-----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, UMWs7IyzRLGUkysk2uHSIAGGD3JVxdwjlwcCdmSO35eZ3+tzZBZGOWvyPY8TKoIG Qnzf2F6fk/pw+Dui6FKiCw== 0000074818-05-000013.txt : 20050408 0000074818-05-000013.hdr.sgml : 20050408 20050407180029 ACCESSION NUMBER: 0000074818-05-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20050404 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets FILED AS OF DATE: 20050408 DATE AS OF CHANGE: 20050407 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORBIT INTERNATIONAL CORP CENTRAL INDEX KEY: 0000074818 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 111826363 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-03936 FILM NUMBER: 05740066 BUSINESS ADDRESS: STREET 1: 80 CABOT COURT CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 7136675601 MAIL ADDRESS: STREET 1: 80 CABOT COURT CITY: HAUPPAUGE STATE: NY ZIP: 11788 FORMER COMPANY: FORMER CONFORMED NAME: ORBIT INSTRUMENT CORP DATE OF NAME CHANGE: 19911015 8-K 1 doc1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): APRIL 4, 2005 ORBIT INTERNATIONAL CORP. (Exact name of registrant as specified in its charter) DELAWARE 0-3936 11-1826363 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 80 CABOT COURT HAUPPAUGE, NEW YORK 11788 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 631-435-8300 NOT APPLICABLE -------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230-425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT See Item 2.01 below for information concerning loan agreements entered into between the Registrant and its lender and various acquisition agreements concerning the Registrant's acquisition of Tulip Development Laboratory, Inc. and TDL Manufacturing, Inc. on April 4, 2005. ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS On April 4, 2005, Orbit International Corp. ("Orbit") completed the acquisition of all of the issued and outstanding capital stock of Tulip Development Laboratory, Inc.("Tulip") and its affiliated manufacturing company, TDL Manufacturing, Inc. ("TDLM"). The Acquisition was pursuant to a Stock Purchase Agreement entered into on December 13, 2004, by and among Orbit, as Buyer, Tulip, TDLM and the respective shareholders of Tulip and TDLM, as the Sellers. Headquartered in Quakertown, Pennsylvania, Tulip Development Laboratory is a leading designer and engineering provider of computer peripheral products including custom integrated solutions for keyboards, illuminated data entry devices and displays. TDLM has years of experience in providing both prime defense electronics contractors, as well as commercial customers, with high volume production to support membrane control panel, military vetronic and avionic display program requirements. Orbit is keeping Tulip's operations in Quakertown and it has become part of Orbit's Electronics Segment along with its Orbit Instrument Division. The Sellers included Richard A. Hetherington, who became President and Chief Operating Officer of Tulip and TDLM following the Closing, his wife Joanne Hetherington, Larry M. Bateman and Stephen G. Hill. There was no material relationship, other than in respect of the transaction, between the Sellers and Orbit or any of its affiliates, or any officer or director of Orbit or any associate of any such director or officer. The aggregate Purchase Price paid was $8,500,000 subject to post-closing adjustment consisting of $5.0 million in cash, $2.0 million promissory notes to the Sellers and $1.5 million in value, or 164,904 shares of Orbit Common Stock, based on the 20 day average ending March 30, 2005. The Purchase Price is subject to adjustment if the combined tangible assets less distributions is greater than or less than $1,800,000. The $5.0 million of the purchase price paid in cash was funded by a five-year term loan (the "Loan") among the parties and Merrill Lynch Business Financial Services, Inc. ("MLBFS"). The Loan was made pursuant to a Term Loan and Security Agreement ("Loan Agreement") entered into on April 4, 2005, between Orbit and MLBFS. The collateral installment note for $5.0 million is payable in 60 consecutive monthly installments at an interest rate equal to 2.25% plus the one-month LIBOR. Orbit pledged all of its assets and those of all of its subsidiaries to MLBFS, and each subsidiary including Tulip and TDLM guaranteed the repayment of the loan. Orbit agreed to various financial covenant ratios customary for a transaction of this size. Orbit's working capital line of credit ("WCMA") was increased to up to $2.5 million from $2.0 million as part of the transaction. The WCMA is based on 80% of receivables and 50% of raw material inventory of Orbit and its subsidiaries. The interest rate is 2.0% plus the one-month LIBOR. Orbit and the Sellers executed a Custody, Pledge and Security Agreement under which Orbit pledged to the Sellers all of the stock of Tulip and TDLM ("Tulip Shares") as collateral for its obligations to pay the $2.0 million of promissory notes to