORATORIES INC CENTRAL INDEX KEY: 0001000683 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 521611421 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14120 FILM NUMBER: 02652302 BUSINESS ADDRESS: STREET 1: ONE JAKE BROWN RD STREET 2: PO BOX 1000 CITY: OLD BRIDGE STATE: NJ ZIP: 08857 BUSINESS PHONE: 9086794000 MAIL ADDRESS: STREET 1: ONE JAKE BROWN ROAD CITY: OLD BRIDGE STATE: NJ ZIP: 08857 10-Q 1 blonder10q03312002.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _____________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002, OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________. COMMISSION FILE NUMBER 1-14120 BLONDER TONGUE LABORATORIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 52-1611421 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) ONE JAKE BROWN ROAD, OLD BRIDGE, NEW JERSEY 08857 - ------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (732) 679-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of shares of common stock, par value $.001, outstanding as of May 11, 2002: 7,613,331 BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
March 31, December 31, 2002 2001 -------------- --------------- (unaudited) ASSETS (NOTE 4) Current assets: Cash............................................................... $ 393 $ 942 Accounts receivable, net of allowance for doubtful accounts of $1,923 and $1,833, respectively........................ 6,249 8,564 Inventories, net (Note 3).......................................... 30,214 30,216 Other current assets .............................................. 716 932 Deferred income taxes.............................................. 1,779 1,746 -------------- --------------- Total current assets........................................... 39,351 42,400 Property, plant and equipment, net of accumulated depreciation and amortization....................................... 6,842 7,137 Patents, net............................................................ 3,347 3,454 Goodwill, net........................................................... - 10,760 Other assets............................................................ 763 585 Deferred income taxes................................................... 4,006 50 -------------- --------------- $54,309 $64,386 ============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt (Note 4)......................... $ 2,691 $ 2,917 Accounts payable................................................... 5,285 6,672 Accrued compensation............................................... 898 867 Accrued benefit liability.......................................... 270 270 Other accrued expenses............................................. 124 218 Income taxes....................................................... 427 202 -------------- --------------- Total current liabilities...................................... 9,695 11,146 -------------- --------------- Long-term debt (Note 4)................................................. 11,355 13,278 Commitments and contingencies........................................... - - Stockholders' equity: Preferred stock, $.001 par value; authorized 5,000 shares; no shares outstanding ............................................. - - Common stock, $.001 par value; authorized 25,000 shares, 8,444 shares issued 8 8 Paid-in capital.................................................... 24,143 24,143 Retained earnings.................................................. 15,745 22,448 Accumulated other comprehensive loss............................... (351) (351) Treasury stock at cost, 831 shares................................. (6,286) (6,286) -------------- --------------- Total stockholders' equity..................................... 33,259 39,962 -------------- --------------- $54,309 $64,386 ============== ===============
See accompanying notes to consolidated financial statements. 2 BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Three Months Ended March 31, -------------------------------------- 2002 2001 ---------------- ---------------- Net sales....................................................... $10,890 $10,745 Cost of goods sold.............................................. 7,574 7,099 ---------------- ---------------- Gross profit................................................ 3,316 3,646 ---------------- ---------------- Operating expenses: Selling..................................................... 1,118 1,461 General and administrative.................................. 1,197 1,563 Research and development.................................... 497 529 ---------------- ---------------- 2,812 3,553 ---------------- ---------------- Earnings from operations........................................ 504 93 ---------------- ---------------- Other expense: Interest expense............................................ (211) (404) ---------------- ---------------- (211) (404) ---------------- ---------------- Earnings (loss) before income taxes............................. 293 (311) Provision (benefit) for income taxes............................ 110 (104) ---------------- ---------------- Earnings (loss) before cumulative effect........................ 183 (207) Cumulative effect of change in accounting principle, net of tax (Note 2) ............................ 6,886 - ---------------- ---------------- Net loss ....................................................... $(6,703) $ (207) ================ ================ Basic earnings (loss) per share before cumulative effect........ $ 0.02 $ (0.03) Cumulative effect of change in accounting principle, net of tax ................................................ (0.90) - ---------------- ---------------- Basic loss per share............................................ $ (0.88) $ (0.03) ================ ================ Basic weighted average shares outstanding....................... 7,613 7,613 ================ ================ Diluted earnings (loss) per share before cumulative effect...... $ 0.02 $ (0.03) Cumulative effect of change in accounting principle, net of tax ................................................ (0.90) - ---------------- ---------------- Diluted loss per share.......................................... $ (0.88) $ (0.03) ================ ================ Diluted weighted average shares outstanding..................... 7,650 7,625 ================ ================
See accompanying notes to consolidated financial statements. 3 BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Three Months Ended March 31, ------------------------------------- 2002 2001 --------------- ---------------- Cash Flows From Operating Activities: Net loss...................................................... $ (6,703) $ (207) Adjustments to reconcile net earnings to cash provided by (used in) operating activities: Cumulative effect........................................... 6,886 - Depreciation................................................ 324 357 Amortization................................................ 107 411 Provision for doubtful accounts............................. 90 90 Deferred income taxes....................................... (115) 108 Changes in operating assets and liabilities: Accounts receivable....................................... 2,225 934 Inventories............................................... 2 (986) Other current assets...................................... 216 1,847 Other assets.............................................. (178) - Income taxes.............................................. 225 (830) Accounts payable and accrued expenses..................... (1,450) (2,069) --------------- ---------------- Net cash provided by (used in) operating activities..... 1,629 (345) --------------- ---------------- Cash Flows From Investing Activities: Capital expenditures.......................................... (29) (80) --------------- ---------------- Net cash used in investing activities................... (29) (80) Cash Flows From Financing Activities: Net borrowings under revolving line of credit................. - 1,300 Borrowings of long-term debt.................................. 14,954 - Repayments of long-term debt.................................. (17,103) (1,081) --------------- ---------------- Net cash provided by (used in) financing activities..... (2,149) 219 --------------- ---------------- Net increase (decrease) in cash.................................... (549) (206) Cash, beginning of period.......................................... 942 363 --------------- ---------------- Cash, end of period................................................ $ 393 $ 157 =============== ================ Supplemental Cash Flow Information: Cash paid for interest........................................ $ 243 $ 408 Cash paid for income taxes.................................... - 618 =============== ================
See accompanying notes to consolidated financial statements. 4 BLONDER TONGUE LABORATORIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (UNAUDITED) NOTE 1 - COMPANY AND BASIS OF PRESENTATION Blonder Tongue Laboratories, Inc. (the "COMPANY") is a designer, manufacturer and supplier of electronics and systems equipment for the cable television industry, primarily throughout the United States. The consolidated financial statements include the accounts of Blonder Tongue Laboratories, Inc. and subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. The results for the first quarter of 2002 are not necessarily indicative of the results to be expected for the full fiscal year and have not been audited. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair statement of the results of operations for the period presented and the consolidated balance sheet at March 31, 2002. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the SEC rules and regulations. These financial statements should be read in conjunction with the financial statements and notes thereto that were included in the Company's latest annual report on Form 10-K for the year ended December 31, 2001. NOTE 2 - EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("FAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." FAS 133 was adopted by the Company on January 1, 2001. FAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of the hedge transaction and the type of hedge transaction. At March 31, 2002 the Company did not have any derivative financial instruments. The adoption of this pronouncement did not have a material effect on the Company's financial position or results of operations. In July 2001, the FASB issued FAS No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets." FAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. FAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. FAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. FAS 142 was adopted by the Company on January 1, 2002. The adoption of this pronouncement resulted in the Company recording a $6,886 one-time, non-cash charge to reduce the carrying value of its goodwill. Such charge is non-operational in nature and is reflected as a cumulative effect of a change in accounting principle. The Company's previous business combinations were accounted for using the purchase method. If FAS 142 had been in effect in 2001, the Company's earnings would have been improved because of reduced amortization, as described below:
Net Loss Basic Net Earnings Per Share Diluted Net Earnings Per Share -------- ---------------------------- ------------------------------ Reported Net Loss $(207) $(0.03) $(0.03) Add Amortization, Net of Tax 156 0.02 0.02 ----- ------ ------ Adjusted Net Loss $( 51) $(0.01) $(0.01) ===== ====== ======
The Company continues to amortize its patents over their estimated useful lives with no significant residual value. Amortization expense for intangible assets excluding goodwill was $107 and $169 for the three month period ending 5 March 31, 2002 and 2001, respectively. Intangibles amortization is projected to be approximately $400 to $500 per year for the next five years. In August 2001, the FASB issued FAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The new guidance resolves significant implementation issues related to FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." FAS 144 supersedes FAS 121, but it retains its fundamental provisions. It also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidate a subsidiary for which control is likely to be temporary. FAS 144 retains the requirement of FAS 121 to recognize an impairment loss only if the carrying amount of a long-lived asset within the scope of FAS 144 is not recoverable from its undiscounted cash flows and exceeds its fair value. FAS 144 is effective for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The provisions of FAS 144 generally are to be applied prospectively. The adoption of FAS 144 did not have a material impact on the Company's financial position or results of operations. NOTE 3 - INVENTORIES Inventories net of reserves are summarized as follows: March 31, Dec. 31, 2002 2001 -------------- ------------- Raw Materials......................... $13,336 $13,071 Work in process....................... 2,064 2,797 Finished Goods........................ 14,814 14,348 -------------- ------------- $30,214 $30,216 ============== ============= NOTE 4 - DEBT On March 20, 2002 the Company executed a credit agreement with Commerce Bank, N.A. for a $19,500 credit facility, comprised of (i) a $7,000 revolving line of credit under which funds may be borrowed at LIBOR, plus a margin ranging from 1.75% to 2.50%, in each case depending on the calculation of certain financial covenants, with a floor of 5% through March 19, 2003 (5% at March 31, 2002), (ii) a $9,000 term loan which bears interest at a rate of 6.75% through September 30, 2002, and thereafter at a fixed rate ranging from 6.50% to 7.25% to reset quarterly depending on the calculation of certain financial covenants (6.75% at March 31, 2002) and (iii) a $3,500 mortgage loan bearing interest at 7.5%. Borrowings under the revolving line of credit are limited to certain percentages of eligible accounts receivable and inventory, as defined in the credit agreement. The credit facility is collateralized by a security interest in all of the Company's assets. The agreement also contains restrictions that require the Company to maintain certain financial ratios as well as restrictions on the payment of cash dividends. The maturity date of the new line of credit with Commerce Bank is March 20, 2004. The term loan requires equal monthly principal payments of $187 and matures on April 1, 2006. The mortgage loan requires equal monthly principal payments of $19 and matures on April 1, 2017. The mortgage loan is callable after five years at the lender's option. Upon execution of the credit agreement with Commerce Bank, $14,954 was advanced to the Company, of which $14,827 was used to pay all unpaid principal and accrued interest under the Company's prior line of credit and term loans with First Union National Bank ("First Union"). At March 31, 2002, there was $754, $9,000 and $3,500 outstanding under the revolving line of credit, term loan and mortgage loan, respectively. Prior to March 20, 2002, the Company had a $5,500,000 revolving line of credit with First Union on which funds could be borrowed at either the bank's base rate plus a margin ranging from 0% to .625%, or 6 LIBOR, plus a margin ranging from 1.50% to 2.625%, in each case depending upon the calculation of certain financial covenants. The agreement contained restrictions that required the Company to maintain certain financial ratios as well as restrictions on the payment of dividends. The Company also had, prior to March 20, 2002, two outstanding term loans with First Union which accrued interest at a variable interest rate. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS In addition to historical information, this Quarterly Report contains forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties that may affect the operation, performance, development and results of the Company's business include, but are not limited to, those matters discussed herein in the section entitled Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. The words "believe", "expect", "anticipate", "project" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission, including without limitation, the Company's Annual Report on Form 10-K for the year ended December 31, 2001 (See Item 10 - Business; Item 3 - Legal Proceedings; and Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations). First three months of 2002 Compared with first three months of 2001 Net Sales. Net sales increased $145,000 or 1.3% to $10,890,000 in the first three months of 2002 from $10,745,000 in the first three months of 2001. The increase is attributed to sales of the Motorola QAM decoder, which was introduced in the fourth quarter of 2001, offset by a reduction in interdiction sales. Net sales included approximately $1,014,000 of interdiction equipment for the first three months of 2002 compared to approximately $2,879,000 for the first three months of 2001. Cost of Goods Sold. Cost of goods sold increased to $7,574,000 for the first three months of 2002 from $7,099,000 for the first three months of 2001 and also increased as a percentage of sales to 69.6% from 66.1%. The increase as a percentage of sales was caused primarily by a higher portion of sales during the period being comprised of lower margin product, including the Motorola QAM decoder, which was introduced in the fourth quarter of 2001. Selling Expenses. Selling expenses decreased to $1,118,000 for the first three months of 2002 from $1,461,000 in the first three months of 2001 and decreased as a percentage of sales to 10.3% for the first three months of 2002 from 13.6% for the first three months of 2001. This $343,000 decrease is primarily attributable to a decrease in wages, fringe benefits, and commissions due to a reduction in headcount, along with a reduction in telecommunications and travel expenses achieved through implementation of expense control programs. General and Administrative Expenses. General and administrative expenses decreased to $1,197,000 for the first three months of 2002 from $1,563,000 for the first three months of 2001 and decreased as a percentage of sales to 11.0% for the first three months of 2002 from 14.5% for the first three months of 2001. The $366,000 decrease can be primarily attributed to a reduction in amortization expense due to the adoption of FAS 142 which required the Company to discontinue amortizing goodwill as well as a reduction in professional fees. Research and Development Expenses. Research and development expenses decreased to $497,000 in the first three months of 2002 from $529,000 in the first three months of 2001, primarily due to a decrease in 7 licensing fees. Research and development expenses, as a percentage of sales, decreased to 4.6% in the first three months of 2002 from 4.9% in the first three months of 2001. Operating Income. Operating income increased to $504,000 for the first three months of 2002 from $93,000 for the first three months of 2001. Interest and Other Expenses. Other expense decreased to $211,000 in the first three months of 2002 from $404,000 in the first three months of 2001. These expenses consisted entirely of interest expense. The decrease is the result of lower average borrowing and lower average interest rates. Income Taxes. The provision for income taxes for the first three months of 2002 increased to $110,000 from a benefit of $104,000 for the first three months of 2001 as a result of an increase in taxable income. Cumulative effect. During the first three months of 2002, the Company implemented FAS 142, which resulted in the write off of $10,760,000 of the net book value of goodwill, offset by the future tax benefit thereof in the amount of $3,874,000. The net cumulative effect of this change in accounting principles was a one-time non-recurring $6,886,000 charge against earnings in the first three months of 2002. LIQUIDITY AND CAPITAL RESOURCES The Company's net cash provided by operating activities for the three-month period ended March 31, 2002 was $1,629,000, compared to net cash used in operating activities for the three-month period ended March 31, 2001, which was $345,000, primarily due to a decrease in accounts receivable offset by a decrease in accounts payable and accrued expenses. Cash used in investing activities was $29,000, which was attributable to capital expenditures for new equipment. The Company anticipates additional capital expenditures during calendar year 2002 aggregating approximately $100,000, which will be used for the purchase of automated assembly and test equipment. Cash used in financing activities was $2,149,000 for the first three months of 2002 primarily comprised of $14,954,000 of borrowings offset by $17,103,000 of repayments of long term debt. On March 20, 2002 the Company executed a credit agreement with Commerce Bank, N.A. for a $19,500,000 credit facility, comprised of (i) a $7,000,000 revolving line of credit under which funds may be borrowed at LIBOR, plus a margin ranging from 1.75% to 2.50%, in each case depending on the calculation of certain financial covenants, with a floor of 5% through March 19, 2003 (5% at March 31, 2002), (ii) a $9,000,000 term loan which bears interest at a rate of 6.75% through September 30, 2002, and thereafter at a fixed rate ranging from 6.50% to 7.25% to reset quarterly depending on the calculation of certain financial covenants (6.75% at March 31, 2002) and (iii) a $3,500,000 mortgage loan bearing interest at 7.5%. Borrowings under the revolving line of credit are limited to certain percentages of eligible accounts receivable and inventory, as defined in the credit agreement. The credit facility is collateralized by a security interest in all of the Company's assets. The agreement also contains restrictions that require the Company to maintain certain financial ratios as well as restrictions on the payment of cash dividends. The maturity date of the new line of credit with Commerce Bank is March 20, 2004. The term loan requires equal monthly principal payments of $187,000 and matures on April 1, 2006. The mortgage loan requires equal monthly principal payments of $19,000 and matures on April 1, 2017. The mortgage loan is callable after five years at the lender's option. Upon execution of the credit agreement with Commerce Bank, $14,954,000 was advanced to the Company, of which $14,827,000 was used to pay all unpaid principal and accrued interest under the Company's prior line of credit and term loans with First Union National Bank ("First Union"). At March 31, 2002, there was $754,000, $9,000,000 and $3,500,000 outstanding under the revolving line of credit, term loan and mortgage loan, respectively. Prior to March 20, 2002, the Company had a $5,500,000 revolving line of credit with First Union on which funds could be borrowed at either the bank's base rate plus a margin ranging from 0% to .625%, or 8 LIBOR, plus a margin ranging from 1.50% to 2.625%, in each case depending upon the calculation of certain financial covenants. The agreement contained restrictions that required the Company to maintain certain financial ratios as well as restrictions on the payment of dividends. The Company also had, prior to March 20, 2002, two outstanding term loans with First Union which accrued interest at a variable interest rate. The Company currently anticipates that the cash generated from operations, existing cash balances and amounts available under its existing or a replacement line of credit, will be sufficient to satisfy its foreseeable working capital needs. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("FAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." FAS 133 was adopted by the Company on January 1, 2001. FAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of the hedge transaction and the type of hedge transaction. At March 31, 2002 the Company did not have any derivative financial instruments. The adoption of this pronouncement did not have a material effect on the Company's financial position or results of operations. In July 2001, the FASB issued FAS No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets." FAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. FAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. FAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. FAS 142 was adopted by the Company on January 1, 2002. The adoption of this pronouncement resulted in the Company recording a $6,886,000 one-time, non-cash charge to reduce the carrying value of its goodwill. Such charge is non-operational in nature and is reflected as a cumulative effect of a change in accounting principle. The Company's previous business combinations were accounted for using the purchase method. If FAS 142 had been in effect in 2001, the Company's earnings would have been improved because of reduced amortization, as described below:
Net Loss Basic Net Earnings Per Share Diluted Net Earnings Per Share -------- ---------------------------- ------------------------------ Reported Net Loss $(207,000) $(0.03) $(0.03) Add Amortization, Net of Tax 156,000 0.02 0.02 --------- ------ ------ Adjusted Net Loss $( 51,000) $(0.01) $(0.01) ========= ====== ======
The Company continues to amortize its patents over their estimated useful lives with no significant residual value. Amortization expense for intangible assets excluding goodwill was $107,000 and $169,000 for the three month period ending March 31, 2002 and 2001, respectively. Intangibles amortization is projected to be approximately $400,000 to $500,000 per year for the next five years. In August 2001, the FASB issued FAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The new guidance resolves significant implementation issues related to FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." FAS 144 supersedes FAS 121, but it retains its fundamental provisions. It also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidate a subsidiary for which control is likely to be temporary. FAS 144 retains the requirement of FAS 121 to recognize an impairment loss only if the carrying amount of a long-lived asset within the scope of FAS 144 is not recoverable from its undiscounted cash flows and exceeds its fair value. FAS 144 is effective for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The provisions of FAS 144 generally are to be applied 9 prospectively. The adoption of FAS 144 did not have a material impact on the Company's financial position or results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market risk inherent in the Company's financial instruments and positions represents the potential loss arising from adverse changes in interest rates. At March 31, 2002 and 2001 the principal amount of the Company's aggregate outstanding variable rate indebtedness was $753,913 and $17,481,116, respectively. A hypothetical 1% adverse change in interest rates would have had an annualized unfavorable impact of approximately $377 and $13,859, respectively, on the Company's earnings and cash flows based upon these quarter-end debt levels. At March 31, 2002, the Company did not have any derivative financial investments. 10 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is a party to certain proceedings incidental to the ordinary course of its business, none of which, in the current opinion of management, is likely to have a material adverse effect on the Company's business, financial condition, or results of operations. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the first quarter ended March 31, 2002 through the solicitation of proxies or otherwise. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The exhibits are listed in the Exhibit Index appearing at page 13 herein. (b) No reports on Form 8-K were filed in the quarter ended March 31, 2002. 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BLONDER TONGUE LABORATORIES, INC. Date: May 15, 2002 By: /s/ James A. Luksch ------------------------------------------ James A. Luksch President and Chief Executive Officer By: /s/ Eric Skolnik ------------------------------------------ Eric Skolnik Vice President and Chief Financial Officer (Principal Financial Officer) 12 EXHIBIT INDEX
Exhibit # Description Location --------- ----------- -------- 3.1 Restated Certificate of Incorporation of Blonder Incorporated by reference from Exhibit 3.1 Tongue Laboratories, Inc. to S-1 Registration Statement No. 33-98070 originally filed October 12, 1995, as amended. 3.2 Restated Bylaws of Blonder Tongue Laboratories, Incorporated by reference from Exhibit 3.2 Inc. to S-1 Registration Statement No. 33-98070 originally filed October 12, 1995, as amended. 10.1 Loan and Security Agreement dated March 20, 2002 Filed herewith. between Blonder Tongue Laboratories, Inc. and Commerce Bank, N.A. 10.2 Revolving Credit Note dated March 20, 2002 by Filed herewith. Blonder Tongue Laboratories, Inc. in favor of Commerce Bank, N.A. 10.3 Term Loan A Note dated March 20, 2002 by Blonder Filed herewith. Tongue Laboratories, Inc. in favor of Commerce Bank, N.A. 10.4 Term Loan B note dated March 20, 2002 by Blonder Filed herewith. Tongue Laboratories, Inc. in favor of Commerce Bank, N.A 10.5 Mortgage, Security Agreement and Fixture Filing Filed herewith. dated March 20, 2002, between Blonder Tongue Laboratories, Inc. and Commerce Bank, N.A. 10.6 Assignment of Rents and Leases made by Blonder Filed herewith. Tongue Laboratories, Inc. in favor of Commerce Bank, N.A. 10.7 Patent Security Agreement dated March 20, 2002 by Filed herewith Blonder Tongue Laboratories, Inc. in favor of Commerce Bank, N.A. 10.8 Trademark Security Agreement dated March 20, 2002 Filed herewith by Blonder Tongue Laboratories, Inc. in favor of Commerce Bank, N.A. 10.9 Surety Agreement dated March 20, 2002 by Blonder Filed herewith Tongue Investment Company in favor of Commerce Bank, N.A.
13 EX-10 3 blonder10q03312002ex10-1.txt EXHIBIT 10.1 EXHIBIT 10.1 -------------------------------------------------------------- LOAN AND SECURITY AGREEMENT BLONDER TONGUE LABORATORIES, INC. and Commerce Bank, N.A. Dated: March 20, 2002 -------------------------------------------------------------- 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...........................................13 2.3. Term Loan A - Description...................................16 2.4. Term Loan B - Description...................................16 2.5. Advances, Conversions, Renewals and Payments................17 2.6. Interest....................................................18 2.7. Additional Interest Provisions..............................18 2.8. Fees and Charges............................................19 2.9. Prepayments.................................................19 2.10. Use of Proceeds.............................................20 2.11. Loan Call Option............................................20 2.12. Capital Adequacy............................................20 SECTION III - COLLATERAL..................................................21 3.1. Description.................................................21 3.2. Lien Documents..............................................22 3.3. Other Actions...............................................22 3.4. Searches, Certificates......................................22 3.5. Landlord's and Warehouseman's Waivers.......................23 3.6. Filing Security Agreement...................................23 3.7. Power of Attorney...........................................23 SECTION IV - CLOSING AND CONDITIONS PRECEDENT TO ADVANCES.................23 4.1. Resolutions, Opinions, and Other Documents..................23 4.2. Absence of Certain Events...................................25 4.3. Warranties and Representations at Closing...................25 4.4. Compliance with this Agreement..............................25 4.5. Officers' Certificate.......................................25 4.6. Closing.....................................................25 4.7. Waiver of Rights............................................25 4.8. Conditions for Future Advances..............................25 SECTION V - REPRESENTATIONS AND WARRANTIES................................26 5.1. Corporate Organization and Validity.........................26 5.2. Places of Business..........................................27 5.3. Pending Litigation..........................................27 5.4. Title to Properties.........................................27 5.5. Governmental Consent........................................27 5.6. Taxes.......................................................27 5.7. Financial Statements........................................27 5.8. Full Disclosure.............................................28 5.9. Subsidiaries................................................28 5.10. Guarantees, Contracts, etc..................................28 5.11. Government Regulations, etc.................................28 5.12. Business Interruptions......................................29 5.13. Names and Intellectual Property.............................29 5.14. Other Associations..........................................30 5.15. Environmental Matters.......................................30 5.16. Regulation O................................................30 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 SECTION VI - BORROWER'S AFFIRMATIVE COVENANTS.............................31 6.1. Payment of Taxes and Claims.................................31 6.2. Maintenance of Properties and Corporate Existence...........32 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.........................................34 6.9. Financial and Business Information..........................34 6.10. Officers' Certificates......................................35 6.11. Audits and Inspection.......................................36 6.12. Tax Returns, Financial Statements and Other Reports.........36 6.13. Information to Participant..................................36 6.14. Material Adverse Developments...............................36 6.15. Places of Business..........................................36 6.16. Commercial Tort Claims......................................36 6.17. Letter of Credit Rights.....................................36 6.18. Lock-Box....................................................37 SECTION VII - BORROWER'S NEGATIVE COVENANTS...............................37 7.1. Dispositions, Merger, Consolidation, Dissolution or Liquidation ..............................................37 7.2. Acquisitions................................................37 7.3. Liens and Encumbrances......................................37 7.4. Transactions With Affiliates or Subsidiaries................37 7.5. Guarantees..................................................38 7.6. Distributions, Bonuses and Other Indebtedness...............38 7.7. Loans and Investments.......................................38 7.8. Use of Lenders' Name........................................38 7.9. Miscellaneous Covenants.....................................38 7.10. Jurisdiction of Organization................................38 ii SECTION VIII - DEFAULT....................................................38 8.1. Events of Default...........................................38 8.2. Cure........................................................40 8.3. Rights and Remedies on Default..............................41 8.4. Nature of Remedies..........................................42 8.5. Set-Off.....................................................42 SECTION IX - MISCELLANEOUS................................................42 9.1. Governing Law...............................................42 9.2. Integrated Agreement........................................42 9.3. Waiver......................................................42 9.4. Indemnity...................................................43 9.5. Time........................................................43 9.6. Expenses of Lender..........................................43 9.7. Brokerage...................................................44 9.8. Notices.....................................................44 9.9. Headings....................................................45 9.10. Survival....................................................45 9.11. Successors and Assigns......................................45 9.12. Duplicate Originals.........................................45 9.13. Modification................................................45 9.14. Signatories.................................................45 9.15. Third Parties...............................................45 9.16. Discharge of Taxes, Borrower's Obligations, Etc.............45 9.17. Withholding and Other Tax Liabilities.......................46 9.18. Consent to Jurisdiction.....................................46 9.19. Waiver of Jury Trial........................................46 iii EXHIBIT LIST ------------ Exhibit A -- Borrowing Certificate Exhibit B -- Form of Quarterly Compliance Certificate SCHEDULES Schedule 1.1(a) -- Existing Indebtedness Schedule 1.1(b) -- Existing Liens Schedule 5.1 -- Borrower's States of Qualifications Schedule 5.2 -- Places of Business Schedule 5.3 -- Judgments, Proceedings, Litigation and Orders schedule 5.6 -- Taxes Schedule 5.7 -- Borrower's Federal Tax Identification Numbers Schedule 5.9 -- Subsidiaries and Affiliates Schedule 5.10(a) -- Existing Guaranties, Investments and Borrowings, Leases and Employment Agreements Schedule 5.11 -- Employee Benefit Plans Schedule 5.13(a) -- Schedule of Names Schedule 5.13(b) -- Intellectual Property Schedule 5.13(c) -- Licenses Schedule 5.14 -- Other Associations Schedule 5.15 -- Environmental Schedule 5.17 -- Capital Stock Schedule 5.19 -- Perfection Schedule 5.20 -- Commercial Tort Claim Schedule 5.21 -- Letter of Credit Rights Schedule 5.22 -- Deposit Accounts iv LOAN AND SECURITY AGREEMENT --------------------------- This Loan and Security Agreement ("Agreement") is dated this 20th day of March, 2002, by and between BLONDER TONGUE LABORATORIES, INC. ("Borrower"), a Delaware corporation and COMMERCE 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. Affiliate - With respect to any Person, (i) 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 (ii) any Person who is a director or officer (a) of such Person, (b) of any Subsidiary of such Person, or (c) any Person described in clause (i) above. For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 15% 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. Applicable Margin - Commencing October 1, 2002 the spread over the LIBOR Rate based upon Borrower's Cash Flow Coverage Ratio (tested as of each quarter-end on a rolling four-quarter basis) as of the last day of the fiscal quarter most recently ended for which the quarterly financial statements have been delivered pursuant to Section 6.9: Level Cash Flow Coverage Ratio Applicable Margin ----- ------------------------ ----------------- Level I >1.75:1 175 basis points - Level II >1.50:1 but < 1.75:1 200 basis points - Level III >1.25:1 but < 1.50:1 225 basis points - Level IV <1.25:1 250 basis points For purposes of the foregoing, (i) the Cash Flow Coverage Ratio (tested on a rolling four-quarter basis) shall be determined as of the end of each fiscal quarter of Borrower based on Borrower's Quarterly Compliance Certificate delivered pursuant to Section 6.10, and (ii) each change in the Applicable Margin resulting from a change in the Cash Flow Coverage Ratio shall be effective commencing on the first day of the fiscal quarter of Borrower following the delivery of such Quarterly Compliance Certificate; provided however, that the Cash Flow Coverage Ratio shall be deemed to be less than 1.25:1 if an Event of Default exists. Asset Sale - The sale, transfer, lease, license or other disposition, outside of the ordinary course of business, 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. Assignment of Claims Act - The Federal Assignment of Claims Act, 31 U.S.C. Sec. 3727 et. seq., as amended from time to time. Assignment of Rents and Leases - That certain Assignment of Rents and Leases to be executed by Borrower in favor of Lender, in form and substance satisfactory to Lender, on or prior to the Closing Date. Assignments - Collectively, all assignments and instruments that Lender may require to effectuate, in accordance with the Assignment of Claims Act, Borrower's assignment of Accounts arising under those Government Contracts with a value in excess of Five Hundred Thousand Dollars ($500,000), all in form and substance satisfactory to Lender. Authorized Officer - Any officer of Borrower authorized by specific resolution of Borrower to request Advances or execute Quarterly Compliance Certificates as set forth in the incumbency certificate referred to in Section 4.1(d) of this Agreement. 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. Borrowing Base - As of the date of determination thereof an amount equal to the lesser of (i) Seven Million Dollars ($7,000,000) less the Letter of Credit Amount or (ii) the sum of (A) (1) ninety percent (90%) of Eligible Domestic Accounts covered, on terms satisfactory to Lender, by Credit Insurance plus (2) eighty percent (80%) of Eligible Domestic Accounts not covered by Credit Insurance plus (3) eighty percent (80%) of Eligible Foreign Accounts plus (B) the lesser of (1) fifty percent (50%) of Eligible Inventory or (2) an amount not to exceed fifty percent (50%) of the outstanding principal balance of Advances under the Revolving Credit 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. 2 Borrowing Certificate - Section 6.9(a)(iv). Business Day - A day other than Saturday or Sunday when Lender is open for business in Philadelphia, Pennsylvania. 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. 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 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) and any and all warrants or options to purchase any of the foregoing. Cash Flow Coverage Ratio - For any period, the ratio of Consolidated Cash Flow to Consolidated Debt Service, as determined in accordance with GAAP. Change of Control - The result caused by (i) any "person" or "group" (as each term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than the Permitted Holders, becoming the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended, except that for purposes of this clause (i) such person shall be deemed to have "beneficiary ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than thirty-three and one third percent (33 1/3%) of the total voting power of the Capital Stock of Borrower entitled to vote; (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted Borrower's board of directors (together with any new directors whose election by such board of directors or whose nomination for election by the shareholders of such Borrower was approved by a vote of sixty-six and two-thirds percent (66 2/3%) of the directors of Borrower at the time of such approval who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) ceasing for any reason to constitute a majority of the board of directors then in office; or (iii) any two of the Designated Officers ceasing to serve as President, Chief Executive Officer or Chief Operating Officer. Closing - Section 4.6. Closing Date - Section 4.6. 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. 3 Consolidated Amortization Expense - For any period, the aggregate consolidated amount of amortization expenses of Borrower, as determined in accordance with GAAP. Consolidated Cash Flow - For any period, Consolidated Operating Income (or deficit) minus (i) extraordinary gains minus (ii) any Distributions, as determined in accordance with GAAP. Consolidated Debt Service - For any period, Borrower's Consolidated Interest Expense, plus scheduled principal payments for the next succeeding twelve (12) month period, on account of long term Indebtedness (including Capitalized Lease Obligations), all as determined in accordance with GAAP. Consolidated Depreciation Expense - For any period, the aggregate consolidated amount of depreciation expenses of Borrower, 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 outstanding during all or any part of such period, as determined in accordance with GAAP. Consolidated Operating Income - For any period, Borrower's consolidated net income before taxes plus, Consolidated Depreciation Expense plus, Consolidated Amortization Expense plus Consolidated Interest Expense, as such would appear on Borrower's consolidated statement of income, as prepared in accordance with GAAP. Consolidated Subsidiary - Any Subsidiary of Borrower whose financial statements are required, in accordance with GAAP, to be consolidated with Borrower's financial statements. Consolidated Total Liabilities - At any time, the consolidated amount of total liabilities of Borrower as such would appear on Borrower's consolidated balance sheet prepared in accordance with GAAP. Credit Insurance - Insurance, on terms and conditions reasonably satisfactory to Lender, pursuant to which CNA Insurance Companies (or such other insurer as Lender may approve in writing) insures the payment of certain of Borrower's Accounts. Without limiting any of Lender's rights to approve the Credit Insurance, the Credit Insurance shall (i) be in the minimum face amount of Four Million Dollars ($4,000,000) per year, (ii) have a maximum deductible of Fifty Five Thousand Dollars ($55,000) in the aggregate, and (iii) shall have a maximum allowable coinsurance of ten percent (10%) on domestic and foreign (including Canadian Accounts) Accounts. Default - Any event, act, condition or occurrence which with notice, or lapse of time or both, would constitute an Event of Default hereunder. Designated Officers - James A. Luksch and Robert J. Palle, Jr. 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 Disqualified Stock or (iii) is redeemable at the option of the holder thereof, in 4 whole or in part, in each case on or prior to the Term Loan B Maturity Date. Distribution - (i) Cash dividends or other cash distributions on any now or hereafter outstanding Capital Stock of Borrower; (ii) The redemption, repurchase, defeasance or acquisition in cash of such Capital Stock or of warrants, rights or other options to purchase such Capital Stock; and (iii) Any loans or advances (other than compensation and reimbursement of business expenses), to any shareholder(s)of Borrower. Eligible Domestic Accounts - All Accounts of Borrower for which the Account Debtor has its principal place of business and chief executive office in the United States and which meet all of the following specifications: (i) the Account is lawfully and exclusively owned by Borrower and subject to no 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 is valid and enforceable representing the undisputed indebtedness of an Account Debtor not more than 120 days past the original invoice date and does not represent a rebilling; (iii) not more than 50% of the aggregate balance of all Accounts owing from an Account Debtor obligated on the Account are outstanding more than 120 days past their original invoice dates; (iv) the Account is not subject to any defense, set-off, or counterclaim, deduction, discount, credit, charge-back, freight claim, allowance or adjustment of any kind; (v) the Account is net of any portion thereof attributable to the sale of goods that have been returned, rejected, lost or damaged; (vi) 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; (vii) if the Account arises from the performance of services, such services have actually been performed; (viii) the Account arose in the ordinary course of Borrower's business; (ix) no notice of the bankruptcy, receivership, reorganization, liquidation, dissolution, or insolvency of the Account Debtor has been received by Lender or Borrower; (x) the Account Debtor is not a Subsidiary or Affiliate of Borrower; (xi) the Account is not an Account on which the Account Debtor is obligated to Borrower under any Instrument; (xii) the transaction which gave rise to the Account complies in all material respects with all applicable laws, rules and regulations of any Governmental Authority; (xiii) the Account does not represent a sale pursuant to a Government Contract (which Government Contract had an initial value in excess of One Hundred Thousand Dollars ($100,000), unless Borrower has executed an Assignment for the benefit of Lender, in accordance with the Assignment of Claims Act; and (xiv) the Account meets such other reasonable specifications and requirements which may from time to time be established by Lender. Eligible Domestic Accounts shall not include that portion of an Account representing interest or finance charges for past due balances or debit memos. Eligible Foreign Accounts - All Accounts of Borrower for which the Account Debtor has its principal place of business or chief executive office outside of the United States and which meet all of the following specifications: (i) the Account is lawfully and exclusively owned by Borrower and subject to no 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 is valid and enforceable representing the undisputed indebtedness 5 of an Account Debtor not more than 120 days past the original invoice date and does not represent a rebilling; (iii) not more than 50% of the aggregate balance of all Accounts owing from an Account Debtor obligated on the Account are outstanding more than 120 days past their original invoice dates; (iv) the Account is not subject to any defense, set-off, or counterclaim, deduction, discount, credit, charge-back, freight claim, allowance or adjustment of any kind; (v) the Account is net of any portion thereof attributable to the sale of goods that have been returned, rejected, lost or damaged; (vi) 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; (vii) if the Account arises from the performance of services, such services have actually been performed; (viii) the Account arose in the ordinary course of Borrower's business; (ix) no notice of the bankruptcy, receivership, reorganization, liquidation, dissolution, or insolvency of the Account Debtor has been received by Lender or Borrower; (x) the Account Debtor is not a Subsidiary or Affiliate of Borrower; (xi) the Account is insured by Credit Insurance, on terms acceptable to Lender or guaranteed by an irrevocable of Letter of Credit; (xii) the Account is not an Account on which the Account Debtor is obligated to Borrower under any Instrument; (xiii) the transaction which gave rise to the Account complies in all material respects with all applicable laws, rules and regulations of any Governmental Authority; and (xiv) the Account meets such other reasonable specifications and requirements which may from time to time be established by Lender. Eligible Foreign Accounts shall not include that portion of an Account representing interest or finance charges for past due balances or debit memos. Eligible Inventory - Any and all raw material, work-in-progress and finished goods Inventory of Borrower located at Borrower's places of business shown on Schedule 5.2 attached hereto and made a 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; (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, (a) fully insured and covered by a Letter of Credit issued under the Revolving Credit, or (b) Borrower has paid for such in-transit Inventory in cash in which case up to a maximum of Two Hundred Thousand Dollars ($200,000) at any one time may be Eligible Inventory; and (vi) 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. 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. Expenses - Section 9.6. 6 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. Governmental Acts - Section 2.2(f). Governmental Authority - Any 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. Government Contracts - All contracts with any department, subdivision, agency or instrumentality of the United States of America. Hazardous Substance - 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. 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. Sec. 101 et. seq.). 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 under any Hedging Agreement 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. Intellectual Property Agreements - Collectively, those certain Patent Security Agreements, and Trademark Security Agreements, to be executed by Borrower and/or Surety on or prior to the Closing Date, in favor of Lender, in form and substance satisfactory to Lender. Interest Hedging Instrument - Any documentation evidencing any interest rate swap, interest "cap" or "collar" or any other foreign currency exchange agreement, interest rate hedging device, or swap agreement (as defined in 11 U.S.C. Sec. 101) 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. Letter of Credit Commitment - The sum of Two Million Dollars ($2,000,000.00). 7 Letter of Credit Fees - Section 2.8(d). Letters of Credit - (i) Standby letters of credit and (ii) commercial letter or letters of credit, in each case issued to or to be issued by Lender for the account of Borrower pursuant to Section 2.2 herein. Drafts under commercial letters of credit may be payable at sight and/or payable thirty (30) days after sight. 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 therefore, 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. Leverage Ratio - For any period, the ratio of (i) Borrower's Consolidated Total Liabilities minus Subordinated Debt to (ii) Tangible Net Worth plus Subordinated Debt. 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 second to the last Business Day of the preceding month as such rate may change from month to month. 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. Loan Call Date - Section 2.11. Loan Call Option - Section 2.11. Loans - Collectively, the unpaid balance of Advances under the Revolving Credit, the unpaid principal balance of the Term Loan A, and the unpaid principal balance of the Term Loan B. Loan Documents - Collectively, this Agreement, the Notes, the Mortgage, the Assignment of Rents and Leases, the Surety Agreement, the Perfection Certificate, the Intellectual Property Agreements, the Assignments, the Letter of Credit Documents, and all agreements, instruments and documents executed and/or delivered in connection therewith, all as may be supplemented, restated, superseded, amended, amended and restated or replaced from time to time. 8 Material Adverse Effect - A material adverse effect with respect to (i) the business, assets, properties, financial condition, stockholders' equity, material agreements or results of operations of Borrower, (ii) Borrower's ability to pay the Obligations in accordance with the terms hereof or (iii) 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 Seven Million Dollars ($7,000,000). Monitoring Fee - Section 2.8(e). Mortgage - That certain Mortgage, Security Agreement and Fixture Filing encumbering the Real Property to be executed by Borrower in favor of Lender, in form and substance satisfactory to Lender, on or prior to the Closing Date. Notes - Collectively, the Revolving Credit Note, the Term Loan A Note and the Term Loan B Note. Obligations - All existing and future debts, liabilities and obligations of every kind or nature at any time owing by Borrower to Lender pursuant to the Loan Documents, whether joint or several, related or unrelated, primary or secondary, matured or contingent, due or to become due, and whether principal, interest, fees, indemnification obligations hereunder or Expenses (specifically including debts, liabilities and obligations arising or occurring after the commencement of any bankruptcy, insolvency or similar proceeding with respect to Borrower whether or not a claim for such post-commencement obligation is allowed), including, without limitation, debts, liabilities and obligations in respect of the Revolving Credit, Reimbursement Obligations, Term Loan A, Term Loan B, Letters of Credit 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 reasonably advanced by Lender to preserve, protect and enforce Lender's rights hereunder and in the Collateral; and all Expenses incurred by Lender. Overadvance - Section 2.1(a). 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 Distributions - Distributions made: (i) for the redemption, repurchase, defeasance or acquisition of outstanding Capital Stock or of warrants, rights or other options to purchase such Capital Stock so long as no Default or Event of Default is outstanding or, after giving effect to such Distribution, no Default or Event of Default would occur; and (ii) as loans or advances to any shareholder of Borrower, which are used solely to enable such shareholder to exercise any stock option and which Distributions are repaid immediately upon such shareholder's exercise of his/her option(s), but in no event later than four (4) Business Days following such Distribution. Permitted Holders - James A. Luksch, Robert J. Palle, Jr., and James H. Williams. 9 Permitted Indebtedness - (i) Indebtedness to Lender in connection with the Revolving Credit, Term Loans and Letters of Credit or otherwise pursuant to the Loan Documents; (ii) trade payables incurred in the ordinary course of Borrower's business; (iii) purchase money Indebtedness (including Capitalized Lease Obligations) hereafter incurred by Borrower to finance the purchase of fixed assets; provided that, (a) such Indebtedness shall not exceed the purchase price of the assets funded, and (b) no such Indebtedness may be refinanced for a principal amount in excess of the principal amount outstanding at the time of such refinancing, (iv) Indebtedness existing on the Closing Date that is identified and described on Schedule "1.1(a)" attached hereto and made part hereof, and (v) Subordinated Debt. Permitted Investments - (i) investments and advances existing on the Closing Date that are disclosed on Schedule "5.10(a)," or (ii) (a) obligations issued or guaranteed by the United States of America or any agency thereof, (b) commercial paper with maturities of not more than 270 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, (c) certificates of time deposit and bankers' acceptances having maturities of not more than 270 days and repurchase agreements backed by United States government securities of a commercial bank if (1) such bank has a combined capital and surplus of at least $100,000,000, or (2) 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, and (d) U.S. money market funds that invest solely in obligations issued or guaranteed by the United States of America or an agency thereof. Permitted Liens - (i) Liens for taxes or assessments or other governmental charges not yet due and payable; (ii) inchoate and unperfected workers', mechanics' or similar Liens arising in the ordinary course of business; (iii) carriers', warehousemen's, suppliers' or other similar possessory Liens arising in the ordinary course of business; (iv) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance, social security and other like laws; (v) Liens on fixed assets securing purchase money Indebtedness permitted under clause (iii) of the definition of Permitted Indebtedness; provided that, (a) such Lien attached only to the assets so acquired, and (b) a description of any asset acquired in excess of Twenty Five Thousand Dollars ($25,000) is furnished to Lender; (vi) Liens existing on the Closing Date and shown on Schedule "1.1(b)" attached hereto and made part hereof; and (vii) 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. Prepayment Premium - Section 2.9(b). 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. Real Property - Borrower's real estate and improvements located at One Jake Brown Road, Old Bridge, New Jersey 08857. 10 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 2.8(a). Revolving Credit Maturity Date - April 1, 2004, 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). Revolving Credit Rate - For the period from the Closing Date through September 30, 2002, a per annum rate equal to the LIBOR Rate plus 200 basis, but in no event, less than 5%. Commencing October 1, 2002, a per annum rate equal to the LIBOR Rate plus the Applicable Margin; provided however, that from October 1, 2002 through March 19, 2003, the Revolving Credit Rate shall in no event be less than 5%. SEC - The Securities and Exchange Commission. Subordinated Debt - Unsecured Indebtedness of Borrower subject to payment terms and subordination provisions acceptable to Lender in its sole and absolute discretion . 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. Surety - Blonder Tongue Investment Company, and any other Consolidated Subsidiary that has assets in excess of Ten Thousand Dollars ($10,000). Surety Agreement - That certain surety agreement to be executed by Blonder Tongue Investment Company in favor of Lender, in form and substance satisfactory to Lender, on or prior to the Closing Date, and any other surety agreement executed by a Consolidated Subsidiary. 