the Sellers. At the Closing of the transaction, Richard A. Hetherington entered into a three-year employment contract with Tulip as President and Chief Operating Officer of Tulip and TDLM. Mr. Hetherington has the option to extend the employment agreement for an additional two-year period on the same terms or become a consultant for up to 40 hours per week. Mr. Hetherington will be employed at Tulip's offices in Quakertown, Pennsylvania. Mr. Hetherington is being compensated at the rate of $350,000 per annum subject to cost of living increases. He will also participate in a bonus pool of Tulip workers. The agreement is terminable for cause (as defined). However, if Tulip terminates Mr. Hetherington's employment other than for cause and Mr. Hetherington resigns for good reason (as defined) he shall be entitled to severance equal to his base salary for the immediate prior year plus bonuses for such year. Mr. Hetherington agreed not to compete with Tulip during the term of his agreement. The Sellers each executed a subordination agreement to subordinate their interests in the Tulip Shares to the rights of Orbit's lender, MLBFS. As part of the transaction, Tulip and TDLM entered into a five-year Triple Net Lease for their facilities at 1765 Walnut Lane, Quakertown, Pennsylvania. The landlord is Rudy's Thermo-Nuclear Devices, a Pennsylvania Limited Partnership whose general partner is an entity controlled by Richard A. Hetherington. The net rent is $9,100 per month, or $109,200 for the first year increasing to $10,044, or $120,528 in the last year, with the tenant responsible for all costs, expenses and obligations of every kind. The tenant has an option to extend for an additional five-year term at increasing rents. ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES (a) On April 4, 2005, Orbit issued an aggregate of 164,904 shares of its Common Stock (the "Shares"). (b) The Shares were issued to the four former shareholders of Tulip and TDLM pursuant to the acquisition described under Item 2.01 above (the "Tulip Acquisition"). (c) The Shares comprised $2.0 million of the Purchase Price for the Tulip Acquisition. (d) The Shares were issued pursuant to an exemption claimed by Orbit under Section 4(2) of the Securities Act of 1933, as amended and Regulation D promulgated thereunder. Each of the Sellers had access to the same information that would have been contained in a registration statement. (e) No convertible securities were issued. ITEM 5.02. DEPARTURE OF DIRECTORS AND PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS As part of the Tulip Acquisition described above under Item 2.01, Richard Hetherington was appointed President and Chief Operating Officer of Tulip and TDLM. Mr. Hetherington had been the Chief Executive Officer of Tulip for more than the last five (5) years. There are no family relationships between Mr. Hetherington and any director or executive officer of Orbit, although his wife was an employee of Tulip. There were no material transactions between Mr. Hetherington and Orbit prior to this transaction. The terms of Mr. Hetherington's employment agreement are described under Item 2.01 above. SECTION 9- FINANCIAL STATEMENTS AND EXHIBITS ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial statements of business acquired. In accordance with Item 9.01(a)(4) of Form 8-K, the Registrant will file the financial statements of the business acquired as required by Item 9.01(a)(1) within seventy one days after the due date of April 8, 2005, for this Report concerning the closing of the transaction. (b) Pro Forma financial information. In accordance with Item 9.01(b)(2) of Form 8-K, the Registrant will file the pro forma financial information required by Item 9.01(b)(1) within seventy one days after the due date of April 8, 2005, for this Report concerning the closing of the transaction. (c) Exhibits. Listed below are all exhibits to this Current Report of Form 8-K. Exhibit Number Description 2.1 Stock Purchase Agreement, dated December 13, 2004, by and among Orbit International Corp., Tulip Development Laboratory, Inc., TDL Manufacturing, Inc. and the respective Shareholders of Tulip Development Laboratories, Inc and TDL Manufacturing, Inc. (foot1 Incorporated by reference herein to the Registrant's Current Report on Form 8-K for December 13, 2004.1) 10.1 Employment Agreement dated April 4, 2005 between Tulip Development Laboratory, Inc. and Richard A. Hetherington. 10.2 Custody, Pledge and Security Agreement dated as of April 4, 2005, by and among Orbit International Corp. ("Pledgor") and Richard A. Hetherington, Joanne Hetherington, Larry M. Bateman and Stephen Hill ("Pledgees" 10.3 Net Lease dated as of April 4, 2005, by and between Rudy's Thermo-Nuclear Devices, as Landlord, and TDL Manufacturing, Inc. and Tulip Development Laboratory, Inc. 10.4 Term Loan and Security Agreement dated as of April 4, 2005 between Orbit International Corp. and Merrill Lynch Business Financial Services Inc. 10.5 Collateral Installment Note to Merrill Lynch Business Financial Services Inc. dated as of April 4, 2005, from Orbit International Corp. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: April 7, 2005 Orbit International Corp. By: /s/ Dennis Sunshine ----------------------- Dennis Sunshine Chief Executive Officer and President EX-10.1 2 doc2.txt EXHIBIT 10.1 EMPLOYMENT AGREEMENT -------------------- AGREEMENT made and entered into as of April 4, 2005 between Tulip Development Laboratory, Inc., a Pennsylvania corporation (the "Company), and Richard A. Hetherington ("Employee"). W I T N E S S E T H ------------------- WHEREAS, the Employee has entered into on December 13, 2004, a Stock Purchase Agreement (the "SPA") by and among the Company, Orbit International Corp. ("Parent"), TDL Manufacturing Inc. ("TDLM") and the respective shareholders of the Company, including the Employee, and of TDLM, which SPA provides in Paragraph 9.12 therein, for the Company and the Employee to enter into an employment agreement; and WHEREAS, the Company desires to enter into this Employment Agreement with the Employee and the Employee desires to be employed by the Company on the terms and conditions set forth in this Employment Agreement. NOW, THEREFORE, the parties hereto, in consideration of the premises and the mutual covenants herein contained, hereby agree as follows: 1. Term of Employment. -------------------- (a) Subject to the terms and conditions hereinafter set forth, the Company shall employ Employee and Employee shall be employed by the Company, for an employment term commencing as of the date hereof and terminating three years from the date hereof unless sooner terminated pursuant to the provisions of Paragraph 8 hereof (the "Initial Term"). (b) At least 90 days prior to the expiration of the Initial Term, the Employee shall give written notice to the Company of his election to either extend this Employment Agreement for an additional 2 year period on the same terms and conditions as set forth in this Employment Agreement (the "Option Term") or to become a consultant to the Company under terms to be mutually agreed upon, but not to exceed 40 hours per week (the Initial Term and the Option Term are collectively referred to herein as the "Term"). At the expiration of the Initial Term or the Option Term, as the case may be, the Company shall have no further obligation to the Employee, and the Employee shall have no further obligation to the Company except with respect to (i) Employee's obligations to the Company pursuant to Paragraphs 9, 10, 11 and 15; (ii) the Company's obligations to Employee pursuant to Paragraphs 4-8; and, (iii) any other obligations the Company may have to Employee and/or Employee may have to the Company under applicable law governing the relationship of an employer to an employee and/or an employee to an employer upon and following termination of such relationship. 2. Scope of Employment. During the Term, Employee shall be employed as ------------------- President and Chief Operating Officer of the Company and of TDLM and shall perform such duties customarily expected to be performed by such officer. In addition, Employee shall faithfully render and perform such other reasonable executive and managerial services as may be assigned to him, from time to time, by or under the authority of the Board of Directors of the Company or of the Parent, or by the Chief Executive Officer of the Company. Employee will devote his full working time and efforts to the business and affairs of the Company, as now or hereafter conducted, and shall be at all times subject to the direction and control of the Board of Directors of the Company or of the Parent, or of the Chief Executive Officer of the Company. Employee shall render such services to the best of his ability and shall use his best efforts to promote the interests of the Company. Employee will not engage in any capacity or activity which is, or reasonably may be, contrary to the welfare, interest or benefit of the business now or hereafter conducted by the Company. 3. Location of Employment. Employee shall render services primarily at ----------------------- the Company's offices that are located in Quakertown, Pennsylvania. During the Term, the Company shall continue to provide Employee with an office and staff at the Company's Quakertown offices consistent with the practice of the Company prior to the effective date of this Agreement. Notwithstanding the foregoing, Employee acknowledges and agrees that Employee's duties hereunder from time-to-time may include such reasonable travel outside of Quakertown, Pennsylvania consistent with past practices of the Company, as the performance of Employee's duties may require. Employee shall not be required to relocate to any other location. 