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 11 liabilities, all as would be shown on Borrower's consolidated balance sheet prepared in accordance with GAAP. Term Loan A - Section 2.3(a). Term Loan A Closing Fee - Section 2.8(b). Term Loan A Maturity Date - April 1, 2006. Term Loan A Note - Section 2.3 (b). Term Loan A Rate - For the period from the Closing Date through September, 30, 2002, the fixed per annum rate of six and three quarters percent (6.75%). Commencing October 1, 2002 the fixed per annum rate, based upon Borrower's Cash Flow Coverage Ratio (tested as of each quarter-end on a rolling four-quarter basis), as of the last day of the fiscal quarter most recently ended for which the quarterly financial statements have been delivered pursuant to Section 6.9: Level Cash Flow Coverage Ratio Fixed Rate ----- ------------------------ ---------- Level I >1.75:1 6.50% - Level II >1.50:1 but < 1.75:1 6.75% - Level III >1.25:1 but < 1.50:1 7.00% - Level IV <1.25:1 7.25% For purposes of the foregoing, (i) the Cash Flow Coverage Ratio (tested on a rolling four-quarter basis) shall be determined as of the end of each fiscal quarter of Borrower based on Borrower's Quarterly Compliance Certificate delivered pursuant to Section 6.10, and (ii) each change in the Term Loan A Rate resulting from a change in the Cash Flow Coverage Ratio shall be effective commencing on the first day of the fiscal quarter of Borrower following the delivery of such Quarterly Compliance Certificate; provided however, that the Cash Flow Coverage Ratio shall be deemed to be less than 1.25:1 if an Event of Default exists. Term Loan B - Section 2.4(a). Term Loan B Closing Fee - Section 2.8(c). Term Loan B Maturity Date - The earlier of the Loan Call Date or April 1, 2017. Term Loan B Note - Section 2.4 (b). Term Loan B Rate - A fixed per annum rate equal to seven and one half percent (7.5%). Term Loans - Collectively, the Term Loan A and Term Loan B. UCC - The Uniform Commercial Code as adopted in the State of New Jersey as the same may be amended from time to time. VTech - Section 3.5 12 Any other capitalized terms used without further definition herein shall have the respective meaning set forth in the UCC unless the context requires otherwise. 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. SECTION II - THE LOANS 2.1. Revolving Credit - Description: a. 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, unreimbursed Letters of Credit plus outstanding and undrawn Letters of Credit, 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, unreimbursed Letters of Credit plus outstanding and undrawn Letters of Credit at any time exceeds the Borrowing Base (such excess referred to as "Overadvance"), Borrower shall immediately repay the Overadvance in full. 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 and therein 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 13 of Credit which shall not exceed, in the aggregate at any one time outstanding, the Letter of Credit 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 (i) three hundred sixty five (365) days from the date of issuance for a stand-by letter or credit of one hundred eighty (180) days from the date of issuance of a commercial 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. 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 Letter of Credit 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 negligence in issuing such payment; 14 (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: (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 any 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 a rising solely from acts or conduct of Lender constituting gross negligence or willful misconduct. 15 (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 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. 2.3. Term Loan A - Description: a. Lender hereby agrees to advance to Borrower, subject to the terms and conditions of this Agreement, the sum of Nine Million Dollars ($9,000,000.00) ("Term Loan A"). b. At Closing, Borrower shall execute and deliver a promissory note to Lender in the original principal amount of the Term Loan A ("Term Loan A Note"). The Term Loan A Note shall evidence Borrower's unconditional obligation to repay to Lender the Term Loan A with interest as herein and therein provided. The Term Loan A Note shall be in form and substance satisfactory to Lender. c. The principal balance of the Term Loan A shall be paid in forty-seven (47) consecutive equal monthly installments of principal in the amount of One Hundred Eighty-Seven Thousand Five Hundred Dollars ($187,500.00) each, commencing on May 1, 2002, and continuing on the first (1st) day of each month thereafter. A final forty-eighth (48th) installment of all unpaid principal and all accrued and unpaid interest outstanding under the Term Loan A shall be due and payable on the Term Loan A Maturity Date. All interest payments on account of Term Loan A will be due in addition to the principal installments, and shall be paid on a monthly basis in accordance with Section 2.6(b). 2.4. Term Loan B - Description: a. Lender hereby agrees to advance to Borrower, subject to the terms and conditions of this Agreement, the sum of Three Million Five Hundred Thousand Dollars ($3,500,000) ("Term Loan B"). b. At Closing, Borrower shall execute and deliver a promissory note to Lender in the original principal amount of the Term Loan B ("Term Loan B Note"). The Term Loan B 16 Note shall evidence Borrower's unconditional obligation to repay to Lender the Term Loan B with interest as herein and therein provided. The Term Loan B Note shall be in form and substance satisfactory to Lender. c. Subject to Lender's Loan Call Option, the principal balance of the Term Loan B shall be paid in one hundred seventy nine (179) consecutive equal monthly installments of principal in the amount of Nineteen Thousand Four Hundred Forty Four Dollars and Forty Four Cents ($19,444.44) each, commencing on May 1, 2002, and continuing on the first (1st) day of each month thereafter. A final one hundred eightieth (180th) installment of all unpaid principal and all accrued and unpaid interest outstanding under the Term Loan B shall be due and payable on the Term Loan B Maturity Date. All interest payments on account of Term Loan B will be due in addition to the principal installments, and shall be paid on a monthly basis in accordance with Section 2.6(c). 2.5. Advances, Conversions, Renewals 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 interest on the Revolving Credit, Reimbursement Obligations, Term Loans 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, 1701 Route 70 East, Cherry Hill, New Jersey, 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 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. Any payments received prior to 2:00 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 2:00 p.m. Eastern time on any Business Day shall be deemed received on the immediately following Business Day. b. [Reserved] 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. (ii) All cash Advances requested by Borrower under the Revolving Credit must be in the minimum amount of Five Hundred Dollars ($500.00), and integral multiples of Five Hundred Dollars ($500.00) in excess thereof. All cash Advances under the Revolving Credit must be requested by 11:00 A.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 satisfactory to Lender, which request is to be executed by an Authorized Officer. Such request may be sent by telecopy or facsimile transmission provided that Lender shall have the right to require that receipt of such request not be effective unless confirmed via telephone with Lender. 17 (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. 2.6. Interest: a. 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 Revolving Credit Rate. In addition to any changes as a result of a change in the Applicable Margin, changes, if any, in the interest rate applicable to the Revolving Credit shall become effective on the first day of each calendar month following 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. b. The unpaid principal balance of the Term Loan A shall bear interest, subject to the terms hereof, at the per annum rate equal to the Term Loan A Rate. Changes, if any, in the Term Loan A Rate shall become effective on the first day of each calendar quarter following delivery of the Quarterly Compliance Certificate. Interest on the Term Loan A 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. c. The unpaid principal balance of the Term Loan B shall bear interest, subject to the terms hereof, at the per annum rate equal to the Term Loan B Rate. Interest on the Term Loan B, 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. 2.7. 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 three hundred (300) 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. Notwithstanding anything to the contrary, the default rate on Advances under the Revolving Credit shall never be less than ten and one half percent (10.5%). c. All contractual rates of interest chargeable on outstanding principal under the Loans shall continue to accrue and be payable 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 18 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. 2.8. 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 Thirty-Five Thousand Dollars ($35,000), less amounts previously paid thereon. b. At Closing, Lender shall have fully earned and Borrower shall unconditionally pay to Lender a non-refundable fee with respect to the Term Loan A ("Term Loan A Closing Fee") of Forty-Five Thousand Dollars ($45,000), less amounts previously paid thereon. c. At Closing, Lender shall have fully earned and Borrower shall unconditionally pay to Lender a non-refundable fee with respect to the Term Loan B ("Term Loan B Closing Fee") of Seventeen Thousand Five Hundred Dollars ($17,500), less amounts previously paid thereon. d. Borrower shall pay to Lender a fee in the amount of one percent (1.00%) per annum of the face amount of each Letter of Credit issued to 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 "Letter of Credit Fees." e. Borrower shall pay to Lender an annual monitoring fee ("Monitoring Fee") of Two Thousand Dollars ($2,000) payable on the Closing Date and on each anniversary thereof. The Monitoring Fee is non-refundable. f. Borrower shall unconditionally pay to Lender a late charge equal to three percent (3%) of any and all payments of principal or interest on the Loans that are not paid 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. 2.9. Prepayments: a. If the Revolving Credit is terminated at any time prior to the two year anniversary of the Closing Date (other than as a result of acceleration or the exercise of rights after an Event of Default), Borrower shall pay to Lender a termination fee of Thirty Five Thousand Dollars ($35,000). Such fee is payable on the date of termination. b. Borrower may prepay Term Loan A or Term Loan B in whole or in part at any time or from time to time, with premium as set forth in this Section 2.9(b). Any such voluntary prepayment (or any mandatory prepayment under Section 2.9(c) below) shall be accompanied by all 19 accrued and unpaid interest, and a premium ("Prepayment Premium") on such prepaid amount equal to (i) four percent (4%) of the prepayment amount if prepaid during the first twelve (12) month period after the date of this Agreement; (ii) three percent (3%) of the prepayment amount if prepaid during the second twelve (12) month period after the date of this Agreement; (iii) two percent (2%) of the prepayment amount if prepaid during the third twelve (12) month period after the date of this Agreement; and (iv) one percent (1%) of the prepayment amount if prepaid during the fourth twelve (12) month period after the date of this Agreement. Any partial prepayment of either Term Loan A or Term Loan B shall first be applied to accrued and unpaid interest on the applicable Term Loan and then to the principal balance of the applicable Term Loan in the inverse order of maturity. If Borrower prepays Term Loan A or Term Loan B (in whole or in part), either by (A) funds generated from Borrower's internal operations or an Asset Sale, or (B) third party financing in the event Lender determines not to extend the Revolving Credit Maturity Date beyond the two (2) year anniversary of the Closing Date or on any subsequent anniversary thereof, then the Prepayment Premium will not be payable on the amounts so prepaid. c. Subject to Section 7.1 hereof, upon any Asset Sale, Borrower shall prepay the Term Loans in an amount equal to the net proceeds of the Asset Sale (i.e., the gross proceeds less the reasonable and customary costs of such sale or other dispositions) upon Borrower's receipt thereof. Any partial prepayment of the Term Loans, pursuant to this Section 2.9(c), shall be applied proportionately to Term Loan A and Term Loan B and shall first be applied to accrued and unpaid interest on the Term Loans, on a proportionate basis and then to the principal balance of the Term Loans on a proportionate basis in the inverse order of maturity. 2.10. Use of Proceeds: The extensions of credit under and proceeds of the Revolving Credit shall be used for working capital and general corporate purposes. The extensions of credit under and proceeds of the Term Loan A shall be used to refinance existing Indebtedness owing to First Union National Bank and for working capital and general purposes. The extension of credit under and proceeds of the Term Loan B shall be used to refinance existing Indebtedness owing to First Union National Bank related to Borrower's Real Property. 2.11. Loan Call Option: Lender, in its sole and absolute discretion, shall have the option ("Loan Call Option") to declare the entire outstanding principal balance of the Term Loan B, together with all outstanding interest under Term Loan B, due and payable on each fifth year anniversary following the Closing Date (each a "Loan Call Date"). In the event that Lender exercises the Loan Call Option, Lender shall provide Borrower with written notice at least one-hundred and eighty (180) days prior to the applicable Loan Call Date. All outstanding principal and interest of the Term Loan B shall be due and payable in full on the Loan Call Date. 2.12. Capital Adequacy: If any present or future law, governmental rule, regulation, policy, guideline, directive or similar requirement (whether or not having the force of law) imposes, modifies, or deems applicable any capital adequacy, capital maintenance or similar requirement which affects the manner in which Lender allocates capital resources to its commitments (including any commitments hereunder), and as a result thereof, in the opinion of Lender, the rate of return on Lender's capital with regard to the Loans is reduced to a level below that which Lender could have achieved but for such circumstances, then in such case and upon notice from Lender to Borrower, from time to time, Borrower shall pay Lender such additional amount or amounts as shall compensate Lender for such reduction in Lender's rate of return. Such notice shall contain the statement of Lender with regard to any such amount or amounts which shall, in the absence of manifest error, be binding upon Borrower. In determining such amount, Lender may use any 20 reasonable method of averaging and attribution that it deems applicable. SECTION III - COLLATERAL 3.1. Description: 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, whether now owned or hereafter acquired, created or arising and wherever located: (i) Accounts - All Accounts; (ii) Inventory - All Inventory; (iii) General Intangibles - All General Intangibles; (iv) Equipment - All Equipment; (v) Deposit Accounts - All Deposit Accounts; (vi) Chattel Paper - All Chattel Paper; (vii) Documents - All Documents; (viii) Instruments - All Instruments; (ix) Fixtures - All Fixtures; (x) Goods - All Goods; (xi) Letter of Credit Rights - All Letter of Credit Rights; (xii) Supporting Obligations - All Supporting Obligations; (xiii) Property in Lender's Possession - All Property of Borrower, now or hereafter in Lender's possession; (xiv) Investment Property - All Investment Property; (xv) Commercial Tort Claims - All Commercial Tort Claims identified and described in Schedule 5.20 (as amended or supplemented from time to time); 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). 21 b. Real Property: Borrower shall execute and deliver to Lender the Mortgage, which shall constitute a first priority Lien upon the Real Property. 3.2. Lien Documents: At Closing and thereafter as Lender deems necessary, Borrower shall execute and deliver to Lender, or have executed and delivered (all in form and substance satisfactory to Lender and its counsel): a. The Mortgage and Assignment of Rents and Leases in proper form for recording in the jurisdiction where the Real Property is located, together with a title insurance policy (in an amount and issued by a title company acceptable to Lender) insuring the Mortgage as a first priority Lien on the Real Property, subject only to the written exceptions approved by Lender; b. Any other agreements, documents, instruments and writings, including, without limitation, the Intellectual Property 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; and c. Financing Statements pursuant to the UCC, which Lender may file in any jurisdiction where Borrower is organized or in any other jurisdiction that Lender deems appropriate. 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. 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. 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, 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): 22 (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 incorporation and in the States of New Jersey, Ohio and California. 3.5. Landlord's and Warehouseman's Waivers: Except for Inventory maintained at VTech Communications, Inc. ("VTech") (which is subject to the limitation set forth in Section 7.11 of this Agreement), Borrower will cause each other owner of any premises occupied by Borrower or to be occupied by Borrower and each warehouseman of any warehouse, where, in either event Collateral in excess of One Million Dollars ($1,000,000) 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. Notwithstanding anything contained to contrary herein, Borrower shall not store Collateral in excess of One Million Seven Hundred Fifty Thousand Dollars ($1,750,000) (not including the value of Inventory maintained at VTech), in the aggregate, at locations for which Borrower has not obtained landlord's and/or warehouseman waivers. 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. 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: (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) file in the name of Borrower any financing statements, and execute in the name of Borrower any 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; and (c) during the continuance of an Event of Default, 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. 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: 23 a. this Agreement, the Notes and each of the other Loan Documents all properly executed; 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 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, (ii) Borrower's Articles or Certificate of Incorporation and By-laws, (iii) resolutions of Surety's board of directors authorizing the execution, delivery, and performance of the Intellectual Property Agreements and (iv) Surety's Articles or Certificate of Incorporation and By-laws ; d. an incumbency certificate for Borrower identifying all Authorized Officers, with specimen signatures; e. a written opinion of Borrower's and Surety'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 September 30, 2001; i. payment by Borrower of all fees including, without limitation, the Revolving Credit Closing Fee, the Term Loan A Closing Fee, the Term Loan B Closing Fee, the Monitoring Fee, and Expenses associated with the Loans; j. Uniform Commercial Code, judgment, federal and state tax lien searches against Borrower and Surety, at Borrower's expense, showing that the Property of each such Person is not subject to any Liens except for Permitted Liens, together with Good Standing and Corporate Tax Lien Search Certificates, showing no Liens on such Person's Property, and showing Borrower to be in good standing in the States of Delaware, New Jersey, Ohio and California and Surety to be in good standing in the State of Delaware; k. an initial Borrowing Certificate dated the Closing Date; l. an endorsement adding the Lender as payee under the Credit Insurance; m. [reserved]; n. an environmental survey, at Lender's expense, of the Real Property performed by an engineering firm acceptable and approved to Lender; 24 o. properly delivered termination statements and discharge(s) of mortgage releasing any Lien(s) on the Collateral in favor of any third party; p. a title insurance commitment as required under Section 3.2; q. evidence of insurance and insurance certifications as required under Section 6.2; and r. Lender's successful participation, on terms satisfactory to Lender, of no less than $5,000,000 under Term Loan A and Term Loan B to a financial institution acceptable to Lender. 4.2. Absence of Certain Events: At the Closing Date, no Default or Event of Default hereunder shall have occurred and be continuing. 4.3. 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. 4.4. 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. 4.5. Officers' Certificate: Lender shall have received a certificate dated the Closing Date and signed by the chief financial officer of Borrower certifying that all of the conditions specified in this Section have been fulfilled. 4.6. 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") at Philadelphia, Pennsylvania. 4.7. 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. 4.8. 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; 25 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 2.5 hereof; e. No Lien (other than a Permitted Lien) has been imposed on Borrower; and 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 Term Loans to Borrower, Borrower warrants and represents to Lender that: 5.1. Corporate Organization and Validity: a. Borrower (i) is a corporation duly organized and validly existing under the laws of its state of incorporation, (ii) has the corporate power and authority to operate its business and to own its Property and (iii) is duly qualified to engage in the business it conducts in each state except where the failure to so qualify does not and could not be reasonably expected to 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 a part hereof. b. The making and performance of this Agreement and the other Loan Documents will not violate any applicable law, government rule or regulation, court or administrative order or other such order, or the charter, minutes or bylaw provisions of Borrower or violate or result in a default (immediately or with the passage of time) under any material 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 material agreement or instrument to which it is a party or by which it may be bound which violation has or could be reasonably expected to have a Material Adverse Effect, or of its charter, minutes or bylaw provisions. c. Borrower has all requisite corporate 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 corporation 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 26 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. 5.3. Pending Litigation: There are no judgments or judicial or administrative orders or proceedings pending, or to the knowledge of Borrower, threatened, against Borrower, or any Subsidiary of 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 against Borrower, or any Subsidiary of Borrower, in any court or before any Governmental Authority. Neither Borrower, nor any Subsidiary, is in default with respect to any order of any Governmental Authority. To the knowledge of Borrower, no executive officer of Borrower, or any Subsidiary of Borrower, has been indicted in connection with or convicted of engaging in, 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, 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, except (a) such as have been duly obtained or made prior to the date hereof and (b) such that the failure to obtain or make would not have a Material Adverse Effect. 5.6. Taxes: Except as set forth on Schedule "5.6", 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 their 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. Except as set forth on Schedule "5.6", 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 (if applicable) balance sheet of Borrower as of December 31, 2000, 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 (if applicable) balance sheet of Borrower as of September 30, 2001, 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 December 31. Borrower's federal tax identification number and state organizational number for UCC purposes are as shown on Schedule "5.7" attached hereto and made part hereof. 27 5.8. Full Disclosure: Neither the financial statements referred to in Section 5.7, nor this Agreement or related agreements and documents or any written statement furnished by Borrower to Lender in connection with the negotiation of the Loans and contained in any financial statements or documents relating to Borrower contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein or herein not 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. 5.9. Subsidiaries: Borrower does not have any Subsidiaries except as shown on Schedule "5.9" attached hereto and made a part hereof. Schedule 5.9 shows the issued and outstanding Capital Stock of each Subsidiary and the holder thereof. No Consolidated Subsidiary, that is listed on Schedule 5.9 (other than Blonder Tongue Investment Company), has any assets in excess of Ten Thousand Dollars ($10,000). 5.10. Guarantees, Contracts, etc.: a. Borrower does not own or hold equity or long term debt investments in, have any outstanding advances to, or serve as guarantor, surety or accommodation maker for the obligations of any Person, and has not entered into any leases for real or personal Property (whether as landlord or tenant), except as shown on Schedule "5.10", attached hereto and made part hereof. b. 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. c. 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 except where the failure to obtain such licenses, permits, franchises or other governmental authorization does not or could not be reasonably expected to have a Material Adverse Effect. 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, if applicable, 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 28 thereunder which could cause a Material Adverse Effect, (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 liability which could cause a Material Adverse Effect, or (iv) has been terminated if such termination would subject Borrower to any liability which could cause a Material Adverse Effect. 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, as defined in Section 4001(a)(3) of ERISA, in which Borrower participates. All Pension 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 in 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 could be reasonably expected to 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. 5.12. Business Interruptions: Within five (5) years prior to the date hereof, none of the business, Property or operations of Borrower has 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. 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 by Borrower and all invoices issued by Borrower 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 material 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 has the right to use 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)." To its knowledge, Borrower is not in violation of any rights of any other Person with respect to such Property. 29 c. Except as shown on Schedule "5.13(c)" attached hereto and made a 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 a 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 or reasonably be expected to impair the fair saleable value thereof. c. Borrower has not received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws and Borrower has no knowledge that any such notice will be received or is being threatened. d. To the best of Borrower's knowledge after due inquiry, Hazardous Substances have not been transported or disposed of 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. 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. 30 5.17. Capital Stock: With respect to issuances by Borrower, 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 issued 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 issuance and delivery of securities. Except for the rights and obligations shown on Schedule "5.17" and for issuances contemplated by Borrower's stock option plans listed on Schedule "5.17", there are no subscriptions, warrants, options, calls, commitments, rights or agreements by which 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 a part hereof under Borrower's name, Borrower will have granted to Lender, and Lender will have perfected first priority Liens in the Collateral, superior in right to any and all other existing Liens (other than Permitted Liens). 5.20. Commercial Tort Claims: 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: 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. 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, a. all taxes, assessments and governmental charges or levies imposed upon it or upon Borrower's Property, and b. all claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons entitled to the benefit of statutory or common law Liens, which, if 31 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 and Mortgagee 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 (but only a check in excess of Five Hundred Thousand Dollars ($500,000) if no Event of Default has occurred) 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 prior written notice to Lender. 32 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 be reasonably expected to 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. 6.3. Business Conducted: Borrower shall continue in the business presently operated by it using its best efforts to maintain its customers and goodwill. Without Lender's prior written consent, 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 One Hundred Thousand Dollars ($100,000) 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), as defined in Section 3(2) of ERISA, in a manner that will satisfy the minimum funding standards of Section 302 of ERISA, if applicable, (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), which could cause a Material Adverse Effect, 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 33 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. Cash Flow Coverage Ratio: Borrower shall have and maintain, as of each fiscal quarter end beginning with the fiscal quarter ending June 30, 2002, a Cash Flow Coverage Ratio of not less than 1.15 to 1.0, measured quarterly on a rolling four quarter basis as of the last day of each fiscal quarter. b. Leverage Ratio: Borrower shall have and maintain, as of each fiscal year beginning with the fiscal year ending December 31, 2002 a Leverage Ratio of no more than 1.75 to 1.0, measured annually, as of the last day of each fiscal year. c. Consolidated Operating Income: Borrower shall have and maintain as of each fiscal quarter end beginning with the fiscal quarter ending June 30, 2002, a Consolidated Operating Income of Zero Dollars ($0) or greater, measured quarterly on a rolling four quarter basis as of the last day of each fiscal quarter. 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 five (5) days after submission to the SEC in accordance with all SEC rules and regulations, the consolidated and consolidating (if applicable) 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 (if applicable) 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, prepared by Borrower's management; (ii) within five (5) days after submission to the SEC in accordance with all SEC rules and regulations, the consolidated and consolidating (if applicable) income and cash flow statements of Borrower and its Subsidiaries for such year, and the consolidated and consolidating (if applicable) 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, together with copies of any management letters provided by such accountants to management of Borrower; 34 (iii) within fifteen (15) days of the end of each calendar month, Borrower's accounts receivable aging report, accounts payable aging report, 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 reasonably satisfactory to Lender; (iv) on a monthly basis and together with each Advance requested pursuant to Section 2.5., a borrowing base certificate, in the form of Exhibit "A" attached hereto ("Borrowing Certificate"); and (v) no later than February 15 of each fiscal year, Borrower's annual consolidated financial statement projections for that fiscal year. 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, notice of default, oral or written, given to Borrower by any creditor for borrowed money, or holding long term Indebtedness of Borrower in excess of Fifty Thousand Dollars ($50,000); and d. Securities and Other Reports - within five (5) days of filing with the Securities and Exchange Commission, one copy of each financial statement, report, notice or proxy statement required to be filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act or 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)(i) hereof and the annual financial statements delivered pursuant to Section 6.9(a)(ii) hereof, Borrower shall deliver to Lender a certificate ("Quarterly Compliance Certificate") (in the form of Exhibit "B" attached hereto and made a part hereof) from the chief financial officer, chief executive officer or president of Borrower 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; and 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. 35 6.11. Audits and Inspection: Borrower shall permit any of Lender's officers or other representatives to visit and inspect upon reasonable advance notice during Borrower's regular business hours any of the locations of Borrower, 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 reasonable out-of-pocket expenses); provided that, Lender shall not, unless a Default or Event of Default occurs, conduct more than one (1) audit per year. 6.12. Tax Returns, Financial Statements and Other Reports: Promptly after filing with the appropriate taxing authority, 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, and (b) the annual federal and state income tax returns of Surety. 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 Term Loan 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, or the discontinuance of any existing place of business; provided that Borrower may not establish any place of business outside of the United States. 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 (as defined in the UCC). Such notification shall include information sufficiently describing 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 and a detailed explanation of the events that gave rise to the claim. Borrower agrees, at Lender's request, to execute and deliver to Lender all documents and/or agreements necessary to grant to Lender a security interest in such 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. 36 6.18. Lock-Box: Upon Lender's request, Borrower shall establish a lock-box through which Borrower shall instruct all Account Debtors to make payment on Accounts. Borrower shall execute such agreements as Lender may reasonably require, to establish the lock-box. 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. Dispositions, Merger, Consolidation, Dissolution or Liquidation: a. Borrower shall not engage in any Asset Sale other than (i) Inventory sold in the ordinary course of Borrower's business; or (ii) 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 Subsidiaries existing on the Closing Date or any Surety and, in any case, where Borrower is the survivor, and Borrower shall not commence a dissolution or liquidation. c. Borrower shall not, and shall not permit any Surety, to transfer any assets to any Consolidated Subsidiary that is not a Surety. 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. 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 except for Permitted Liens. 7.4. Transactions With Affiliates or Subsidiaries: a. Subject to Section 7.1(c), Borrower shall not, and shall not permit any Surety to, 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, or is a Surety, and the transaction is in the ordinary course of and pursuant to the reasonable requirements of Borrower's or such Surety's business and upon terms substantially the same and no less favorable to Borrower or such Surety 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; (ii) such transaction is intended for incidental administrative purposes, or (iii) such transactions consist of payment of royalties, license fees, or any other amounts, to Blonder Tongue Investment Company in connection with that certain License Agreement dated as of January 1, 2000, by and between Borrower and Blonder Tongue Investment Company, or such other intellectual property arrangements that may be in effect between Borrower and any of its Subsidiaries or Affiliates. 37 b. Borrower shall not create or acquire any Subsidiary. 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 [except for Borrower's obligations under its customer accommodation program as in effect from time to time. 7.6. Distributions, Bonuses and Other Indebtedness: Borrower shall not: (a) declare or pay or make any forms of Distribution, except for Permitted Distributions; (b) declare or pay any bonus compensation to its officers if a Default or Event of Default is outstanding or, after giving effect to any such bonus compensation, a Default or Event of Default would occur; (c) hereafter incur or become liable for any Indebtedness other than Permitted Indebtedness. 7.7. Loans and Investments: Borrower shall not make or have outstanding loans, advances, extensions of credit or capital contributions to, 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 with Lender's prior written consent. 7.11. Inventory Maintained at VTech: Borrower shall not maintain or store Inventory in excess of One Million Dollars ($1,000,000) at VTech, at any given time. 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 Loans within five (5) days of the date such payment is due and payable; or 38 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 twenty (20) Business Days after 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 6.8 and Section 7 for which no cure period shall exist), such failure continues for thirty (30) days after the occurrence thereof; or d. Financial Information - if any 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 Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate with respect to any portion of any Property of Borrower; or f. Warranties or Representations - if any warranty, representation or other written 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 Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate; (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; or (iii) if Borrower shall default under any Government Contract, which default could reasonably be expected to have a Material Adverse Effect; or h. Other Agreements with Lender - if Borrower breaches or violates the terms of, or if a default 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 Two Hundred Fifty Thousand Dollars ($250,000) 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 twenty (20) consecutive days without being vacated, discharged, satisfied or stayed pending appeal (and if stayed, is not discharged within ten (10) days after expiration of such stay); 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 39 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 ninety (90) days to obtain the dismissal or discharge of involuntary proceedings filed against it, it being understood that during such ninety (90) 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 Agreement - if any material breach or default occurs under the Surety Agreement or if the Surety Agreement, or any obligation to perform thereunder is terminated; or s. Liens - if, other than as a result of Lender's negligence, 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 t. Other Loan Documents - if any other Person (other than Lender) party to a Loan Document, breaches or violates any material term, provision or condition of such Loan Document. 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. 40 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 (other than Obligations under an Interest Hedging Investment) 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), 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 (d) 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. d. Borrower hereby agrees that a notice received by it at least ten (10) days before the time of any intended public sale or of the time after which any private sale or other 41 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 shall 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: If any bank account of Borrower with 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, the immediate right of set-off and may apply the funds or amount thus set-off against any of Borrower's Obligations hereunder. SECTION IX - MISCELLANEOUS 9.1. Governing Law: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW JERSEY(WITHOUT REGARD TO NEW JERSEY'S CONFLICTS OF LAW PRINCIPLES). 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. 42 9.4. Indemnity: a. Borrower 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. 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 and delivery 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 and reasonable charges of any expert consultant to Lender and (ii) the enforcement of any Obligations of, or the collection of any payments owing from, Borrower under this Agreement and/or the other Loan Documents or protection or defense of the rights of Lender under the Loan Documents, following the occurrence of any Event of Default or in connection with 43 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 outside counsel for Lender (collectively, the "Expenses"); 9.7. Brokerage: This transaction was brought about and entered into by Lender and Borrower acting as principals and 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: Commerce Bank, N.A. 1001 Durham Avenue South Plainfield, NJ 07080 Attention: Kurt J. Fuoti, Vice President Telecopy No. (908) 756-7021 With copies to: Blank Rome Comisky & McCauley LLP One Logan Square Philadelphia, PA 19103 Attention: Steven M. Miller, Esquire Telecopy No. (215) 569-5522 If to Borrower to: Blonder Tongue Laboratories, Inc. One Jake Brown Road Old Bridge, NJ 08857 Attention: President Telecopy No. (732) 679-4353 With copies to: Stradley, Ronon, Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 Attention: Gary P. Scharmett, Esquire Telecopy No. (215) 564-8120 44 b. Any notice sent by Lender, or 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 and 9.7, shall survive the termination of this Agreement and payment of the Obligations for a period of one (1) years. 9.11. Successors and Assigns: 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. 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 fails 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 45 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), with at least ten (10) days prior notice to Borrower if Borrower fails to do so, 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. 9.18. Consent to Jurisdiction: Borrower and Lender each hereby irrevocably consent to the non-exclusive jurisdiction of the Courts of the State of New Jersey or the United States District Court for New Jersey 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. 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. 46 IN WITNESS WHEREOF, the undersigned parties have executed this Agreement the day and year first above written. Blonder Tongue Laboratories, INC. By: /s/ James A. Luksch ----------------------------------------- James A. Luksch President and Chief Executive Officer COMMERCE BANK, N.A. By: /s/ Kurt J. Fuoti ----------------------------------------- Kurt J. Fuoti, Vice President 47 EX-10 4 blonder10q03312002ex10-2.txt EXHIBIT 10.2 EXHIBIT 10.2 REVOLVING CREDIT NOTE $7,000,000 March 20, 2002 FOR VALUE RECEIVED and intending to be legally bound, the undersigned, BLONDER TONGUE LABORATORIES, Inc., a Delaware corporation, ("Borrower"), promises to pay, in lawful money of the United States of America, to the order of COMMERCE BANK, N.A. ("Lender"), at 1701 Route 70 East, Cherry Hill, New Jersey 08034, the maximum aggregate principal sum of Seven Million Dollars ($7,000,000) or such lesser sum which represents the principal balance outstanding under the Revolving Credit established pursuant to the provisions of that certain Loan and Security Agreement dated of even date herewith, between Borrower and Lender (as it may be supplemented, restated, superseded, amended or replaced from time to time, "Loan Agreement"). The outstanding principal balance hereunder shall be payable in accordance with the terms of the Loan Agreement. The actual amount due and owing from time to time hereunder shall be evidenced by Lender's records of receipts and disbursements with respect to the Revolving Credit, which shall, in the absence of manifest error, be conclusive evidence of the amount. All capitalized terms used herein without further definition shall have the respective meanings ascribed thereto in the Loan Agreement. Borrower further agrees to pay interest on the outstanding principal balance hereunder from time to time at the per annum rates set forth in the Loan Agreement. Interest shall be calculated on the basis of a year of 360 days but charged for the actual number of days elapsed, and shall be due and payable as set forth in the Loan Agreement. This Revolving Credit Note is that certain Revolving Credit Note referred to in the Loan Agreement. If an Event of Default occurs and is continuing under the Loan Agreement, the unpaid principal balance of this Revolving Credit Note along with all accrued and unpaid interest and unpaid Expenses shall become, or may be declared, immediately due and payable as provided in the Loan Agreement. The obligations evidenced by this Revolving Credit Note are secured by the Collateral. This Revolving Credit Note may be prepaid only in accordance with the terms and conditions of the Loan Agreement. Borrower hereby waives protest, demand, notice of nonpayment and all other notices in connection with the delivery, acceptance, performance or enforcement of this Revolving Credit Note. This Revolving Credit Note shall be governed by and construed in accordance with the substantive laws of the jurisdiction set forth in Section 9.1 of the Loan Agreement. The provisions of this Revolving Credit Note are to be deemed severable and the invalidity or unenforceability of any provision shall not affect or impair the remaining provisions of this Revolving Credit Note which shall continue in full force and effect. No modification hereof shall be binding or enforceable against Lender unless approved in writing by Lender. BORROWER (AND LENDER BY ITS ACCEPTANCE HEREOF) HEREBY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION 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. IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower has executed these presents the day and year first above written. BLONDER TONGUE LABORATORIES, INC. By: /s/ James A. Luksch ------------------------------------ James A. Luksch, President and CEO - 2 - EX-10 5 blonder10q03312002ex10-3.txt EXHIBIT 10.3 EXHIBIT 10.3 TERM LOAN A NOTE $9,000,000 March 20, 2002 FOR VALUE RECEIVED and intending to be legally bound, the undersigned, BLONDER TONGUE LABORATORIES, Inc., a Delaware corporation (the "Borrower"), promises to pay, in lawful money of the United States of America, to the order of COMMERCE BANK, N.A. ("Lender"), at 1701 Route 70 East, Cherry Hill, New Jersey 08034, the original principal sum of Nine Million Dollars ($9,000,000) under the Term Loan A established pursuant to the provisions of that certain Loan and Security Agreement, of even date herewith, by and between Borrower and Lender (as it may be supplemented, restated, superseded, amended or replaced from time to time, the "Loan Agreement"). All capitalized terms used herein without further definition shall have the respective meanings ascribed thereto in the Loan Agreement. The principal balance of the Term Loan A shall be paid in accordance with the terms of the Loan Agreement. Borrower further agrees to pay interest on the outstanding principal balance hereunder from time to time at the per annum rates set forth in the Loan Agreement. Interest shall be calculated on the basis of a year of 360 days but charged for the actual number of days elapsed, and shall be due and payable as set forth in the Loan Agreement. This Term Loan A Note is that certain Term Loan A Note referred to in the Loan Agreement. If an Event of Default occurs and is continuing under the Loan Agreement, the unpaid principal balance of this Term Loan A Note along with all accrued and unpaid interest and unpaid Expenses shall become, or may be declared, immediately due and payable as provided in the Loan Agreement. The obligations evidenced by this Term Loan A Note are secured by the Collateral. This Term Loan A Note may be prepaid only in accordance with the terms and conditions of the Loan Agreement. Borrower hereby waives protest, demand, notice of nonpayment and all other notices in connection with the delivery, acceptance, performance or enforcement of this Term Loan A Note. This Term Loan A Note shall be governed by and construed in accordance with the substantive laws of the jurisdiction set forth in Section 9.1 of the Loan Agreement. The provisions of this Term Loan A Note are to be deemed severable and the invalidity or unenforceability of any provision shall not affect or impair the remaining provisions of this Term Loan A Note which shall continue in full force and effect. No modification hereof shall be binding or enforceable against Lender unless approved in writing by Lender. BORROWER (AND LENDER BY ITS ACCEPTANCE HEREOF) HEREBY WAIVES 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. IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower has executed these presents the day and year first above written. BLONDER TONGUE LABORATORIES, INC. By: /s/ James A. Luksch ------------------------------------ James A. Luksch, President and CEO 2 EX-10 6 blonder10q03312002ex10-4.txt EXHIBIT 10.4 EXHIBIT 10.4 TERM LOAN B NOTE $3,500,000 March 20, 2002 FOR VALUE RECEIVED and intending to be legally bound, the undersigned, BLONDER TONGUE LABORATORIES, Inc., a Delaware corporation (the "Borrower"), promises to pay, in lawful money of the United States of America, to the order of COMMERCE BANK, N.A. ("Lender"), at 1701 Route 70 East, Cherry Hill, New Jersey 08034, the original principal sum of Three Million Five Hundred Thousand Dollars ($3,500,000) under the Term Loan B established pursuant to the provisions of that certain Loan and Security Agreement, of even date herewith, by and between Borrower and Lender (as it may be supplemented, restated, superseded, amended or replaced from time to time, the "Loan Agreement"). All capitalized terms used herein without further definition shall have the respective meanings ascribed thereto in the Loan Agreement. The principal balance of the Term Loan B shall be paid in accordance with the terms of the Loan Agreement. Borrower further agrees to pay interest on the outstanding principal balance hereunder from time to time at the per annum rates set forth in the Loan Agreement. Interest shall be calculated on the basis of a year of 360 days but charged for the actual number of days elapsed, and shall be due and payable as set forth in the Loan Agreement. This Term Loan B Note is that certain Term Loan B Note referred to in the Loan Agreement. If an Event of Default occurs and is continuing under the Loan Agreement, the unpaid principal balance of this Term Loan B Note along with all accrued and unpaid interest and unpaid Expenses shall become, or may be declared, immediately due and payable as provided in the Loan Agreement. The obligations evidenced by this Term Loan B Note are secured by the Collateral. This Term Loan B Note may be prepaid only in accordance with the terms and conditions of the Loan Agreement. Borrower hereby waives protest, demand, notice of nonpayment and all other notices in connection with the delivery, acceptance, performance or enforcement of this Term Loan B Note. This Term Loan B Note shall be governed by and construed in accordance with the substantive laws of the jurisdiction set forth in Section 9.1 of the Loan Agreement. The provisions of this Term Loan B Note are to be deemed severable and the invalidity or unenforceability of any provision shall not affect or impair the remaining provisions of this Term Loan B Note which shall continue in full force and effect. No modification hereof shall be binding or enforceable against Lender unless approved in writing by Lender. BORROWER (AND LENDER BY ITS ACCEPTANCE HEREOF) HEREBY WAIVES 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. IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower has executed these presents the day and year first above written. BLONDER TONGUE LABORATORIES, INC. By: /s/ James A. Luksch ------------------------------------ James A. Luksch, President and CEO 2 EX-10 7 blonder10q03312002ex10-5.txt EXHIBIT 10.5 EXHIBIT 10.5 This instrument was prepared by: --------------------------------- Name --------------------------------- Signature ================================================================================ MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING by and between BLONDER TONGUE LABORATORIES, INC., a Delaware Corporation ("Mortgagor") and COMMERCE BANK, N.A., a National Banking Association ("Mortgagee") Amount: $19,500,000 Dated: March 20, 2002 Premises: Township of Old Bridge County of Middlesex State of New Jersey ================================================================================ MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING -------------------- THIS MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING made the 20th day of March, 2002, between BLONDER TONGUE LABORATORIES, INC., a Delaware corporation, having its principal business office at an address at One Jake Brown Road, Old Bridge, New Jersey 08857 ("Mortgagor"), and COMMERCE BANK, N.A., a National Banking Association, having its principal business office at 1701 Route 70 East, Cherry Hill, New Jersey 08034 ("Mortgagee"). W I T N E S S E T H - - - - - - - - - - A. Pursuant to a certain Loan and Security Agreement of even date herewith between Mortgagor and Mortgagee (as same may be supplemented, restated, superseded, amended or replaced from time to time, the "Loan Agreement"), Mortgagor has executed and delivered to Mortgagee a certain Revolving Credit Note bearing even date herewith in the principal amount of Seven Million Dollars ($7,000,000) (the "Revolving Credit Note"), a certain Term Loan A Note bearing even date herewith in the principal amount of Nine Million Dollars ($9,000,000) (the "Term Loan A Note") and a certain Term Loan B Note bearing even date herewith in the principal amount of Three Million Five Hundred Thousand Dollars ($3,500,000) (the "Term Loan B Note" and together with the Revolving Credit Note and the Term Loan A Note being collectively hereinafter referred to as, the "Notes"). B. As a condition to Mortgagee making the loans to Mortgagor evidenced by the Notes, Mortgagor has agreed to grant Mortgagee a mortgage on the Land (as defined below). C. Capitalized terms used without further definition herein shall have the meaning set forth in the Loan Agreement. NOW, THEREFORE, in consideration of the indebtedness evidenced by the Notes, and as security for: (1) payment to Mortgagee of all Obligations; (2) payment to Mortgagee of all future or additional advances which may be made by Mortgagee to or for the account of Mortgagor, together with interest on such advances (including, without limitation, all sums which Mortgagee may advance under this Mortgage with respect to the Real Estate (as defined below) to pay for taxes, assessments, maintenance charges, insurance premiums or costs incurred for the protection of the Real Estate or the lien of this Mortgage, and expenses incurred by Mortgagee by reason of default by Mortgagor under this Mortgage); and (3) performance of the undertakings and covenants contained in the Loan Documents. Mortgagor has granted, conveyed, bargained, sold, aliened, enfeoffed, released, confirmed and mortgaged, and by these presents does hereby grant, convey, bargain, sell, alien, enfeoff, release, confirm and mortgage unto Mortgagee all that certain real estate situate in the Township of Old Bridge, Middlesex County, State of New Jersey, more particularly described in Exhibit "A" attached hereto and made a part hereof (the "Land"); TOGETHER WITH all of Mortgagor's right, title and interest now owned or hereafter acquired in: (1) all buildings and improvements now or hereafter situate upon the Land (the "Improvements") (the Land and Improvements being hereinafter collectively referred to as the "Real Estate"); (2) all present and future leases, subleases and other occupancy agreements covering all or any portion of the Real Estate (which together with Mortgagor's interest as landlord thereunder are herein collectively referred to herein as the "Leases"); (3) all rents, issues and profits payable under the Leases and under any future renewals, extensions, amendments or modifications thereof; (4) all fixtures, appliances, machinery, equipment, furnishings and furniture of any nature whatsoever, and other articles of personal property now or hereafter owned by Mortgagor and (i) which now or at any time hereafter are installed in, attached to or situated in or upon the Real Estate; (ii) used or intended to be used in connection with the Real Estate, or in the operation or maintenance of the Real Estate (including, without limitation, communications, computer and security systems and the software system therefore); or (iii) the plant or business situate thereon, whether or not the personal property is or shall be affixed thereto, expressly including, but without limiting the generality of the foregoing, all articles of personal property listed on Exhibit "B" attached hereto and made part hereof; (5) all building materials, fixtures, building machinery and building equipment owned by Mortgagor and delivered on site to the Real Estate during the course of, or in connection with, the construction of, or reconstruction of, or remodeling of any Improvements from time to time during the term hereof; (6) any and all tenements, hereditaments and appurtenances belonging to the Real Estate or any part thereof, or in any way appertaining thereto, and all streets, alleys, passages, ways, water courses, and all leasehold estates, easements and covenants now existing or hereafter created for the benefit of Mortgagor or any subsequent owner or tenant of the Real Estate over ground adjoining the Real Estate and all rights to enforce the maintenance thereof, and all other rights, liberties and privileges of whatsoever kind or character, together with any after-acquired property interest in the Real Estate which Mortgagor may at any time hereafter have or acquire, and all the estate, right, title, interest, property, possession, claim and demand whatsoever, at law or in equity, of Mortgagor in and to the Real Estate or any part thereof; (7) To the extent assignable, all management agreements, service contracts, license agreements, concession agreements, written or oral, relating to the use and occupancy of the Real Estate now or hereafter existing and the reversions and remainders, income, rents, issues and profits arising therefrom and all deposits (including tenant security deposits) thereunder, and all rights and benefits now or hereafter accruing to Mortgagor under any and all guarantees of the 2 obligations of any tenant, licensee, concessionaire or other occupant thereunder, as any of the foregoing may be amended, extended, renewed or modified from time to time; (8) All reciprocal easement agreements, operating agreements, and similar agreements however labeled or denominated affecting the Real Estate; (9) All other documentation belonging to or in Mortgagor's possession now or hereafter existing in connection with the use or operation of the Real Estate including any plans and specifications pertaining to the Improvements, all appraisals, engineering, environmental, soils, marketing and other reports and studies relating to the Real Estate, all permits, licenses, and contract rights, warranties, guarantees, tenant lists, correspondence with present or prospective tenants or suppliers, advertising materials, and telephone exchange numbers as identified in such advertising materials; and (10) All proceeds of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including without limitation, proceeds of insurance and condemnation awards. All of the above-mentioned Leases, fixtures, machinery, furniture, equipment, tenements, hereditaments and appurtenances, agreements and other documents, and other property interests are sometimes collectively referred to herein as the "Mortgaged Property". TO HAVE AND TO HOLD the Mortgaged Property hereby conveyed or mentioned and intended so to be, unto Mortgagee, to its own use forever. PROVIDED ALWAYS, this instrument is upon the express condition that, upon payment in full of all Obligations and termination of the Revolving Credit, then this Mortgage and the estate hereby granted shall cease and become void. MORTGAGOR REPRESENTS, COVENANTS AND WARRANTS to and with Mortgagee that until the Obligations are fully repaid and the Revolving Credit is terminated: 1. Payment and Performance. Mortgagor shall pay to Mortgagee all Obligations, in accordance with the terms of the Loan Documents. Mortgagor shall perform and comply with all the agreements, conditions, covenants, provisions and stipulations of this Mortgage and the other Loan Documents to which it is a party. Mortgagor shall timely perform all of its obligations and duties as landlord under any Leases of any portion of the Mortgaged Property now or hereafter in effect. 