4. Compensation. ------------ (a) As full compensation for all services provided for herein, the Company will pay, or cause to be paid, to Employee, and Employee will accept, a base salary (as increased from time to time, the "Base Salary") during the Term at an annual rate of not less than Three Hundred Fifty Thousand and 00/100 ($350,000.00), provided that as of each anniversary of the date of this Agreement, the Base Salary shall be increased by an amount equal to the annual percentage increase in the "All-Urban" consumer price index published by the United States Bureau of Labor Statistics for the Philadelphia, Pennsylvania area for the immediately preceding 12-month period (or, if such index is no longer published, by an amount equal to the annual percentage increase in the most closely comparable index). The Board of Directors shall review Employee's performance annually and may, in its sole discretion, increase the Base Salary by an amount greater than that provided for in the preceding sentence. The Base Salary shall be paid in regular installments in accordance with the Company's usual paying practices, but not less frequently than monthly. (b) During the Term of this Agreement, the Employee shall also have use of an automobile owned or leased by the Company ("Employee's Company Car"), at least comparable to the one currently used by Employee. Employee shall also be entitled to reimbursement of costs related to the use by Employee of Employee's Company Car, including, but not limited to, insurance, repairs, maintenance, mileage charges and fuel costs, reasonably incurred on the Company's behalf, upon submission of a detailed accounting for such car expenses by Employee to the Company in accordance with the Company's expense reimbursement policy and procedures then in effect. (c) In addition to the compensation set forth in subparagraphs (a) and (b) of this Paragraph 4, Employee shall be entitled to receive an annual incentive bonus, which amount shall be computed as follows: For each fiscal year during the Term, or any pro rated portion thereof, Employee shall be entitled to participate in a bonus pool, to be distributed among employees of the Company, which shall consist of an aggregate amount equal to five (5) % of the pre-tax income of the Company and TDLM. "Pre-Tax Income" shall mean the net income generated by the Company and by TDLM on a combined basis (exclusive of any extraordinary gains, extraordinary losses, or any interest expense, with the exception of interest paid to the Sellers under the Orbit Note (as defined in Section 2.02(iii) of the SPA), as set forth in the respective financial statements of the Company and TDLM, determined in accordance with generally accepted accounting principles consistently applied, and which shall also include an agreed upon allocation of administrative and overhead costs of the Parent. The Employee shall participate equally with other members of senior management of the Parent in the determination of the amount of the distribution from the bonus pool. Such payment shall be made within ten (10) days following completion of the annual audit of the Company's and TDLM's respective financial statements, and with regard to that period remaining in the Term after the conclusion of the final complete fiscal year of the Term (the "Stub Period"), within forty five (45) days after the end of the Stub Period. Pre-Tax Income for the Stub Period shall be taken from the unaudited financial statements of the Company and TDLM. The Base Salary and any bonus payments will be subject to such deductions by the Company as the Company is from time to time required to make pursuant to law, government regulations or order or by agreement with, or consent of, Employee. Such payments may be made by check or checks of the Company or any of its parent, subsidiaries or affiliates as the Company may, from time to time, find proper and appropriate. 5. Vacation. During the Term, Employee shall be entitled to vacations -------- in accordance with past practice of the Company prior to the date of this Agreement. It is hereby acknowledged by both Employee and the Company that the Schedule of vacation days and availability attached to this Agreement constitutes past practice prior to the effective date of this Agreement. 6. Benefits. -------- (a) During the Term, Employee shall be entitled to participate in all group insurances as are presently being offered by the Company or which may hereafter, during the Term, be offered to its executive and/or non-executive employees on a company wide basis (including group life insurance, group disability insurance, group medical and hospitalization plans, pension and profit sharing plans). During the Term, Employee shall be entitled to medical and hospitalization coverage for himself, his spouse, and dependents under the BlueCross Personal Choice Plan (including prescription drug coverage) pursuant to which he currently has coverage. In the event the Company fails to provide such coverage, or such coverage is otherwise unavailable, then the Company shall provide Employee, his spouse, and dependents with at least equivalent