2. Warranty of Title. Mortgagor warrants to Mortgagee that Mortgagor possesses good and marketable unencumbered fee simple title to the Mortgaged Property, except for those title exceptions listed in the lender's title insurance policy approved by and issued to Mortgagee insuring the priority of the lien of this Mortgage. 3. Maintenance of Mortgaged Property. Mortgagor shall keep and maintain the Mortgaged Property and the abutting sidewalks and curbs in good order and condition (ordinary wear and tear excepted) in compliance with all applicable laws and in a rentable and tenantable 3 state of repair, and will make, as and when necessary, all repairs, renewals and replacements, structural and nonstructural, exterior and interior, ordinary and extraordinary, foreseen and unforeseen. Mortgagor shall abstain from and shall not permit the commission of waste in or about the Mortgaged Property, shall not remove or demolish any portion of the Improvements, or, other than in the ordinary course of business, any machinery, equipment or other personal property located thereon or alter the structural character or exterior appearance of any Improvements, without the prior written consent of Mortgagee. Mortgagor shall not permit the Mortgaged Property to become deserted or abandoned. Mortgagor shall operate the Mortgaged Property as it is currently being operated, and Mortgagor shall not change the use of the Mortgaged Property from its current use without first obtaining the prior written consent of Mortgagee. 4. Insurance. (i) Mortgagor shall provide and maintain insurance coverage in accordance with the terms of the Loan Agreement. (b) Reserved. (c) If the insurance, or any part thereof, shall expire, or be canceled, or become void or voidable by reason of Mortgagor's breach of any condition thereof, or if Mortgagee determines that such coverage is unsatisfactory by reason of the failure or impairment of the capital of any company in which the insurance may then be carried or the lowering of such insurance carrier's rating from its rating on the date hereof, or if for any reason whatever the insurance shall, in Mortgagee's reasonable discretion, be unsatisfactory to Mortgagee, Mortgagor shall place new insurance on the Mortgaged Property, reasonably satisfactory to Mortgagee. (d) In the event of loss, Mortgagor will give prompt notice thereof to Mortgagee, and Mortgagee may make proof of loss if not made promptly by Mortgagor; provided, however, that any adjustment of a proof of loss shall require the prior written consent of Mortgagee. Such policies of insurance and all renewals thereof are hereby assigned to Mortgagee as additional security for payment of the Obligations and Mortgagor hereby agrees that after an Event of Default any values available thereunder upon cancellation or termination of any of said policies or renewals, whether in the form of return of premiums or otherwise, shall be payable to Mortgagee as assignee thereof. If Mortgagee becomes the owner of the Mortgaged Property or any part thereof by foreclosure or otherwise, such policies, including all right, title and interest of Mortgagor thereunder, shall become the absolute property of Mortgagee. (e) Mortgagee shall retain and apply the proceeds of any such insurance to reduction of the indebtedness secured hereby, or to restoration or repair of the property damaged, in accordance with the terms of the Loan Agreement. Mortgagee's application of insurance proceeds to reduction of the indebtedness secured by this Mortgage shall not excuse or modify Mortgagor's obligation to continue to pay the installments of interest and/or principal required under the Notes unless the amount of such insurance proceeds received by Mortgagee is sufficient to repay in full all interest, principal and all other sums required to be paid to Mortgagee under the Notes and this Mortgage. 4 5. Taxes and Other Charges. (a) Mortgagor shall pay when due and payable and prior to the time interest, penalties or additions are due thereon, without any deduction, defalcation or abatement, all real estate taxes, municipal assessments and liens, water and sewer rents, and other governmental levies and all other charges or claims of every nature and kind which may be assessed, levied, imposed, suffered, placed or filed at any time against Mortgagor, the Mortgaged Property or any part thereof or against the interest of Mortgagee therein, or which by any present or future law may have priority over the indebtedness secured hereby either in lien or in distribution out of the proceeds of any judicial or other sale (collectively "Taxes"); and upon request by Mortgagee, Mortgagor shall produce to Mortgagee, official receipts for the payment of the Taxes; provided, however, that if, pursuant to this Mortgage, Mortgagor shall have deposited with Mortgagee before the due date thereof sums sufficient to pay any Taxes, and Mortgagor is not otherwise in default under the Loan Documents, the Taxes shall be paid by Mortgagee. Mortgagor will not apply for or claim any deduction, by reason of this Mortgage, from the taxable value of all or any part of the Mortgaged Property. No credit shall be claimed or allowed on the interest payable on the Notes because of any Taxes paid. (b) Mortgagor shall procure for Mortgagee, at Mortgagor's expense, a real estate tax reporting service throughout the term of this Mortgage, and if Mortgagor fails to do so, Mortgagee may obtain such service directly and Mortgagor shall, upon demand, reimburse Mortgagee for the cost of such service. 6. Installments for Taxes and Other Charges. Without limiting the effect of Paragraphs 4 and 5, while an Event of Default exists, upon Mortgagee's request, Mortgagor shall pay to Mortgagee, monthly with the monthly installments of interest or principal and interest, an amount equal to one-twelfth (1/12) of the annual Taxes ("Escrow Items"). On demand by Mortgagee from time to time, Mortgagor shall pay to Mortgagee any additional sums necessary to pay the Escrow Items, all as estimated by Mortgagee. The amounts paid by Mortgagor shall be security for the Escrow Items and shall be used in payment thereof if Mortgagor is not otherwise in default under the Loan Documents. No amount so paid shall be deemed to be trust funds but may be commingled with general funds of Mortgagee, and no interest shall be payable thereon. If, pursuant to the Loan Documents, the entire unpaid principal debt secured hereby becomes due and payable, Mortgagee shall have the right, at its election, to apply any amount of Escrow Items held by Mortgagee against the entire indebtedness secured hereby. At Mortgagee's option, Mortgagee from time to time may waive, and after any such waiver may reinstate, the provisions of this Paragraph requiring the monthly payments of Escrow Items. 7. Corporate Existence and Taxes. Reserved. 8. Documentary and Other Stamps. If at any time the United States, the state in which the Mortgaged Property is located or any political subdivision thereof, or any department or bureau of any of the foregoing shall require documentary, revenue or other stamps or taxes on the Notes or this Mortgage, Mortgagor on demand shall pay for them with any interest or penalties payable thereon. 5 9. Other Taxes. If any law or ordinance now or hereafter imposes a tax directly or indirectly on Mortgagee with respect to the Mortgaged Property (other than an income tax, withholding tax or foreign taxes), the value of Mortgagor's equity therein, or the indebtedness evidenced by the Notes and secured by this Mortgage, Mortgagor shall have the right to contest such taxes but shall promptly pay such tax during the pendency of such contest. If Mortgagor fails to pay such tax or if Mortgagor is not lawfully permitted to pay such tax, Mortgagee, at its election, shall have the right at any time to give Mortgagor written notice declaring that the principal debt, with interest and other appropriate charges, shall be due on a specified date not less than sixty (60) days thereafter; provided, however, that such election shall be ineffective if, prior to the specified date, Mortgagor lawfully pays the tax (in addition to all other payments required hereunder) and agrees to pay the tax whenever it becomes due and payable thereafter, which agreement shall then constitute a part of this Mortgage. 10. Security Agreement. This Mortgage constitutes a security agreement under the Uniform Commercial Code in effect in the state where the Real Estate is situated and Mortgagor hereby grants to Mortgagee a security interest in all that property (and the proceeds thereof) included in the Mortgaged Property which might be deemed "personal property". Mortgagor shall deliver or file and refile any financing statements, continuation statements, or other security agreements Mortgagee may request from time to time to confirm the lien of this Mortgage with respect to such property. Without limiting the foregoing, Mortgagor hereby irrevocably appoints Mortgagee attorney in fact for Mortgagor to deliver and file such instruments for and on behalf of Mortgagor. Mortgagor shall not change its principal place of business or state of organization without giving Mortgagee at least thirty (30) days prior written notice thereof, which notice shall be accompanied by new financing statements in the same form as the financing statements delivered to Mortgagee on the date hereof except for the change of address. Mortgagor covenants to retain all of the Mortgaged Property within the county in which the Real Estate is located, other than equipment which may be removed in the ordinary course of business. Upon any Event of Default under this Mortgage, Mortgagee shall have, in addition to any other rights and remedies under the Loan Documents, all of the rights and remedies granted to a secured party under the Uniform Commercial Code with respect to all personal property. Mortgagor agrees that the personal property is not and will not be used or acquired for personal, family or household purposes. Upon an Event of Default under this Mortgage, (i) Mortgagee may require Mortgagor to assemble the personal property or any portion thereof, at a place designated by Mortgagee and reasonably convenient to both parties, and promptly to deliver such personal property to Mortgagee, or an agent or representative designated by it, (ii) Mortgagee, and its agents and representatives shall have the right to enter upon the Mortgaged Property to exercise Mortgagee's rights hereunder, and (iii) Mortgagee may sell, lease or otherwise dispose of the personal property at public sale, with or without having the personal property at the place of sale, and upon such terms and in such manner as Mortgagee may determine. Mortgagee may be a purchaser at any such sale. Unless the personal property is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Mortgagee shall give Mortgagor ten (10) days' prior written notice of the time and place of any public sale of the personal property or other intended disposition thereof, and Mortgagor agrees that such notice is reasonable. To the extent permitted by law, Mortgagor and Mortgagee agree that the items set forth on the financing statements shall be treated as part of the Real Estate and Improvements regardless of the fact that such items are set forth in the financing statement. Such items are 6 contained in the financing statements to create a security interest in favor of Mortgagee in the event such items are determined to be personal property under the law. Notwithstanding any release of any or all of that property included in the Mortgaged Property which is deemed "real property", any proceedings to foreclose this Mortgage or its satisfaction of record, the terms hereof shall survive as a security agreement with respect to the security interest created hereby and referred to above until the repayment or satisfaction in full of the obligations of Mortgagor as are now or hereafter evidenced by the Notes. 11. Compliance with Law and Other Matters. (a) Mortgagor shall comply with all material laws ordinances, regulations and orders (collectively "Laws") of all federal, state, municipal and other governmental authorities ("Governmental Authority") relating to the Mortgaged Property and the use and occupancy of the Mortgaged Property. (b) Mortgagor shall at all times maintain the legal existence of Mortgagor and, if and to the extent required by applicable law to enable it to own and operate the Mortgaged Property and to perform its obligations under the Notes and this Mortgage, its qualification to do business in the state in which the Mortgaged Property is located and, from time to time, file and record such certificates or instruments as may be necessary or desirable to maintain such existence and qualification and to permit the continued operation of its business. (c) Mortgagor will not initiate, join in or consent to any change in any private restrictive covenant, zoning ordinance or other public or private restrictions limiting or defining the uses which may be made of the Mortgaged Property or any part thereof, without the prior written consent of Mortgagee, which consent shall not be unreasonably withheld. (d) Mortgagor will comply with all material restrictive covenants, easement agreements and other recorded documents affecting the Mortgaged Property. Mortgagor will not record or permit to be recorded any document, instrument, agreement or other writing against the Mortgaged Property without the prior written consent of Mortgagee, which consent shall not be unreasonably withheld. (e) Mortgagor shall pay when due all utility charges which are incurred by Mortgagor, whether public or private and whether or not such charges are or may become liens on the Mortgaged Property. (f) Mortgagor agrees to subject to the lien of this Mortgage, in a form reasonably satisfactory to Mortgagee, all additional strips, gores, or parcels of land acquired by Mortgagor or any leasehold interest therein acquired by Mortgagor, which adjoin the Mortgaged Property, and all additional interest in and easements, rights and appurtenances to the Mortgaged Property above described and in and to said strips, gores and parcels, and to execute and deliver to Mortgagee such security agreements and extensions thereof as Mortgagee reasonably may request and promptly to pay Mortgagee's reasonable costs (including reasonable attorneys' fees) in connection therewith and the title insurance premiums necessary to insure such additional land is encumbered by this Mortgage as a first lien thereon. 7 (g) While an Event of Default exists, Mortgagor agrees to deliver to Mortgagee, within fifteen (15) days after written request by Mortgagee, any and all plans, specifications, renderings, studies, analyses, reports or evaluations in the possession of Mortgagor with respect to the physical condition of, or the development or use of, the Mortgaged Property or any part thereof. (h) Mortgagor shall not suffer or permit the Mortgaged Property to be used by the public in such manner as might reasonably tend to impair Mortgagor's title to the Mortgaged Property or any portion thereof, or in such manner as might reasonably make possible a right or rights of adverse usage or adverse possession by the public, as such, or of implied dedication of the Mortgaged Property or any portion thereof. 12. Inspection. Reserved. 13. Declaration of No Set-Off. Reserved. 14. Required Notices. Mortgagor shall notify Mortgagee promptly of the occurrence of any of the following: (a) a fire or other casualty causing damage in excess of $100,000 to the Mortgaged Property, (b) receipt of notice of eminent domain proceedings or condemnation of the Mortgaged Property, (c) receipt of a material notice from any Governmental Authority relating to the condition, structure, use or occupancy of the Mortgaged Property or any real estate adjacent to the Mortgaged Property, (d) receipt of any notice of default or threatened default, notice of lease termination or similar material notice from a tenant under any of the Leases, or (e) a material change in the occupancy of the Mortgaged Property. 15. Condemnation. (a) In the event of any condemnation or taking of any part of the Mortgaged Property by eminent domain, alteration of the grade of any street, or other injury to or decrease in the value of the Mortgaged Property by any public or quasi-public authority or corporation, all proceeds (that is, the award or agreed compensation for the damages sustained) allocable to Mortgagor, after deducting therefrom all costs and expenses (regardless of the particular nature thereof and whether incurred with or without suit) including attorneys' fees incurred by Mortgagee in connection with the collection of such proceeds, shall be applied as set forth in this Section 15. No settlement for the damages sustained shall be made by Mortgagor without Mortgagee's prior written approval, which approval shall not be unreasonably withheld. All the proceeds shall be applied in the order and in the amounts that Mortgagee, in Mortgagee's sole discretion, may elect, to the payment of principal (whether or not then due and payable), interest 8 or any other sums secured by this Mortgage. Notwithstanding the foregoing sentence and provided that no Event of Default has occurred and is continuing, Mortgagor may first apply such proceeds for the sole purpose of altering, restoring or rebuilding any part of the Mortgaged Property which may have been altered, damaged or destroyed as a result of the taking, alteration of grade or other injury to the Mortgaged Property. (b) If prior to the receipt of the proceeds by Mortgagee the Mortgaged Property shall have been sold on foreclosure of this Mortgage, Mortgagee shall have the right to receive the proceeds to the extent of: (i) the full amount of all such proceeds if Mortgagee is the successful purchaser at the foreclosure sale, or (ii) if any one other than Mortgagee is the successful purchaser at the foreclosure sale, any deficiency (as hereinafter defined) due to Mortgagee in connection with the foreclosure sale, with interest thereon at the rate set forth in the Notes, and reasonable counsel fees, costs and disbursements incurred by Mortgagee in connection with collection of such proceeds of condemnation and the establishment of such deficiency. For purposes of this subparagraph (b) (ii), the word "deficiency" shall be deemed to mean the difference between (A) the net sale proceeds actually received by Mortgagee as a result of such foreclosure sale less any costs and expenses incurred by Mortgagee in connection with enforcement of its rights under the Notes, this Mortgage and the other Loan Documents and (B) the aggregate amount of the Obligations. (c) Mortgagee shall have the right to prosecute to final determination or settlement an appeal or other appropriate proceedings in the name of Mortgagee or Mortgagor, for which Mortgagee is hereby appointed irrevocably as attorney-in-fact for Mortgagor, which appointment, being for security, is irrevocable. In that event, the expenses of the proceedings, including reasonable counsel fees, shall be paid first out of the proceeds, and only the excess, if any, paid to Mortgagee shall be credited against the amounts due under this Mortgage. (d) Nothing herein shall limit the rights otherwise available to Mortgagee, at law or in equity, including the right to intervene as a party to any condemnation proceeding. 16. Completion of Construction. Mortgagor shall complete and timely pay for any construction which is commenced at any time on the Mortgaged Property free of any mechanics liens or other liens. All such construction shall comply with all applicable Laws and shall be performed in a good and workmanlike manner. Nothing contained in this Paragraph shall be deemed to waive any right Mortgagee may have under the Loan Documents to approve construction on the Mortgaged Property. 17. Leases. (a) Mortgagor hereby represents that there are no leases or agreements to lease all or any part of the Mortgaged Property now in effect except the Leases, if any, expressly approved in writing by Mortgagee. Mortgagor agrees not to enter into any Leases or agreements to lease all or any part of the Mortgaged Property or to modify, amend, terminate or consent to 9 the surrender of, or assign its interest in, any Leases or to permit the tenant or subtenant thereunder to subordinate its Leases to any lien subordinate to this Mortgage, without the prior written consent thereof by Mortgagee. (b) Upon receipt by Mortgagor, from time to time, of any security deposit, prepaid rent (other than prepaid rent for the next succeeding calendar month), or similar payments by a tenant, subtenant, licensee or other user of the Mortgaged Property, Mortgagor shall deposit such sum in a separate escrow account with a national or state bank having banking offices in the state in which the Mortgaged Property is located. Mortgagor shall promptly give Mortgagee written notice of the name and address of the bank and the account number of the escrow account. Mortgagor shall also give written authorization to such bank to permit Mortgagee to receive any information requested by Mortgagee from the bank as to the status and balance of such account. Said sums shall be held in trust by Mortgagor and disbursed only upon the prior written approval of Mortgagee, which approval shall not be unreasonably withheld. The prior written consent of Mortgagee shall not be required when by law (or agreement approved by Mortgagee) Mortgagor is required to return any of such sums to the party who deposited it with Mortgagor. Mortgagor hereby assigns all of such bank accounts to Mortgagee as collateral security for the Obligations and Mortgagor agrees that after an Event of Default by Mortgagor under the Loan Documents, the sums in said bank accounts shall, at the election of Mortgagee, be payable to Mortgagee as assignee of such bank account; provided, however, that Mortgagee shall have no liability for any prior misapplication of said sums by Mortgagor. 18. No Other Financing or Liens. Reserved. 19. No Transfer. Reserved. 20. Hazardous Materials. Reserved. 21. Right to Remedy Defaults. (a) If Mortgagor should fail to pay corporate taxes, Taxes, sums due under any Permitted Lien against the Mortgaged Property, or insurance premiums, or any sums payable by Mortgagor pursuant to the Leases, or fail to make necessary repairs to the Mortgaged Property, or permit waste to the Mortgaged Property, shall otherwise fail to perform its obligations under this Mortgage, Mortgagee, at its election, after giving Mortgagor three (3) business days' notice of such failure (except in an emergency in which case no such notice shall be required), shall have the right to make any payment or expenditure and to take any action which Mortgagor should have made or taken, or which Mortgagee deems advisable to protect the security of this Mortgage or the Mortgaged Property, without prejudice to any of Mortgagee's rights or remedies available hereunder or otherwise, at law or in equity. Such payment by Mortgagee shall not release Mortgagor from Mortgagor's obligations or constitute a waiver of Mortgagor's default under this Mortgage. (b) Mortgagee in making any payment authorized by this Paragraph: (i) relating to Taxes and corporate taxes, may do so according to any bill, statement or estimate procured from the appropriate public office without inquiry into the accuracy of such bill, statement or estimate or into the validity of the Tax or claim thereof; or (ii) for the purchase, 10 discharge, compromise or settlement of any other Lien, may do so without inquiry as to the validity or amount of any claim for lien which may be asserted; or (iii) for the payment of any sums to cure any default under the Leases, may do so without inquiry as to the validity or amount of any claimed default thereunder. In exercising its rights hereunder Mortgagee may, but need not, make full or partial payments on any Lien, if any, and purchase, discharge, compromise or settle any tax lien or other Lien or title or claim thereof, or redeem from any tax sale or forfeiture effecting the Mortgaged Property or contest any tax. Such payments will be deemed made by Mortgagee at Mortgagor's request and Mortgagee shall be subrogated to any and all rights and liens held by the owner or holder of any Lien, irrespective of whether such Lien is released or satisfied. (c) All such sums, as well as costs, advanced by Mortgagee pursuant to this Mortgage shall be due immediately from Mortgagor to Mortgagee, shall be secured by this Mortgage and the lien therefore shall relate back to the date of this Mortgage, and such sums, as well as costs, shall bear interest at the default rate specified by Term Loan B Note from the date of payment by Mortgagee until the date of repayment to Mortgagee. 22. Events of Default. Each of the following shall constitute an "Event of Default" under this Mortgage: (a) Mortgagor's non-performance or non-compliance with any of the other agreements, conditions, covenants, provisions or stipulations contained in this Mortgage and the continuance of such default for thirty (30) days after the occurrence thereof; (b) The occurrence of an Event of Default under the Loan Agreement. 23. Remedies. (a) Upon the occurrence of an Event of Default, Mortgagee may exercise all rights and remedies under the Loan Agreement. (b) Upon the occurrence of an Event of Default, or Mortgagor's failure to pay the Obligations when such Obligations become due and payable because of maturity or because of acceleration after the occurrence of an Event of Default, then forthwith: (i) Foreclosure. Mortgagee may institute an action of mortgage foreclosure against the Mortgaged Property, or take such other action at law or in equity for the enforcement of this Mortgage and realization on the mortgage security or any other security herein or elsewhere provided for, as the law may allow, and may proceed therein to final judgment and execution for the entire unpaid balance of the Obligations, with interest at the rate set forth in the Loan Agreement, together with all other sums due by Mortgagor in accordance with the provisions of this Mortgage and the other Loan Documents, including all sums which may have been loaned by Mortgagee to Mortgagor after the date of this Mortgage, and all sums which may have been advanced by Mortgagee for Taxes, payments on Liens, insurance premiums, utilities or repairs to the Mortgaged Property and other sums which Mortgagee is permitted to advance pursuant to the terms of this Mortgage, all costs of suit, together with interest at such rate on any judgment obtained by Mortgagee from and after the date of any 11 sheriff or other judicial sale until actual payment is made of the full amount due Mortgagee, and all Expenses. (ii) Possession. Mortgagee may enter into possession of the Mortgaged Property, with or without legal action, collect therefrom all rentals (which term shall also include sums payable for use and occupation) and, after deducting all costs of collection and administration expense, apply the net rentals to any or all of the following in such order and amounts as Mortgagee, in Mortgagee's sole discretion, may elect: the payment of any sums due under any Lien, Taxes, insurance premiums and all other carrying charges, and to the maintenance, repair or restoration of the Mortgaged Property, and on account and in reduction of the principal or interest, or both, secured by this Mortgage; in and for that purpose, Mortgagor hereby assigns to Mortgagee all rentals due and to become due under the Leases or rights to use and occupation of the Mortgaged Property hereafter created, as well as all rights and remedies provided in such Leases or at law or in equity for the collection of the rentals. The taking of possession and collections of rents by Mortgagee shall not be construed to be an affirmation of any Leases or acceptance of attornment with respect to any Leases of all or any portion of the Mortgaged Property. Mortgagee, in its discretion, may, as attorney in fact or agent of Mortgagor, or in its own name as Mortgagee and under the powers herein granted, hold, operate, manage and control the Mortgaged Property and conduct the business, if any, thereof, either personally or by its agents, and with full power to use such measures, legal or equitable, as in its discretion or in the discretion of its successors or assigns may be deemed proper or necessary to enforce the payment or security of the avails, rents, issues, and profits of the Mortgaged Property, including actions for the recovery of rent, actions in forcible detainer and actions in distress for rent, and with full power: to cancel or terminate any Leases for any cause or on any ground which would entitle Mortgagor to cancel the same; to elect to disaffirm any Leases which are then subordinate to the lien of this Mortgage; to extend or modify any then existing Leases and to make new Leases, which extensions, modifications and new Leases may provide for terms to expire, or for options to extend or renew terms to expire, beyond the maturity date of the indebtedness hereunder and beyond the date of the issuance of a deed or deeds to a purchaser or purchasers at a foreclosure sale, it being understood and agreed that any such Leases, and the options or other such provisions to be contained therein, shall be binding upon Mortgagor and all persons whose interests in the Mortgaged Property are subject to the lien hereof and upon the purchaser or purchasers at any foreclosure sale, notwithstanding any redemption from sale, discharge of the Mortgage indebtedness, satisfaction of any foreclosure decree, or issuance of any certificate of sale or deed to any purchaser; and to enter into any management, leasing or brokerage agreements covering the Mortgaged Property. (c) Mortgagee shall have the right, from time to time, to bring an appropriate action to recover any Obligations without prejudice to the right of Mortgagee thereafter to bring an action of mortgage foreclosure, or any other action, for any Event of Default by Mortgagor existing at the time the earlier action was commenced. (d) Any real estate sold pursuant to any writ of execution issued on a judgment obtained by virtue of this Mortgage, or pursuant to any other judicial proceedings under the Mortgage, may be sold in one parcel, as an entirety, or in such parcels, and in such manner or order as Mortgagee, in its sole discretion, may elect. 12 (e) Reserved. (f) Upon, or at any time after the filing of an action to foreclose this Mortgage, the court in which such action is filed may, at the request of Mortgagee, appoint a receiver of the Mortgaged Property. Such appointment may be made either before or after sale, with notice to Mortgagor, without regard to the solvency or insolvency of Mortgagor at the time of application for such receiver and without regard to either the then value of the Mortgaged Property, the adequacy or inadequacy of any remedy available at law, or the solvency or insolvency of Mortgagor and any other person liable to pay such indebtedness, and Mortgagee hereunder or any agent of Mortgagee may be appointed as such receiver. Such receiver shall have the power to perform all of the acts permitted Mortgagee pursuant to subparagraph (b) (ii) above and such other powers which may be necessary or are customary in such cases for the protection, possession, control, management and operation of the Mortgaged Property during such period. (g) Mortgagee may, at its sole option, disaffirm and cancel any Leases which are subordinate to this Mortgage at any time before the expiration of sixty (60) days after Mortgagee acquires the legal title to the Mortgaged Property by sheriff's deed or any other transfer of legal title to the Mortgaged Property pursuant to the exercise of a remedy hereunder or otherwise, even though Mortgagee shall have enforced such Leases, collected rents thereunder or taken any action that might be deemed by law to constitute an affirmance of the Leases. Such disaffirmance shall be made by written notice addressed to the applicable tenants at the Mortgaged Property or, at Mortgagee's option, such other address of such tenants as may be provided in the Leases. (h) Mortgagor, for itself and for all persons hereafter claiming through or under it or who may at any time hereafter become holders of a Lien junior to the lien of this Mortgage, hereby expressly waives and releases all rights to direct the order in which any of the Mortgaged Property shall be sold in the event of any sale or sales pursuant hereto and to have any of the Mortgaged Property and/or any other property now or hereafter constituting security for any of the Obligations marshalled upon any foreclosure of this Mortgage or of any other security for any of said indebtedness. (i) If Mortgagor or any party comprising the Mortgagor is an occupant of part or all of the Mortgaged Property, they shall immediately upon any acceleration after an Event of Default hereunder surrender the possession thereof to Mortgagee and if they remain in possession, such possession shall be as tenant at sufferance of Mortgagee, and Mortgagor agrees to pay monthly in advance to Mortgagee such rent for the premises so occupied as Mortgagee may reasonably demand, and in default of so doing Mortgagor or any party comprising the Mortgagor may be dispossessed by summary proceedings or otherwise with or without any action being brought to foreclose this Mortgage and without applying for a receiver to collect the rents. In case of the appointment of a receiver of rents and profits of the Mortgaged Property, the covenants of this Section may be enforced by such receiver. (j) Upon any sale made under or by virtue of this Paragraph 23, Mortgagee may bid for and then acquire the Mortgaged Property or any part thereof and in lieu of paying cash therefore may make settlement for the purchase price by crediting upon the indebtedness of 13 the Mortgagor secured by this Mortgage the net sales price after deducting therefrom the expenses of the sale and the costs of the action and any other sums which the Mortgagee is authorized to deduct under this Mortgage. (k) If Mortgagee shall have the right to foreclose this Mortgage, Mortgagor authorizes Mortgagee at its option to foreclose this mortgage subject to the rights of any tenants of the Mortgaged Property, and the failure to make any such tenants parties defendant to any such foreclosure proceeding and to foreclose their rights will not be asserted by Mortgagor as a defense to any proceeding instituted by Mortgagee to collect the indebtedness secured hereby or any deficiency remaining unpaid after the foreclosure sale of the Mortgaged Property, it being expressly understood and agreed, however, that nothing herein contained shall prevent Mortgagee from asserting in any proceeding disputing the amount of the deficiency or the sufficiency of any bid at such foreclosure sale, that any such tenancies adversely affect the value of the Mortgaged Property. 24. Rights and Remedies Cumulative. (a) The rights and remedies of Mortgagee as provided in this Mortgage and the other Loan Documents and in the warrants attached thereto or contained therein shall be cumulative and concurrent; may be pursued separately, successively or together against Mortgagor or against the Mortgaged Property, or both, at the sole discretion of Mortgagee, and may be exercised as the need to exercise them shall arise. The failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. (b) Any failure by Mortgagee to insist upon strict performance by Mortgagor of any of the provisions of this Mortgage or the other Loan Documents shall not be deemed to be a waiver of any of the terms or provisions of the Mortgage or the other Loan Documents, and Mortgagee shall have the right thereafter to insist upon strict performance by Mortgagor of any and all of them. (c) Neither Mortgagor nor any other person now or hereafter obligated for payment of all or any part of the sums now or hereafter secured by this Mortgage shall be relieved or discharged of such obligation by reason of the failure of Mortgagee to comply with any request of Mortgagor or of any other person so obligated to take action to foreclose on this Mortgage or otherwise enforce any provisions of this Mortgage or the other Loan Documents, or by reason of the release, regardless of consideration, of all or any part of the security held for the indebtedness secured by this Mortgage, or by reason of consenting to the granting of any easements or recordation of restrictive covenants affecting the Mortgaged Property or by reason of any agreement or stipulation between any subsequent owner of the Mortgaged Property and Mortgagee extending the time or amount of payment or modifying the terms of this Mortgage or the other Loan Documents without first having obtained the consent of Mortgagor or such other person; and in the latter event Mortgagor and all such other persons shall continue to be liable to make payments according to the terms of any such extension or modification agreement, unless expressly released and discharged in writing by Mortgagee. 14 (d) Mortgagee may release, regardless of consideration, any part of the security held for the Obligations without, as to the remainder of the security, in any way impairing or affecting the lien of this Mortgage or its priority over any subordinate lien. (e) For payment of the Obligations secured hereby Mortgagee may resort to any other security therefore held by Mortgagee in such order and manner as Mortgagee may elect. (f) The receipt by Mortgagee of any sums from Mortgagor after the date on which Mortgagee elects to accelerate the Obligations by reason of an Event of Default hereunder shall not constitute a cure or waiver of such default or a reinstatement of this Mortgage or the other Loan Documents unless Mortgagee expressly agrees, by written notice to Mortgagor, that such payment shall be accepted as a cure or waiver of the default. 25. Mortgagor's Waivers. Mortgagor hereby waives and releases: (a) all procedural errors, defects and imperfections in any proceeding instituted by Mortgagee under the Notes, this Mortgage or any of the other Loan Documents; (b) all benefit that might accrue to Mortgagor by virtue of any present or future law, exempting the Mortgaged Property, or any part of the proceeds arising from any sale thereof, from attachment, levy or sale on execution, or providing for any stay of execution, exemption from civil process or extension of time for payment; and (c) unless specifically required herein, all notices of Mortgagor's default or of Mortgagee's election to exercise, or Mortgagee's actual exercise of, any option under the Leases, the Notes, this Mortgage or the other Loan Documents. 26. Counsel Fees. Reserved. 27. Further Assurances. Mortgagor will execute and deliver such further instruments and perform such further acts as may be reasonably requested by Mortgagee from time to time to confirm the priority of the lien created by this Mortgage on any property, rights or interest encumbered or intended to be encumbered by the lien of this Mortgage or the other Loan Documents. 28. Future Advances. Without limiting any other provisions of this Mortgage and pursuant to the provision of New Jersey statutes 46:9-8.1 and 9-8.2, this Mortgage shall also secure additional loans and other future advances hereafter made by Mortgagee to Mortgagor, or for the benefit of Mortgagor, but in no event shall the total outstanding indebtedness secured hereby at any such time exceed (a) twice the amount of the original principal indebtedness of the Notes plus (b) all accrued and unpaid interest. Each such additional loans or future advance shall be evidenced by a Notes or other evidence of indebtedness and shall be automatically secured hereby without the necessity of the Notes or other evidence of indebtedness identifying such additional loans or future advance as part of the indebtedness secured by this Mortgage. Nothing herein contained shall imply any obligation on the part of Mortgagee to make any such additional loans or future advance(s). 15 29. Representations and Warranties. Mortgagor represents, warrants and covenants to and with Mortgagee that: (a) Reserved. (b) Reserved. (c) There are no pending or, to the best of Mortgagor's knowledge, threatened proceedings or actions to revoke, invalidate, rescind, or modify the zoning classification or status of the Mortgaged Property, or any building, occupancy or other permits heretofore issued with respect thereto, or asserting that such zoning or permits do not permit either the current or proposed use of the Mortgaged Property. (d) Reserved. (e) There are no leases or other arrangements for occupancy of space within the Mortgaged Property other than leases previously furnished to Mortgagee. (f) No condemnation by any governmental authority of any portion of the Mortgaged Property or any roadways or other access ways abutting the Mortgaged Property, has commenced or, to the best of Mortgagor's knowledge, is contemplated. (g) The Mortgaged Property has access to and adequate supply of water, electricity, gas, storm and sanitary sewerage and other required public utilities to serve the present and contemplated uses of the Mortgaged Property, fire and police protection, and free means of appropriate vehicular and pedestrian access between the Mortgaged Property and public highways; and none of the foregoing will be delayed or impeded by virtue of any requirements under any applicable laws including environmental protection laws; and that all of the foregoing comply with all applicable laws including environmental protection laws. (h) The improvements located in the Mortgaged Property do not encroach upon any building line, setback line, side yard line, or any recorded or visible easement (or other easement of which Mortgagor has knowledge of or has reason to believe may exist with respect to the Mortgaged Property) except as disclosed in the title policy insuring the lien of this Mortgage. (i) If any construction has occurred at the Mortgaged Property within the last twelve (12) months, the construction has been completed substantially in accordance with the applicable laws and governmental approvals and, all such improvements are in good working order and are structurally sound and fit for their current use. (j) The Mortgaged Property is taxed separately without regard to any other property, and for all purposes the Mortgaged Property may be mortgaged, conveyed, and otherwise dealt with as an independent parcel. (k) Reserved. 16 (l) Mortgagor is not a "foreign person" within the meaning of Sections 1445 or 7701 of the Internal Revenue Code. 30. Severability and Savings Clauses. If any provision of this Mortgage is held to be invalid or unenforceable by a Court of competent jurisdiction, the other provisions of this Mortgage shall remain in full force and effect and shall be liberally construed in favor of Mortgagee in order to effect the remaining provisions of this Mortgage. 31. Commercial Loans. Mortgagor hereby stipulates and warrants that the loans secured hereby are commercial loans, and that all of the proceeds of such loans will be used solely to acquire or carry on a business or commercial enterprise. 32. Notices. (a) Any notices or consents required or permitted by this Mortgage shall be in writing and shall be deemed given if delivered in person or if sent by facsimile or by nationally recognized overnight courier, as follows, unless such address is changed by written notice hereunder: If to Mortgagee: Commerce Bank, N.A. 1001 Durham Avenue South Plainfield, NJ 07080 Attention: Kurt J. Fuoti, Vice President Telecopy No. (908) 756-7021 with copies to: Blank Rome Comisky & McCauley LLP One Logan Square Philadelphia, PA 19103 Attention: Steven M. Miller, Esquire Phone No.: (215) 569-5500 Facsimile.: (215) 569-5522 If to Mortgagor.: Blonder Tongue Laboratories, Inc. One Jake Brown Road Old Bridge, NJ 08857 Attention: President Telecopy No. (732) 679-4353 with copies to: Stradley, Ronon, Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103 Attention: Gary P. Scharmett, Esquire Telecopy No. (215) 564-8120 17 (b) Any notice sent by Mortgagee or Mortgagor by any of the above methods shall be deemed to be given when so received. (c) Mortgagee shall by fully entitled to rely upon any facsimile transmission or other writing purported to be sent by any Authorized Officer as being genuine and authorized. (d) Time of Essence. Time shall be of the essence of each provision of this Mortgage of which time is an element. 33. Lost Notes. Reserved. 34. Covenant Running with the Land. Any act or agreement to be done or performed by Mortgagor shall be construed as a covenant running with the land and shall be binding upon Mortgagor and its successors and assigns as if they had personally made such agreement. 35. Amendment. This Mortgage cannot be changed or amended except by agreement in writing signed by the party against whom enforcement of the change is sought. 36. Applicable Law. This mortgage and all questions relating to its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the State of New Jersey, notwithstanding any conflict-of-laws doctrines of such state or other jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. 37. Financing Statement. This mortgage is effective as a financing statement which is filed as a "fixture filing" pursuant to Section 9-502 (or any other applicable section) of the Uniform Commercial Code from the date of recordation of this Mortgage with respect to the following types of goods which are or will be fixtures related to the Mortgaged Property: Fixtures, equipment, appliances and furnishings and the items set forth in the granting clauses of this Mortgage and on Exhibit "B" hereto. For the purpose of this Paragraph, Mortgagor is the Debtor, and Mortgagee is the Secured Party and their addresses are as set forth in the recitals of this Mortgage. The record owner of the REAL ESTATE is Mortgagor. 38. Definitions and Interpretation. Whenever used in this Mortgage, unless the context clearly indicates a contrary intent: (a) The word "Mortgagor" shall mean the person who executes this Mortgage and any subsequent owner of the Mortgaged Property and its respective heirs, executors, administrators, successors and assigns; (b) The word "Mortgagee" shall mean the person specifically named herein as "Mortgagee" or any subsequent holder of this mortgage; 18 (c) Reserved. (d) The use of any gender shall include all genders; (e) The singular number shall include the plural and the plural the singular as the context may require. (f) Reserved. (g) The following phrase shall have the following meanings: (i) "including" shall mean "including but not limited to," (ii) "provisions" shall mean "provisions, terms, covenants and/or conditions," (iii) "lien" shall mean "lien, charge, encumbrance, security interest, mortgage and/or deed of trust," (iv) "obligation" shall mean "obligation, duty, covenant and/or condition," (v) "any of the Mortgaged Property" shall mean "the Mortgaged Property or any part thereof or interest therein, and (vi) "Partnership" shall mean "partnership or joint venture" and "partner" shall mean "partner or joint venturer." (h) Any act which Mortgagee is permitted to perform under the Loan Documents may be performed at any time and from time to time by Mortgagee or any person or entity designated by Mortgagee. (i) Any act which Mortgagor is required to perform under the Loan Documents shall be performed at Mortgagor's sole cost and expense. (j) Any act which is prohibited to Mortgagor under the Loan Documents is also prohibited to all tenants or other occupants of any of the Real Estate and the Mortgaged Property. (k) Reserved. (l) Reserved. (m) The captions preceding the text of the Paragraphs or subparagraphs of this Mortgage are inserted only for convenience of reference and shall not constitute a part of this Mortgage, nor shall they in any way affect its meaning, construction or effect. (n) All Exhibits attached hereto are hereby incorporated by reference into, and made a part of, this Mortgage. (o) Reserved. (p) This Mortgage may be executed in counterparts, each of which, together with all counterparts, shall be deemed one Mortgage. This Mortgage shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. (q) Reserved. 19 (r) Definitions contained in this Mortgage which identify documents, including the Loan Documents, shall be deemed to include all amendments and supplements to such documents from the date hereof, and all future amendments and supplements thereto entered into from time to time to satisfy the requirements of this Mortgage or otherwise with the consent of Mortgagee. Reference to this Mortgage contained in any of the foregoing documents shall be deemed to include all amendments and supplements to this Mortgage. 39. No Third Party Benefits. This Mortgage and the other Loan Documents are made for the sole benefit of Mortgagor and Mortgagee and their successors and assigns, and no other party shall have any legal interest of any kind under or by reason of any of the foregoing. Whether or not Mortgagee elects to employ any or all the rights, powers or remedies available to it under any of the foregoing, Mortgagee shall have no obligation or liability of any kind to any third party by reason of any of the foregoing or any of Mortgagee's actions or omissions pursuant thereto or otherwise in connection with the transaction evidenced by the Notes and secured by this Mortgage. 40. Failure of Mortgagee to Perform. (a) Mortgagee shall not be liable to Mortgagor for consequential damages, whatever the nature of a breach by Mortgagee of its obligations under this Mortgage, or any of the other Loan Documents, and Mortgagor for itself and all parties claiming through Mortgagor hereby waives all claims for consequential damages. (b) Mortgagee shall not be in default under this Mortgage, or under any other Loan Documents, unless a written notice specifically setting forth the claim of Mortgagor shall have been given to Mortgagee within thirty (30) days after Mortgagor first had knowledge of, or reasonably should have had knowledge of, the occurrence of the event which Mortgagor alleges gave rise to such claim and Mortgagee does not remedy or cure the default, if any there be, promptly thereafter. (c) Any action taken by Mortgagee to inspect the Mortgaged Property, and to approve leases and all other documents and instruments submitted to Mortgagee, will be exercised and taken by Mortgagee for its own protection only and may not be relied upon by Mortgagor or any other party for any purposes whatever; and Mortgagee shall not be deemed to have assumed any responsibility to Mortgagor or any other party with respect to any such action herein authorized or taken by Mortgagee with respect to the proper construction of improvements on the Mortgaged Property, or performance under any lease or other agreement. Any review, investigation or inspection conducted by Mortgagee, any architectural or engineering consultants retained by Mortgagee or any agent or representative of Mortgagee in order to verify independently Mortgagor's satisfaction of any conditions precedent to loan disbursements, Mortgagor's performance of any of the covenants, agreements and obligations of Mortgagor, or the truth of any representations and warranties made by Mortgagor hereunder or under any of the Loan Documents (regardless of whether or not the party conducting such review, investigation or inspection should have discovered that any of such conditions precedent were not satisfied or that any such covenants, agreements or obligations were not performed or that any such representations or warranties were not true), shall not affect (or constitute a waiver by Mortgagee of) (i) any of Mortgagor's representations and warranties under this Mortgage or 20 any of the other Loan Documents or Mortgagee's reliance thereon or (ii) Mortgagee's reliance upon any certifications of Mortgagor under the Loan Documents or any other facts in formation or reports furnished Mortgagee by Mortgagor. 41. Waiver of Trial by Jury. MORTGAGOR AND MORTGAGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THE LOANS SECURED BY THIS MORTGAGE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS MORTGAGE OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF MORTGAGOR OR MORTGAGEE. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE MORTGAGEE'S MAKING OF THE LOANS SECURED BY THE LOAN DOCUMENTS. 42. Copy of Mortgage. Mortgagor hereby declares and acknowledges that it has received, without charge, a true copy of this Mortgage. IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly executed as a sealed instrument the day and year first above written. BLONDER TONGUE LABORATORIES, INC., a Delaware corporation By: /s/ James A. Luksch -------------------------------------- James A. Luksch President and Chief Executive Officer (Corporate Seal) 21 COMMONWEALTH OF PENNSYLVANIA : : SS COUNTY OF PHILADELPHIA : On the 20th day of March, 2002 before me, the subscriber, a Notary Public in and for the Commonwealth and County aforesaid, personally appeared James A. Luksch, who acknowledged himself to be the President and Chief Executive Officer, of BLONDER TONGUE LABORATORIES, INC., a Delaware corporation, and that he, as such officer, being authorized to do so, executed the foregoing Mortgage, Security Agreement and Fixture Filing for the purposes therein contained by signing the name of the corporation by himself as such officer, and desired that this Mortgage, and Security Agreement and Fixture Filing be recorded as such as the act and deed of said corporation. WITNESS my hand and seal the day and year aforesaid. --------------------------------------- Notary Public My Commission Expires: 22 EXHIBIT "A" METES AND BOUNDS DESCRIPTION ATTACHED 23 EXHIBIT "B" ----------- PROPERTY SUBJECT TO SECURITY INTEREST ------------------------------------- Any and all fixtures, appliances, machinery, equipment furnishings and furniture of any nature whatsoever, contract rights, accounts, accounts receivable, inventory, intangibles and other items of personal property and fixtures at any time now or hereafter owned by Mortgagor/Debtor and now or at any time hereafter installed in, attached to or situated in or upon the land described in Exhibit "A" or the buildings and improvements now erected or to be erected thereon (including, without limitation, communications, computer and security systems and the software system therefor), or used or intended to be used in connection with the real estate, or in the operation or maintenance of the buildings and improvements, plant or business situate or operated thereon (the "Property") or in connection with the conduct of Mortgagor/Debtor's business whether or not the personal property is or shall be affixed to the Property. Such personal property and fixtures shall include, without limiting the generality of the foregoing: All plants, furnaces, boilers, machinery, ranges, engines, stokers, pumps, heaters, tanks, compressors, dynamos, motors, electrical transformers, fittings, siding, pipe, pipe connections, conduits, ducts, partitions, communication systems, storm and screen windows, doors, refrigerators, ovens, kitchen equipment, chests, chairs, desks, bookcases, tables, curtains, hangings, pictures, carpeting, artwork, lighting fixtures and apparatus, furniture, furnishings, elevators and motors, built-in filing cabinets, shelves, water coolers, signs, tools, electrical equipment, and all equipment, appliances and apparatus of every kind and description now or hereafter affixed or attached to or contained within and used or procured for use in connection with said buildings or improvements for heating, cooling, lighting, plumbing, ventilating, sprinkling, irrigating, refrigerating or air conditioning, or for providing water, gas, electricity or other services or for general operation of the buildings and improvements, or the plant or business situate or operated thereon. All licenses, permits, franchises, trade names, logos, service marks, service contracts, management agreements, telephone numbers, advertising materials, warranties, guarantees, tenant lists, engineering, environmental, marketing and similar studies and appraisals for the Property and all other documents and items relating to the operation of the Property, and all leases and lease guarantees with respect to any part of the Property, and all rents, issues and profits arising out of the operation, use or occupancy of the Property. All of Mortgagor's/Debtor's interest in all utility security deposits or bonds for the Property and all security deposits, bonds or other security delivered 24 to any governmental authority in connection with the use, development or operation of the Property. All of Mortgagor's/Debtor's books and records relating to the use, operation and occupation of the buildings and the Property including, without limitation, the books and records relating to the operation of Mortgagor's/Debtor's business therein, and the plans and specifications for the construction or reconstruction thereof. All inventory and all other goods, merchandise and other personal property that are held for sale or lease or are furnished under a contract of service or are raw materials, work in process or materials used or consumed or to be used or consumed in the Mortgagor's/Debtor's business. If the Property is now or hereafter used in whole or in part as a hotel, motel or similar facility or as a restaurant or other food and/or beverage service facility, such personal property shall also include all licenses for the serving of alcoholic beverages at the Property and all lodging and food and/or beverage equipment including, without limitation, beds, bureaus, divans, couches, chinaware, linens, glassware, silverware, uniforms, ornaments, kitchen utensils, bars, bar fixtures, radios, televisions, electric equipment, lamps, mirrors, and other personal property and fixtures used now or hereafter in on or about the operation, use and occupation of a lodging facility and/or food and/or beverage facility, on the Property. Such security interest shall extend to and include as well as any and all cash and non-cash proceeds, insurance proceeds and condemnation proceeds of such fixtures and personal property and any and all subsequently acquired fixtures and personal property by way of replacement, substitution, addition or otherwise and the proceeds thereof. Such security interest shall not extend to property owned by third party space tenants now or hereafter occupying the Property. 25 EX-10 8 blonder10q03312002ex10-6.txt EXHIBIT 10.6 EXHIBIT 10.6 ---------------------------------------------- ASSIGNMENT OF RENTS AND LEASES made by ---------------------------------------------- BLONDER TONGUE LABORATORIES, INC., a Delaware Corporation ("Assignor") in favor of COMMERCE BANK, N.A., a National Banking Association ("Assignee") DATED: March 20, 2002 ASSIGNMENT OF RENTS AND LEASES THIS ASSIGNMENT, made this 20th day of March, 2002, by BLONDER TONGUE LABORATORIES, INC., a Delaware corporation ("Assignor"), to Commerce Bank, N.A., a national banking association ("Assignee"). W I T N E S S E T H: - - - - - - - - - - A. Pursuant to a certain Loan and Security Agreement of even date herewith between Assignor and Assignee (the "Loan Agreement"), Assignor has executed and delivered to Assignee a certain Revolving Credit Note bearing even date herewith in the principal amount of Seven Million Dollars ($7,000,000) ("Revolving Credit Note"), a certain Term Loan A Note bearing even date herewith in the principal amount of Nine Million Dollars ($9,000,000) ("Term Loan A Note") and a certain Term Loan B Note bearing even date herewith in the principal amount of Three Million Five Hundred Thousand Dollars ($3,500,000) ("Term Loan B Note" and together with the Revolving Credit Note and Term Loan A Note) (referred to as the "Notes"), which Notes are secured by, among other things, a certain mortgage, security agreement and fixture filing (the "Mortgage") of even date herewith from Assignor to Assignee, encumbering real property situated in the Township of Old Bridge, Middlesex County, State of New Jersey, and more fully described as set forth in Exhibit "A" attached hereto (the "Property") and certain other loan documents executed by Assignor and identified in the Loan Agreement (the Notes, the Mortgage, the Loan Agreement and the other loan documents are hereinafter collectively referred to as the "Loan Documents"). B. As a condition to Assignee making the loans to Assignor evidenced by the Notes, Assignor has agreed to assign to Assignee all of Assignor's rights under any leases affecting the Property and the rents thereunder pursuant to the terms and conditions herein set forth. C. Capitalized terms used without further definition herein shall have the meaning set forth in the Loan Agreement. NOW, THEREFORE, intending to be legally bound hereby, Assignor agrees as follows: 1. Assignment of Leases. Assignor hereby conveys, transfers and assigns unto Assignee, its successors and assigns, all the rights, interest and privileges, (a) which Assignor as lessor has and may have in the leases now existing or hereafter made and affecting the Property or any part thereof as such leases may from time to time be hereafter, modified, extended and renewed (collectively the "Leases" or individually a "Lease"), with all rents, income and profits due and becoming due therefrom (including, but not limited to, any sums in lieu of rent), and (b) which Assignor has and may have by virtue of any guaranty or surety agreement (collectively "Guaranties") with respect to the tenant's obligations under the Leases, as such Guaranties may have been, or may from time to time be hereafter, modified and extended. Assignor will, on request of Assignee, execute assignments of any future leases and assignments of any Guaranties made in connection therewith. Within five (5) days after execution thereof, Assignor shall deliver to Assignee a counterpart original of any Lease, any amendment thereof or any Guaranties or amendment thereof. Within five (5) days after request by Assignee, Assignor shall deliver to Assignee a counterpart original of any Lease, any amendment thereof or any Guaranties or amendment thereof. Anything to the contrary notwithstanding, Assignor also hereby assigns to Assignee any award made hereafter - 2 - to it in any court procedure involving any of the tenants in any bankruptcy, insolvency, or reorganization proceedings in any state or Federal court, and any and all payments made by tenants in lieu of rent. Assignor hereby appoints Assignee as its irrevocable attorney-in-fact (which appointment is coupled with an interest) to appear in any action and/or to collect any such award or payment. 2. All Obligations. This Assignment shall remain in effect until all of the Obligations have been paid in full and the Revolving Credit has been terminated. The acceptance of this Assignment and the collection of rents or the payments under the Leases or any sums under the Guaranties hereby assigned shall not constitute a waiver of any rights of Assignee under the terms of the Loan Documents. 3. Assignor's Rights Notwithstanding Assignment. As used herein, the term Event of Default shall have the meaning ascribed thereto in the Loan Agreement. This Assignment is an absolute assignment of the Leases and Guaranties from Assignor to Assignee, and is not merely the granting of a security interest in the Leases and Guaranties. However, unless an Event of Default exists, Assignor shall have (i) the right to exercise all of the rights of the landlord under the Leases and Guaranties to the extent not prohibited by the provisions of this Assignment and the Loan Documents and (ii) a revocable license to collect such rents, income and profits from the Leases and Guaranties and to retain, use and enjoy the same, in trust (but not in a separate account) to be applied first to payment of (a) real estate taxes and assessments upon the Property, (b) cost of maintaining the insurance policies on the Property required by the Mortgage, (c) maintenance and repair of the Property, and (d) the payment of all sums becoming due and payable under the Loan Documents, before Assignor may use any portion of the rents, income or profits for any other purpose; provided, however, that even before default occurs no rents more than one (1) month in advance shall be collected or accepted without the prior written consent of Assignee. Upon an acceleration after an Event of Default, such license shall be automatically revoked without any further action or notice being required, and Assignee shall thereupon solely be entitled to collect the rents, income and profits due or to become due under the Leases and Guaranties whether or not Assignee has taken possession of the Property pursuant to the other provisions of this Assignment. 4. Right to Possession. Assignor, upon an acceleration after an Event of Default, hereby authorizes Assignee, at its option, to enter and take possession of the Property and to manage and operate the same, to collect all or any rents accruing therefrom and from the Leases, to collect all or any sums due or becoming due under the Guaranties, to let or re-let the Property or any part thereof, to cancel and modify Leases and Guaranties, evict tenants, bring or defend any suits in connection with the possession of the Property in its own name or Assignor's name, make repairs as Assignee deems appropriate, and perform such other acts in connection with the management and operation of the Property as Assignee, in its discretion, may deem proper, provided, however, that nothing herein shall limit Assignee's remedies under the Loan Documents. 5. Use of Rents. Effective upon an acceleration after an Event of Default, Assignor hereby irrevocably constitutes and appoints Assignee or any officer or agent of Assignee to be Assignor's true and lawful attorney (which appointment shall be irrevocable and shall be coupled with an interest), in Assignor's name, place, and stead, (a) to exercise any right which Assignor may have to record any Lease, (b) to endorse any checks payable to Assignor from tenants or guarantors for the payment of rents, income or profits from the Property and to deposit the checks or to further endorse them over to Assignee, and (c) to demand, collect, sue for, attach, levy, and recover - 3 - any of the rents and any premium or penalty payable upon the exercise by any tenant under any Lease of a privilege of cancellation originally provided in any Lease, and to give proper receipts and releases therefor and, after deducting all expenses of collection, to apply the net proceeds as a credit upon any portion of the indebtedness secured hereby which may be selected by Assignee, in such order as Assignee may elect, or, at Assignee's option, apply the net proceeds to pay the costs of operation or maintenance of the Property. No other person senior to Assignor in priority shall be appointed Assignor's attorney with any of such powers so long as any part of the indebtedness secured hereby remains unpaid. Nothing herein contained shall be construed as constituting Assignee a mortgagee in possession in the absence of the taking of actual physical possession of the Property by Assignee. In the exercise of the powers herein granted Assignee, no liability shall be asserted or enforced against Assignee, all such liability being expressly waived and released by Assignor. The receipt by Assignee of any rents, issues or profits pursuant to this Assignment after the institution of foreclosure or sale proceedings under the Mortgage or execution proceedings under the Note or Loan Agreement shall not cure such default or affect such proceedings or any sale pursuant thereto. 6. Assignee Not Bound to Perform Under Leases. Assignee shall not be obligated to perform or discharge any obligation or duty to be performed or discharged by Assignor under any of the Leases, and Assignor hereby agrees to indemnify, defend and hold Assignee harmless of and from any and all liability or expense (including, but not limited to, reasonable attorneys' fees, court costs and other disbursements) arising from any of the Leases, Guaranties, this Assignment, or by reason of any action taken by Assignee pursuant to this Assignment, except to the extent caused wholly or in part by the gross negligence or willful misconduct of Assignee, and this Assignment shall not place responsibility for the control, care, management or repair of the Property upon Assignee, or make Assignee responsible or liable for any negligence in the management, operation, upkeep, repair or control of the Property resulting in loss or injury or death to any tenant, licensee, employee or other person. The amount of any liability or expense with respect to which Assignor is obligated to indemnify Assignee pursuant to the provisions of this paragraph, together with interest at the default rate (as specified in the Loan Agreement), shall immediately and without notice be due and payable by Assignor to Assignee. 7. Representations and Covenants. Assignor covenants and represents that (a) Assignor has title to, and full right to assign the Leases, Guaranties, and the rents, income and profits due or to become due thereunder; (b) no other assignment of any interest in the Leases and Guaranties senior to this Assignment has been made which remains in effect; (c) other than in the ordinary course of business, Assignor shall not materially discount or compromise any of such rents, income or profits to become due; (d) other than in the ordinary course of business, Assignor will not enter into any Lease for the Property without the prior approval of the Lease by Assignee unless otherwise expressly permitted by the Mortgage; and (e) Assignor will not hereafter (i) assign or transfer in any manner any future payment of the rents, income or profits or any of Assignor's rights under any Lease to any person other than a person lawfully succeeding, subject to the Mortgage, to all of Assignor's right, title and interest in and to all or part of the Property (nothing contained in this clause shall be construed as a modification or waiver of any transfer restrictions contained in the Mortgage); (ii) other than in the ordinary course of business, waive the performance or observance by the tenant, guarantor or surety under any Lease or Guarantee of any material covenant or condition, as determined by Assignee (including, without limitation, any covenant or condition relating to rent or additional rent or the lease term, all of which terms and conditions are hereby deemed to be material) to be performed or observed by such tenant, guarantor or surety thereunder; - 4 - (iii) other than in the ordinary course of business, commence an action of ejectment or any summary proceeding for dispossession of any tenant under any Lease; (iv) other than in the ordinary course of business, exercise any right of recapture provided in any Lease; (v) other than in the ordinary course of business, modify or in any way alter the terms of any Lease; (vi) other than in the ordinary course of business, consent to any subletting of any or all of the portion of the Property or to any assignment of any Lease by any tenant thereunder or to any assignment or further subletting of any sublease; or (vii) do or permit to be done anything which will cause any Lease to be subordinate to any mortgage covering any or all of the Property which is subordinate to the Mortgage. Any act of Assignor enumerated in the immediately preceding sentence which is done without Assignee's prior written consent thereto shall be void and of no force or effect. 8. Notice to Tenants. Assignor hereby authorizes Assignee to give notice in writing of this Assignment at any time after an Event of Default to any tenant under the Leases and to any guarantor of the Leases. Assignor hereby consents to any such tenant or guarantor paying all rent, income and profits to Assignee following receipt by such tenant or guarantor of a notice from Assignee that an Event of Default exists, and Assignor waives any right to demand from any such tenant or guarantor, payment to Assignor of such rent, income or profits after Assignee has sent any such notice to such tenant or guarantor. Each tenant and guarantor shall be entitled to rely upon any notice from Assignee and shall be protected with respect to any payment of rent, income and profits made pursuant to such notice. Irrespective of whether a dispute exists between Assignor and Assignee with respect to the existence of a default or the rights of Assignee under this Assignment, each tenant and guarantor who receives a notice from Assignee pursuant to this Assignment shall not be required to investigate or determine the validity or accuracy of such notice or the validity or enforceability of this Assignment. Assignor hereby agrees to indemnify, defend and hold each such tenant harmless from and against any and all loss, claims, damage or liability arising from or related to any payment of rent, income and profits or performance of obligations under any Lease by such tenant and guarantor made in good faith in reliance on and pursuant to such notice. The provisions of this Paragraph are expressly made for the benefit of, and shall be binding on and enforceable by, each tenant and guarantor under a Lease. 9. Cross Default. Violation of any of the covenants, representations and provisions contained in this Assignment by Assignor, after thirty (30) days' written notice to Assignor (which period shall run concurrently with any other notice period required), shall be deemed an Event of Default under the terms of the Loan Documents. 10. Compliance with Leases. Assignor shall comply with all of the terms and conditions of the Leases. Any expenditures made by Assignee, after any notice required by the terms of the Mortgage, in curing Assignor's failure to so comply with the Leases, with interest thereon at the default rate, shall become part of the debt secured by this Assignment and the Loan Documents. Except to the extent otherwise expressly provided herein, Assignor shall diligently enforce the tenant's obligations under the Leases and shall diligently enforce the obligations of any guarantor or surety under the Guaranties. 11. Satisfaction. The full performance of the obligations of Assignor pursuant to the Loan Documents and the duly recorded satisfaction of the Mortgage or release from the Mortgage of the Real Estate described therein shall render this Assignment automatically void with respect to the Real Estate or portion thereof described in any such satisfaction or release. - 5 - 12. "Lease" and "Rent" Defined. The term "Lease" shall include any lease of all or any portion of the Property as well as any sublease of all or any portion of the Property and any license, concession or other agreement with respect to the use, occupancy or utilization of all or any portion of the Property. The term "Rent" shall include all rent, additional rent, license fees or charges, concession fees or charges, lease cancellation fees and all other payments of any kind (including, without limitation, security deposits to the extent that they may be lawfully assigned, and all payments made on account of operating expenses and real estate taxes and other similar items whether categorized as rent, additional rent or otherwise) with respect to the use, occupancy or utilization of all or any portion of the Property. 13. Miscellaneous. (a) Indulgences, Etc. Neither the failure nor any delay of Assignee to exercise any right, remedy, power or privilege under this Assignment shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. (b) Controlling Law. This Assignment and all questions relating to its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the internal laws of the State of New Jersey, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. (c) Notices. All notices, requests, demands and other communications required or permitted under this Assignment between Assignor and Assignee shall be in writing and shall be deemed to have been duly given, made and received only when delivered as set forth in the Mortgage. (d) Execution in Counterparts. This Assignment may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Assignment shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. (e) Provisions Separable. The provisions of this Assignment are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. (f) Amendment. This Assignment may not be modified or amended other than by an agreement in writing signed by the party against which enforcement of the change is sought. (g) Paragraphs Headings. The paragraph headings in this Assignment are for convenience only; they form no part of this Assignment and shall not affect its interpretation. - 6 - (h) Gender, Etc. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate. (i) Definitions. Definitions contained in this Assignment which identify documents, including the Loan Documents, shall be deemed to include all amendments and supplements to such documents from the date hereof, and all future amendments and supplements thereto entered into from time to time with the consent of Assignee. Reference to this Assignment contained in any of the foregoing documents shall be deemed to include all amendments and supplements to this Assignment. (j) Effect. This Assignment shall be binding upon and inure to the benefit of Assignor, Assignee and their respective successors and assigns. If Assignor consists of more than one person or entity, the obligations of Assignor under this Assignment shall be joint and several. (k) Exhibits. All exhibits attached hereto are hereby incorporated by reference into, and made a part of, this Assignment. IN WITNESS WHEREOF, Assignor has duly executed this assignment the 20th day of March, 2002. BLONDER TONGUE LABORATORIES, INC., a Delaware Corporation By: /s/ James A. Luksch ------------------------------------- James A. Luksch, President and CEO - 7 - Exhibit "A" Legal Description - 8 - COMMONWEALTH OF PENNSYLVANIA : : ss. COUNTY OF PHILADELPHIA : On the 20th day of March 2002, before me, the subscriber, a Notary Public in for the Commonwealth and County aforesaid, personally appeared JAMES A. LUKSCH, who acknowledged himself to be the President and CEO of BLONDER TONGUE LABORATORIES, INC., a Delaware corporation, and that he, as such officer, being authorized to do so, executed the foregoing Assignment by the act and deed of said corporation for the purposes therein contained by signing the name of the corporation by himself as such officer, and desired that the same might be recorded as such. WITNESS my hand and seal the day and year aforesaid. ---------------------------------- Notary Public My Commission Expires: - 9 - EX-10 9 blonder10q03312002ex10-7.txt EXHIBIT 10.7 EXHIBIT 10.7 PATENT SECURITY AGREEMENT This Patent Security Agreement ("Agreement") is made this 20th day of March, 2002, by BLONDER TONGUE INVESTMENT COMPANY, a Delaware corporation, having a mailing address of One Jake Brown Road, Old Bridge, New Jersey 08857 ("Surety") and delivered to COMMERCE BANK, N.A. having a mailing address of 1701 Route 70 East, Cherry Hill, New Jersey 08034 ("Lender"). BACKGROUND A. This Agreement is being executed contemporaneously with that certain Surety Agreement of even date herewith between Surety and Lender (as it may be supplemented, restated, superseded, amended or replaced from time to time, the "Surety Agreement"), under which Surety is guarantying the repayment by Blonder Tongue Laboratories, Inc. ("Borrower") to Lender of the Obligations under that certain Loan and Security Agreement between Borrower and Lender dated the date hereof ("Loan Agreement"). As security for the Obligations, Surety has agreed to grant Lender a security interest in Surety's Patent Collateral (as defined herein), and under which Lender is entitled to foreclose or otherwise deal with such assets under the terms and conditions set forth herein. Capitalized terms not defined herein shall have the meanings given to such terms in the Surety Agreement or Loan Agreement as applicable. B. Surety has rights with respect to: (i) the United States Letters Patents and the inventions described and claimed therein set forth on Schedule A hereto (hereinafter referred to collectively as the "Patents"); (ii) the application for Letters Patents and the inventions described and claimed therein set forth on Schedule A hereto and any United States Letters Patents which may be issued upon any of said applications (hereinafter referred to collectively as the "Applications"); (iii) any reissues, extension, division or continuation of the Patents or Applications (such reissues, extension, divisions and continuations being herein referred to collectively as the "Reissued Patents"); and (iv) all future royalties or other fees paid or payments made to Surety in respect of the Patents including, without limitation, any royalties due or owing from Borrower to Surety (hereinafter referred to collectively as the "Royalties") (the Patents, Applications and the Reissued Patents and the Royalties being herein referred to collectively as the "Patent Rights"). Notwithstanding the foregoing or any representation to the contrary in this Agreement, as of the date hereof, Surety's interest (ownership or otherwise) in the Patent Rights is not of record with the United States Patent and Trademark Office. NOW THEREFORE, with the foregoing Background hereinafter deemed incorporated by reference and made a part hereof, and in consideration of the premises and mutual promises herein contained, the parties hereto, intending to be legally bound hereby, covenant and agree as follows: 1. In consideration of the Surety Agreement, and for other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, and to secure repayment of the Obligations, Surety grants to Lender a lien on and security interest in all of the Patent Rights and all proceeds thereof and all Surety's right, title, interest, claims and demands that Surety has or may have in profits and damages for past and future infringements of the Patent Rights (such rights, interest, claims and demand being herein called the "Claims") (the Patent Rights and Claims are collectively referred to as the "Patent Collateral"). 2. Surety hereby covenants and agrees to maintain the Patent Collateral as permitted under applicable law in full force and effect until all of Surety's Obligations are indefeasibly paid and satisfied in full. 3. Surety represents, warrants and covenants to Lender that: (a) Except as set forth in the Section 3(d) below, Surety is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to the Patent Collateral as set forth on Schedule "A". (b) The Patent Collateral is subsisting and has not been adjudged invalid or unenforceable; (c) All of the Patent Rights are registered, valid and enforceable; (d) All of the Patent Collateral is free and clear of any liens, charges and encumbrances including, without limitation, pledges, assignments, licenses (other than to Surety, Borrower and Lender hereunder) and covenants by Surety not to sue third persons; (e) Surety has no notice of any suits or actions commenced or threatened against it, or notice of claims asserted or threatened against it, with reference to the Patent Collateral; (f) Surety has the corporate power and authority to enter into this Agreement and perform its terms; (g) Surety has complied with, and will continue for the duration of this Agreement to comply with the requirements set forth in 35 U.S.C. Sec. 1 et seq. and any other applicable statutes, rules and regulations in connection with its use of the Patent Collateral except where failure to comply would not have a material adverse effect on Surety or its property; and (h) Surety has used and will continue to use for the duration of this Agreement, consistent standards of quality in services or products leased or sold under the Patent Collateral and hereby grants to Lender and its employees and agents the right (with no obligation of any kind upon Lender to do so) to visit Surety's affiliates, franchises or management locations and to inspect the use of the Patent Collateral and quality control records relating thereto at reasonable times during regular business hours to ensure Surety's compliance with this paragraph 3(h). 4. Surety further covenants that: (a) Until all the Obligations are indefeasibly paid and satisfied in full and the Revolving Credit is terminated, Surety will not enter into any agreement, including, without limitation, license agreements or options, which are inconsistent with Surety's obligations under this Agreement, Borrower's obligations under the Loan Agreement, or which restrict or impair Lender's rights hereunder. 2 (b) If Surety acquires rights to any new United States Letters Patents, the provisions of this Agreement shall automatically apply thereto and such Letters Patents shall be deemed part of the Patent Collateral. Surety shall give Lender written notice thereof along with an amended Schedule "A." 5. So long as this Agreement is in effect and so long as Surety has not received notice from Lender that an Event of Default has occurred under the Loan Agreement and that Lender has not elected to exercise its rights hereunder: (i) Surety shall continue to have the exclusive right to use the Patent Collateral; and (ii) Lender shall have no right to use the Patent Collateral or issue any exclusive or non-exclusive license with respect thereto, or assign, pledge or otherwise transfer title in the Patent Collateral to anyone else. 6. Surety agrees not to sell, license, grant any option, assign or further encumber its rights and interest in the Patent Collateral to any entity or person other than Lender, Borrower or any other subsidiary of Borrower that has guaranteed the Obligations without the prior written consent of Lender. 7. Anything herein contained to the contrary notwithstanding, if and while an Event of Default exists under the Loan Agreement, Surety hereby covenants and agrees that Lender, as the holder of a security interest under the Uniform Commercial Code, as now or hereafter in effect in the State of New Jersey, may take such action permitted hereunder, in its exclusive discretion, to foreclose upon the Patent Collateral covered hereby. For such purposes, while an Event of Default exists, Surety hereby authorizes and empowers Lender to make, constitute and appoint any officer or agent of Lender as Lender may select, in its exclusive discretion, as Surety's true and lawful attorney-in-fact, with the power to endorse Surety's name on all applications, documents, papers and instruments necessary for Lender to use the Patent Collateral or to grant or issue any exclusive or non-exclusive license under the Patent Collateral to anyone else, or necessary for Lender to assign, pledge, convey or otherwise transfer title in or dispose of the Patent Collateral to anyone else including, without limitation, the power to execute a Patent Assignment in the form attached hereto as Exhibit 1. Surety hereby ratifies all that such attorney or agent shall lawfully do or cause to be done by virtue hereof, except for the gross negligence or willful misconduct of such attorney or agent. This power of attorney shall be irrevocable for the life of this Agreement, the Surety Agreement, and until all of the Obligations are indefeasibly paid and satisfied in full and the Revolving Credit is terminated. 8. This Agreement shall be subject to the terms, provisions, and conditions set forth in the Surety Agreement and may not be modified without the written consent of the party against whom enforcement is being sought. 9. All rights and remedies herein granted to Lender shall be in addition to any rights and remedies granted to Lender under the Loan Documents. In the event of an inconsistency between this Agreement and Loan Documents, the language of this Agreement shall control. 10. Upon Surety's performance of all of the obligations under the Surety Agreement and after all of the Obligations are indefeasibly paid and satisfied in full and the Revolving Credit is terminated, Lender shall, at Surety's expense, execute and deliver to Surety all documents reasonably necessary to terminate Lender's security interest in the Patent Collateral. 3 11. Any and all reasonable fees, costs and expenses, of whatever kind or nature, including the reasonable attorneys' fees and legal expenses incurred by Lender in connection with the preparation of this Agreement and all other documents relating hereto and the consummation of this transaction, the filing or recording of any documents (including all taxes in connection therewith) in public offices, the payment or discharge of any taxes, reasonable counsel fees, maintenance fees, encumbrances or costs otherwise incurred in protecting, maintaining, preserving the Patent Collateral, or in defending or prosecuting any actions or proceedings arising out of or related to the Patent Collateral, in each case in accordance with the terms of this Agreement, shall be borne and paid by Surety on demand by Lender and until so paid shall be added to the principal amount of the Obligations to Lender and shall bear interest at the otherwise applicable rate prescribed in the Loan Agreement. 12. Subject to the terms of this Agreement, Surety shall have the duty to prosecute diligently any application and/or registration with respect to the Patent Collateral pending as of the date of this Agreement or thereafter, until the Obligations are indefeasibly paid and satisfied in full and the Revolving Credit is terminated to preserve and maintain all rights in the Patent Collateral, and upon reasonable request of Lender, Surety shall make federal application on registerable but unregistered Patent Collateral belonging to Surety and licensed to Surety unless Surety determines in good faith that such unregistered Patent Collateral does not have any material value. Any reasonable expenses incurred in connection with such applications shall be borne exclusively by Surety. Surety shall not abandon any Patent Collateral without the prior written consent of Lender. 13. Surety shall have the right to bring suit in its own name to enforce the Patent Collateral, in which event Lender may, if Surety reasonably deems it necessary, be joined as a nominal party to such suit if Lender shall have been satisfied, in its sole discretion, that it is not thereby incurring any risk of liability because of such joinder. Surety shall promptly, upon demand, reimburse and indemnify Lender for all damages, costs and expenses, including reasonable attorneys' fees and costs, incurred by Lender in the fulfillment of the provisions of this paragraph. 14. Upon the occurrence of an Event of Default under the Loan Agreement or Surety Agreement, Lender may, without any obligation to do so, complete any obligation of Surety hereunder, in Surety's name or in Lender's name, but at the expense of Surety. 15. No course of dealing between Surety and Lender, nor any failure to exercise, nor any delay in exercising, on the part of Lender, any right, power or privilege hereunder, shall operate as a waiver thereof, and all of Lender's rights and remedies with respect to the Patent Collateral, whether established hereby or by the Surety Agreement, or by any other future agreements between Surety and Lender or by law, shall be cumulative and may be exercised singularly or concurrently. 16. The provisions of this Agreement are severable and the invalidity or unenforceability of any provision herein shall not affect the remaining provisions which shall continue unimpaired and in full force and effect. 17. This Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. 4 18. Surety irrevocably agrees to consent to the jurisdiction of the state and federal courts of the jurisdiction set forth in Section 9.1 of the Loan Agreement, without regard to its otherwise applicable principles or conflicts of law. 19. SURETY AND LENDER BY ITS ACCEPTANCE HEREOF) HEREBY WAIVES 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 SURETY AGREEMENT 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 HEREBY OR BY THE SURETY AGREEMENT. 20. Surety hereby agrees that it will, within thirty (30) days of the date of this Agreement, file all agreements and/or documents required to record Surety's interest (ownership or otherwise) in the Patent Rights with the United States Patent and Trademark Office. IN WITNESS WHEREOF, the parties hereto have executed this Patent Security Agreement, under seal, the day and year first above written. SURETY: BLONDER TONGUE INVESTMENT COMPANY By: /s/ James A. Luksch ------------------------------------------- James A. Luksch, President and CEO (Corporate Seal) Address: c/o Blonder Tongue Laboratories, Inc. One Jake Brown Road Old Bridge, NJ 08857 Attn: President APPROVED AND ACCEPTED: COMMERCE BANK, N. A. By: /s/ Kurt J. Fuoti ------------------------------------- Kurt J. Fuoti, Vice President 5 CORPORATE ACKNOWLEDGMENT ------------------------ UNITED STATES OF AMERICA : COMMONWEALTH OF PENNSYLVANIA : SS COUNTY OF PHILADELPHIA : On this 20th day of March, 2002, before me personally appeared JAMES A. LUKSCH, to me known and being duly sworn, deposes and says that he is the President and CEO of BLONDER TONGUE INVESTMENT COMPANY, the corporation described in the foregoing Agreement; that he knows the seal of the corporation; that the seal so affixed to the Agreement is such corporate seal; that he signed the Agreement and affixed the seal of the corporation thereto as such officer pursuant to the authority vested in him by law; that the within Agreement is the voluntary act of such corporation; and he/she desires the same to be recorded as such. ------------------------------------ Notary Public My Commission Expires: SCHEDULE A TO PATENT SECURITY AGREEMENT --------------------------------------- APPLICATION/ REGISTRATION PATENTS REGISTRATION NO. COUNTRY DATE - ------- ---------------- ------- ---- EXHIBIT 1 TO PATENT SECURITY AGREEMENT -------------------------------------- PATENT ASSIGNMENT WHEREAS, BLONDER TONGUE INVESTMENT COMPANY, a Delaware corporation ("Grantor"), is the registered owner, holder or user of: (i) the United States Letters Patents and the inventions which are registered in the United States Patent and Trademark Office and set forth on Schedule A hereto (hereinafter referred to collectively as the "Patents"); (ii) the application for Letters Patents and the inventions described and claimed therein set forth on Schedule A hereto and any United States Letters Patents which may be issued upon any of said applications (hereinafter referred to collectively as the "Applications"); (iii) any reissues, extension, division or continuation of the Patents or Applications (such reissues, extension, divisions and continuations being herein referred to collectively as the "Reissued Patents"); and (iv) all future royalties or other fees paid or payments made to Surety in respect of the Patents (hereinafter referred to collectively as the "Royalties") (the Patents, Applications and the Reissued Patents and the Royalties being herein referred to collectively as the "Patent Rights"). WHEREAS, ____________________________ ("Grantee"), having a place of business at ________________________________________________ is desirous of acquiring the Patent Rights; NOW THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound hereby, Grantor, its successors and assigns, does hereby transfer, assign and set over unto Grantee, its successors, transferees and assigns, all of its present and future right, title and interest in and to the Patent Rights and all proceeds thereof and all Surety's right, title, interest, claims and demands that Surety has or may have in profits and damages for past and future infringements of the Patent Rights. IN WITNESS WHEREOF, the undersigned has caused this Patent Assignment to be executed as of the _____day of _________________, 200___. BLONDER TONGUE INVESTMENT COMPANY Witness: _____________________ By:___________________________ As Attorney-in-fact CORPORATE ACKNOWLEDGMENT UNITED STATES OF AMERICA : STATE OF ________________ : SS COUNTY OF ____________________ : On this the ____ day of ________________, 200___ before me a Notary Public for the said County and State, personally appeared __________________________________ known to me or satisfactorily proven to me to be attorney-in-fact on behalf of BLONDER TONGUE INVESTMENT COMPANY ("Grantor"), and he/she acknowledged to me that he/she executed the foregoing Patent Assignment on behalf of Grantor, and as the act and deed of Grantor for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. ----------------------------- (Individual Notary) My Commission Expires: _______________, ________ SCHEDULE A TO PATENT ASSIGNMENT ------------------------------- APPLICATION/ REGISTRATION PATENTS REGISTRATION NO. COUNTRY DATE - ------- ---------------- ------- ---- EX-10 10 blonder10q03312002ex10-8.txt EXHIBIT 10.8 EXHIBIT 10.8 TRADEMARK SECURITY AGREEMENT This Trademark Security Agreement ("Agreement") is made this 20th day of March, 2002, by BLONDER TONGUE LABORATORIES, INC., a Delaware corporation, having a mailing address of One Jake Brown Road, Old Bridge, New Jersey 08857 ("Borrower") and delivered to COMMERCE BANK, N.A. having a mailing address of 1701 Route 70 East, Cherry Hill, New Jersey 08034 ("Lender"). BACKGROUND ---------- A. This Agreement is being executed contemporaneously with that certain Loan and Security Agreement between Borrower and Lender dated the date hereof ("Loan Agreement"), under which Borrower is granting Lender a lien on and security interest in certain assets of Borrower associated with or relating to services or products sold under Borrower's trademarks and the goodwill associated therewith, and under which Lender is entitled to foreclose or otherwise deal with such assets under the terms and conditions set forth therein. Capitalized terms not defined herein shall have the meanings given to such terms in the Loan Agreement. B. Borrower has adopted, used and is using (or has filed applications for the registration of) the trademarks, servicemarks and tradenames listed on Schedule "A" attached hereto and made part hereof (all such marks or names hereinafter referred to as the "Trademarks"). C. Pursuant to the Loan Agreement, Lender is acquiring a lien on, security interest in and a license to use the Trademarks and the registration thereof, together with all the goodwill of Borrower associated therewith and represented thereby, as security for all of Borrower's Obligations, and Lender desires to have its security interest in such Trademarks confirmed by a document identifying same and in such form that it may be recorded in the United States Patent and Trademark Office. NOW THEREFORE, with the foregoing Background hereinafter deemed incorporated by reference and made a part hereof, and in consideration of the premises and mutual promises herein contained, the parties hereto, intending to be legally bound hereby, covenant and agree as follows: 1. In consideration of and pursuant to the terms of the Loan Agreement, and for other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, and to secure all of the Obligations, Borrower grants to Lender a lien on and security interest in all of Borrower's present and future right, title and interest in and to the Trademarks, together with all the goodwill of Borrower associated with and represented by the Trademarks, and the registration thereof and the right (but not the obligation) to sue for past, present and future infringements, and the proceeds thereof, including, without limitation, license royalties and proceeds of infringement suits. 2. Borrower hereby covenants and agrees to maintain the Trademarks as permitted under applicable law in full force and effect until all of the Obligations are indefeasibly paid and satisfied in full and the Revolving Credit is terminated. 3. Borrower represents, warrants and covenants to Lender that: (a) The Trademarks are subsisting and have not been adjudged invalid or unenforceable; (b) All of the Trademarks (other than application for the registration thereof which have been filed) are registered, valid and enforceable; (c) Borrower is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of the Trademarks, and each of the Trademarks is free and clear of any liens, charges and encumbrances including, without limitation, pledges, assignments, licenses (other than to Surety, Borrower and Lender hereunder) and covenants by Borrower not to sue third persons; (d) Borrower has the corporate power and authority to enter into this Agreement and perform its terms; (e) Borrower has complied with, and will continue for the duration of this Agreement to comply with the requirements set forth in 15 U.S.C. Sec. 1051-1127 and any other applicable statutes, rules and regulations in connection with its use of the Trademarks except where failure to comply would not have a Material Adverse Effect on Borrower or its property; (f) Borrower has no notice of any suits or actions commenced or threatened against it, or notice of claims asserted or threatened against it, with reference to the Trademarks; and (g) Borrower has used and will continue to use for the duration of this Agreement, consistent standards of quality in services or products leased or sold under the Trademarks and hereby grants to Lender and its employees and agents the right (with no obligation of any kind upon Lender to do so) to visit Borrower's affiliates, franchises or management locations and to inspect the use of the Trademarks and quality control records relating thereto at reasonable times during regular business hours to ensure Borrower's compliance with this paragraph 3(g). 4. Borrower further covenants that: (a) Until all of the Obligations are indefeasibly paid and satisfied in full and the Revolving Credit is terminated, Borrower will not enter into any agreement, including, without limitation, license agreements or options, which are inconsistent with Borrower's obligations under this Agreement, Borrower's obligations under the Loan Agreement or which restrict or impair Lender's rights hereunder. (b) If Borrower acquires rights to any new trademarks, the provisions of this Agreement shall automatically apply thereto and such trademarks shall be deemed part of the Trademarks. Borrower shall give Lender prompt written notice thereof along with an amended Schedule "A." 5. So long as this Agreement is in effect and so long as Borrower has not received notice from Lender that an Event of Default has occurred under the Loan Agreement and that 2 Lender has not elected to exercise its rights hereunder: (i) Borrower shall continue to have the exclusive right to use the Trademarks; and (ii) Lender shall have no right to use the Trademarks or issue any exclusive or non-exclusive license with respect thereto, or assign, pledge or otherwise transfer title in the Trademarks to anyone else. 6. Borrower agrees not to sell, grant any option, assign or further encumber its rights and interest in the Trademarks to any entity or person other than Lender, Borrower or any Surety without the prior written consent of Lender. 7. Anything herein contained to the contrary notwithstanding, if and while an Event of Default exists under the Loan Agreement, Borrower hereby covenants and agrees that Lender, as the holder of a security interest under the Uniform Commercial Code, as now or hereafter in the jurisdiction set forth in Section 9.1 of the Loan Agreement, may take such action permitted hereunder, in its exclusive discretion, to foreclose upon the Trademarks covered hereby. For such purposes, while an Event of Default exists, Borrower hereby authorizes and empowers Lender to make, constitute and appoint any officer or agent of Lender as Lender may select, in its exclusive discretion, as Borrower's true and lawful attorney-in-fact, with the power to endorse Borrower's name on all applications, documents, papers and instruments necessary for Lender to use the Trademarks or to grant or issue any exclusive or non-exclusive license under the Trademarks to anyone else, or necessary for Lender to assign, pledge, convey or otherwise transfer title in or dispose of the Trademarks to anyone else including, without limitation, the power to execute a Trademark Assignment in the form attached hereto as Exhibit 1. Borrower hereby ratifies all that such attorney or agent shall lawfully do or cause to be done by virtue hereof, except for the gross negligence or willful misconduct of such attorney or agent. This power of attorney shall be irrevocable for the life of this Agreement, the Loan Agreement, and until all of the Obligations are indefeasibly paid and satisfied in full and the Revolving Credit is terminated. 8. This Agreement shall be subject to the terms, provisions, and conditions set forth in the Loan Agreement and may not be modified without the written consent of the party against whom enforcement is being sought. 9. All rights and remedies herein granted to Lender shall be in addition to any rights and remedies granted to Lender under the Loan Documents. In the event of an inconsistency between this Agreement and Loan Agreement, the language of this Agreement shall control. 10. Upon Borrower's performance of all of the obligations under the Loan Agreement and after all of the Obligations are indefeasibly paid and satisfied in full and the Revolving Credit is terminated, Lender shall, at Borrower's expense, execute and deliver to Borrower all documents reasonably necessary to terminate Lender's security interest in the Trademarks. 11. Any and all reasonable fees, costs and expenses, of whatever kind or nature, including the reasonable attorneys' fees and legal expenses incurred by Lender in connection with the preparation of this Agreement and all other documents relating hereto and the consummation of this transaction, the filing or recording of any documents (including all taxes in connection therewith) in public offices, the payment or discharge of any taxes, reasonable counsel fees, maintenance fees, encumbrances or costs otherwise incurred in protecting, maintaining, preserving the Trademarks, or in defending or prosecuting any actions or proceedings arising out of or related 3 to the Trademarks, in each case in accordance with the terms of this Agreement, shall be borne and paid by Borrower on demand by Lender and until so paid shall be added to the principal amount of the Obligations to Lender and shall bear interest at the otherwise applicable rate prescribed in the Loan Agreement. 12. Subject to the terms of this Agreement, Borrower shall have the duty to prosecute diligently any application and/or registration with respect to the Trademarks pending as of the date of this Agreement or thereafter, until all of the Obligations are indefeasibly paid and satisfied in full and the Revolving Credit is terminated, to preserve and maintain all rights in the Trademarks, and upon reasonable request of Lender, Borrower shall make federal application on registerable but unregistered Trademarks belonging to Borrower and licensed to Borrower unless Borrower determines in good faith that failure to register such Trademarks would not have a Material Adverse Effect on Borrower or its Property. Any reasonable expenses incurred in connection with such applications shall be borne exclusively by Borrower. Borrower shall not abandon any Trademarks without the prior written consent of Lender. 13. Borrower shall have the right to bring suit in its own name to enforce the Trademarks, in which event Lender may, if Borrower reasonably deems it necessary, be joined as a nominal party to such suit if Lender shall have been satisfied, in its sole discretion, that it is not thereby incurring any risk of liability because of such joinder. Borrower shall promptly, upon demand, reimburse and indemnify Lender for all damages, costs and expenses, including reasonable attorneys' fees and costs, incurred by Lender in the fulfillment of the provisions of this paragraph. 14. Upon the occurrence of an Event of Default under the Loan Agreement, Lender may, without any obligation to do so, complete any obligation of Borrower hereunder, in Borrower's name or in Lender's name, but at the expense of Borrower. 15. No course of dealing between Borrower and Lender, nor any failure to exercise, nor any delay in exercising, on the part of Lender, any right, power or privilege hereunder, shall operate as a waiver thereof, and all of Lender's rights and remedies with respect to the Trademarks, whether established hereby or by the Loan Agreement, or by any other future agreements between Borrower and Lender or by law, shall be cumulative and may be exercised singularly or concurrently. 16. The provisions of this Agreement are severable and the invalidity or unenforceability of any provision herein shall not affect the remaining provisions which shall continue unimpaired and in full force and effect. 17. This Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. 18. Borrower irrevocably agrees to consent to the jurisdiction of the state and federal courts of the jurisdiction set forth in Section 9.1 of the Loan Agreement, without regard to its otherwise applicable principles or conflicts of law. 19. BORROWER (AND LENDER BY ITS ACCEPTANCE HEREOF) HEREBY WAIVES 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 4 LOAN AGREEMENT 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 AGREEMENT. IN WITNESS WHEREOF, the parties hereto have executed this Trademark Security Agreement, under seal, the day and year first above written. BORROWER: BLONDER TONGUE LABORATORIES, INC. By: /s/ James A. Luksch ----------------------------------------- James A. Luksch, President and CEO (Corporate Seal) Address: c/o Blonder Tongue Laboratories, Inc. One Jake Brown Road Old Bridge, NJ 08857 Attn: President APPROVED AND ACCEPTED: COMMERCE BANK, N. A. By: /s/ Kurt J. Fuoti ------------------------------------- Kurt J. Fuoti, Vice President 5 CORPORATE ACKNOWLEDGMENT ------------------------ UNITED STATES OF AMERICA : COMMONWEALTH OF PENNSYLVANIA :SS COUNTY OF PHILADELPHIA : On this 20th day of March, 2002, before me personally appeared JAMES A. LUKSCH, to me known and being duly sworn, deposes and says that he is the President and CEO of BLONDER TONGUE LABORATORIES, INC., the corporation described in the foregoing Agreement; that he knows the seal of the corporation; that the seal so affixed to the Agreement is such corporate seal; that he signed the agreement and affixed the seal of the corporation thereto as such officer pursuant to the authority vested in him by law; that the within Agreement is the voluntary act of such corporation; and he/she desires the same to be recorded as such. ------------------------ Notary Public My Commission Expires: 6 SCHEDULE A TO TRADEMARK SECURITY AGREEMENT ------------------------------------------ APPLICATION OR TRADEMARK REGISTRATION NO. COUNTRY FILING DATE - --------- ---------------- ------- ----------- BLONDER TONGUE 819,812 US 12/6/66 Renewed: 12/16/86 BT (with design) 821,512 US 1/3/67 Renewed: 12/16/86 7 EXHIBIT 1 TO TRADEMARK SECURITY AGREEMENT ----------------------------------------- TRADEMARK ASSIGNMENT WHEREAS, BLONDER TONGUE LABORATORIES, INC., a Delaware corporation ("Grantor"), is the registered owner of the United States trademarks, tradenames and registrations listed on Schedule "A" attached hereto and made a part hereof (the "Trademarks"), which are registered in the United States Patent and Trademark Office; and WHEREAS, ___________________("Grantee") having a place of business at ___________________________________, is desirous of acquiring the Trademarks; NOW THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound hereby, Grantor, its successors and assigns, does hereby transfer, assign and set over unto Grantee, its successors, transferees and assigns, all of its present and future right, title and interest in and to the Trademarks and all proceeds thereof and all goodwill associated therewith. IN WITNESS WHEREOF, the undersigned has caused this Trademark Assignment to be executed as of the ____ day of _________, 200___. BLONDER TONGUE LABORATORIES, INC. Witness: _____________________ By:_______________________________ As Attorney-in-fact 8 CORPORATE ACKNOWLEDGMENT ------------------------ UNITED STATES OF AMERICA : STATE OF ______________________ : SS COUNTY OF _____________________ : On this the ____ day of _____________, 200___ before me a Notary Public for the said County and State, personally appeared ______________________________ known to me or satisfactorily proven to me to be attorney-in-fact on behalf of BLONDER TONGUE LABORATORIES, INC. ("Grantor"), and he/she acknowledged to me that he/she executed the foregoing Trademark Assignment on behalf of Grantor, and as the act and deed of Grantor for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. ----------------------------- (Individual Notary) My Commission Expires: _____________, ______ 9 SCHEDULE A TO TRADEMARK ASSIGNMENT ---------------------------------- APPLICATION/OR TRADEMARK REGISTRATION NO. COUNTRY FILING DATE - --------- ---------------- ------- ----------- BLONDER TONGUE 819,812 US 12/6/66 Renewed: 12/16/86 BT (with design) 821,512 US 1/3/67 Renewed: 12/16/86 10 EX-10 11 blonder10q03312002ex10-9.txt EXHIBIT 10.9 EXHIBIT 10.9 SURETY AGREEMENT To: Commerce Bank, N.A. March 20, 2002 1701 Route 70 East Cherry Hill, NJ 08034 To induce you to establish and/or continue financing arrangements with and consider making or continuing certain loans and extending or continuing to extend credit from time to time to BLONDER TONGUE LABORATORIES, INC., a Delaware corporation, (the "Borrower"), the Undersigned, intending to be legally bound, hereby guarantees and becomes surety for the unconditional and prompt payment and performance to you of all of the Obligations (as defined in the Loan Agreement, as defined below) of Borrower to you. The Undersigned shall also pay or reimburse you on demand for all reasonable costs and expenses, including without limitation, reasonable attorneys' fees and costs, incurred by you at any time to enforce, protect, preserve, or defend your rights hereunder and with respect to any property securing this Surety Agreement. All payments hereunder shall be made in lawful money of the United States, in immediately available funds. Unless otherwise defined herein, all capitalized terms shall have the respective meanings given to such terms in that certain Loan and Security Agreement, of even date herewith, by and between Borrower and you (as it may be supplemented, restated, superseded, amended or replaced from time to time, the "Loan Agreement"). The Undersigned further undertakes and agrees as follows: 1. The Undersigned represents and warrants that: (a) The Undersigned's execution and performance of this Surety Agreement shall not (i) violate or result in a default or breach (immediately or with the passage of time) under any material contract, agreement or instrument to which the Undersigned is a party or by which the Undersigned is bound, (ii) violate or result in a default or breach under any applicable order, decree, award, injunction, judgment, law, regulation or rule, (iii) cause or result in the imposition or creation of any lien upon any property of the Undersigned, other than liens in favor of you, or (iv) violate the Undersigned's Certificate of Incorporation, By-Laws or any other organizational document of the Undersigned. (b) The Undersigned has full corporate power and authority to enter into and perform under this Surety Agreement and to incur the obligations provided for herein. The execution, delivery and performance of this Surety Agreement has been authorized by all proper and necessary corporate actions of the Undersigned. (c) No consent, license or approval of, or filing or registration with, any Governmental Authority is necessary for the execution and performance hereof by the Undersigned, except (a) such as have been duly obtained or made prior to the date hereof and (b) such that the failure to obtain or make would not have a material adverse effect on the Undersigned's financial condition. (d) This Surety Agreement constitutes the valid and binding obligation of the Undersigned enforceable in accordance with its terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors' rights generally and general equitable principles. (e) This Surety Agreement promotes and furthers the business and interests of the Undersigned, and the incurrence of the Obligations by Borrower and creation of the obligations hereunder will result in financial benefit to the Undersigned. 2. The Undersigned hereby waives all notices with respect to this Surety Agreement, including without limitation, notices of (a) acceptance of this Surety Agreement, (b) the existence or incurring from time to time of any Obligations guaranteed hereunder, (c) the existence of any Event of Default, the making of demand, or the taking of any action by you, under the Loan Agreement, and (d) demand and default hereunder. 3. The Undersigned hereby consents and agrees that you may at any time or from time to time in your discretion (a) extend or change the time of payment, and/or the manner, place or terms of payment of any or all Obligations, (b) amend, supplement or replace the Loan Agreement or any related agreements, (c) renew, extend, modify, increase (without limit of any kind and whether related or unrelated) or decrease loans and extensions of credit to Borrower, (d) modify the terms and conditions under which loans and extensions of credit may be made to Borrower, (e) settle, compromise or grant releases for liabilities of Borrower and/or any other person or persons liable with Undersigned for any Obligations, (f) exchange, release, surrender, sell, subordinate, or compromise any collateral of any party now or hereafter securing any of the Obligations, and (g) apply any and all payments received by you at any time against the Obligations in any order as you may determine; all of the foregoing in such manner and upon such terms as you may see fit and without notice to or further consent from the Undersigned, who hereby agrees to be and shall remain bound under this Surety Agreement notwithstanding any such action(s) on your part. 4. The liability of the Undersigned hereunder is absolute and unconditional and shall not be reduced, impaired or affected in any way by reason of (a) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any person or persons (including, without limitation, Borrower, the Undersigned, or any other obligor) or in any property, (b) the invalidity or unenforceability of any Obligations or rights in any Collateral, (c) any delay in making demand upon Borrower (or any other obligor), or any delay in enforcing, or any failure to enforce, any rights against Borrower, any other obligor or in any Collateral even if such rights are thereby lost, (d) any failure, neglect or omission on your part to obtain or perfect any lien upon, protect, exercise rights against, or realize on, any property of Borrower, the Undersigned or any other party securing the Obligations, (e) the existence or nonexistence of any defenses which may be available to Borrower with respect to the Obligations (other than the defense of payment), (f) any failure to proceed against Borrower or any Collateral in a commercially reasonable manner, or (g) the commencement of any bankruptcy, reorganization, liquidation, dissolution or receivership proceeding or case filed by or against Borrower. 5. If any or all payments made from time to time to you with respect to any Obligation hereby guaranteed are recovered from, or repaid by, you in whole or in part in any bankruptcy, reorganization, insolvency or similar proceeding instituted by or against Borrower, this Surety Agreement shall continue to be fully applicable to such Obligation to the same extent as if the recovered or repaid payment(s) had never been originally made on such Obligation. 2 6. All rights and remedies hereunder and under the Loan Agreement, and related agreements, are cumulative and not alternative, and you may proceed in any order from time to time against Borrower, the Undersigned and/or any other obligor of Borrower's Obligations and their respective assets. 7. Any and all rights of any nature of the Undersigned to subrogation, reimbursement or indemnity and any right of the Undersigned to recourse to any assets or property of Borrower for any reason shall be unconditionally subordinated to all of your rights under the Loan Agreement and the Undersigned shall not at any time exercise any of such rights unless and until all of the Obligations have been indefeasibly paid and satisfied in full. 8. Your books and records of any and all of Borrower's Obligations, absent manifest error, shall be prima facie evidence against the Undersigned of the indebtedness due you or to become due to you hereunder. 9. This Surety Agreement shall constitute a continuing surety obligation and you may continue to act in reliance hereon until all of the Obligations have been indefeasibly paid and satisfied in full. You shall not have any obligation to proceed against, or exhaust any or all of your rights against, Borrower prior to proceeding against the Undersigned hereunder. 10. The Undersigned agrees that you shall have a right of setoff against any and all property of the Undersigned now or at any time in your possession, including without limitation deposit accounts, and the proceeds thereof, as security for the obligations of the Undersigned hereunder. 11. If an Event of Default occurs and is continuing under the Loan Agreement, then all of the Undersigned's Obligations to you hereunder shall, at your option, become immediately due and payable and you may at any time and from time to time take any and/or all actions and enforce all rights and remedies available hereunder or under applicable law to collect the Undersigned's liabilities hereunder. 12. Failure or delay in exercising any right or remedy against the Undersigned hereunder shall not be deemed a waiver thereof or preclude the exercise of any other right or remedy hereunder. No waiver of any breach of or provision of this Surety Agreement shall be construed as a waiver of any subsequent breach or of any other provision. The invalidity or unenforceability of any provision hereof shall not affect the remaining provisions which shall remain in full force and effect. 13. This Surety Agreement shall (a) be legally binding upon the Undersigned and the Undersigned's successors and assigns, provided that the Undersigned's obligations hereunder may not be delegated or assigned without your prior written consent and (b) benefit any and all of your successors and assigns. 14. This Surety Agreement embodies the whole agreement and understanding of the parties hereto relative to the subject matter hereof. No modification of any provision hereof shall be enforceable unless approved by you in writing. 3 15. This Surety Agreement shall in all respects be interpreted, construed and governed in accordance with the substantive laws of the jurisdiction set forth in Section 9.1 of the Loan Agreement. The Undersigned irrevocably (i) submits to jurisdiction of the state and federal courts of the jurisdiction as set forth in Section 9.18 of the Loan Agreement for the purposes of any litigation or proceeding hereunder or concerning the terms hereof and (ii) WAIVES ANY AND ALL RIGHTS THE UNDERSIGNED 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. 16. (a) In any action or proceeding brought by you to enforce the terms hereof, the Undersigned waives personal service of the summons, complaint, and any motion or other process, and agrees that notice thereof may be served by registered or certified mail, return receipt requested or by nationally recognized overnight courier at the address of the Undersigned set forth on the signature page hereof. Such service shall be deemed made on the date of delivery at such address. (b) Any and all notices which may be given to the Undersigned by you hereunder shall be sent to the Undersigned at the address of the Undersigned set forth on the signature page hereof and shall be deemed given to and received (on the date delivered) by the Undersigned if personally delivered or if sent by facsimile transmission or if sent in the manner provided for service of process in paragraph 16(a) above. 17. So long as the Obligations are outstanding, the Undersigned shall not sell, transfer, convey or dispose of any assets outside of the ordinary course of business to any entity other than Borrower or any other Surety. IN WITNESS WHEREOF, the undersigned parties have executed this Surety Agreement the day and year first above written. BLONDER TONGUE INVESTMENT COMPANY By: /s/ James A. Luksch ------------------------------------- James A. Luksch, President and CEO Address: c/o Blonder Tongue Laboratories, Inc. One Jake Brown Road Old Bridge, NJ 08857 Attn: President 4 -----END PRIVACY-ENHANCED MESSAGE-----