coverage (including healthcare provider choices, deductibles, co-pays, etc.). (b) During the Term, if the Company shall further maintain a simplified employee pension plan ("SEP") it shall make contributions of at least Twenty Thousand and 00/100 ($20,000.00) Dollars each year to Employee's SEP account. The Company shall make such contributions to Employee's SEP account on or before the due date for the Company's tax return for each year. The Company's SEP shall not be terminated until all employees covered by SEP are transferred to participate in the Parent's Orbit International Corp Employee Savings Plan. (c) From and after the date of this Employment Agreement, the terms "compensation" as used in any pension or profit sharing plan maintained by the Company shall include only the Base Salary (exclusive of any bonus payments) payable hereunder, unless the plan or applicable law provides otherwise. 7. Expenses. Employee shall be entitled to reimbursement by the Company -------- for reasonable expenses actually incurred by him on its behalf or on behalf of the Parent or TDLM, in the course of his employment by the Company, upon the presentation by Employee, from time to time, of an itemized account of such expenditures together with such vouchers and other receipts as the Company may request, in accordance with Company policy and Internal Revenue Service regulations. 8. Termination. ----------- (a) Disability. If, during the Term, Employee shall be unable, for a ---------- period of more than six (6) consecutive months or for periods aggregating more than twenty-six (26) weeks in any fifty-two (52) consecutive weeks to perform the services provided for herein as a result of illness, incapacity or a physical or other disability of any nature, the Company may, upon not less than thirty (30) days' written notice, terminate Employee's employment and the Term hereunder. Employee shall be considered unable to perform the services provided for herein if he is unable, with or without reasonable accommodation, to attend to the essential duties required of him. (b) Death. If Employee shall die during the Term, Employee's employment ----- hereunder and the Term shall terminate upon Employee's death. Employee's estate shall continue to receive the compensation specified in Paragraph 4 hereof until the end of the month in which Employee's death occurs. Medical and hospitalization insurance coverage, as provided for in Paragraph 6(a), will continue for Employee's spouse and dependents for a period of six (6) months thereafter, without prejudice to the rights of his spouse and dependents) under Section 4980B of the Internal Revenue Code. (c) For Cause. In addition to the provisions for the cancellation ---------- and/or termination hereof hereinabove provided, the Company may, at any time and in its sole discretion, terminate and/or cancel the Term and this Employment Agreement for cause (as hereinafter defined) by sending written notice to the Employee of its intention to so cancel and/or terminate. Cancellation and/or termination under this paragraph shall become effective within ten (10) business days of Employee's receipt of the notice provided for under this paragraph. For purposes of this Employment Agreement, "cause" shall be defined to mean: (i) fraud, dishonesty or similar malfeasance; (ii) substantial refusal to comply or default in complying with the reasonable, ethical, and lawful directions of the Board of Directors of the Company or the Parent, or the Chief Executive Officer and/or failure to comply with or perform any of the material terms and/or obligations of this Employment Agreement and such refusal, default or failure continues for a period of more than ten (10) days after receipt by Employee of written notice from the Company setting forth in reasonable detail the activity by Employee which the Company deems to be cause for termination of this Employment Agreement; (iii) Employee's repeated and intemperate use of alcohol or illegal drugs after written notice from the Company that such use, if continued, will result in termination of Employee's employment; (iv) Employee's conviction of a felony involving personal dishonesty, moral turpitude, or willfully violent conduct; or, (v) Employee materially breaching any provision of this Employment Agreement, which breach continues for a period of more than ten (10) days after receipt by Employee of written notice from the Company setting forth in reasonable detail the breach by Employee which the Company deems to be cause for termination of this Employment Agreement. (d) Resignation for Good Reason. Employee's employment and the Term may be ---------------------------- terminated by Employee for "Good Reason" if any of the following occurs without Employee's written consent: (i) a substantial and adverse alteration of Employee's position, duties, and responsibilities under this Agreement such that they are no longer consistent with the position, duties, and/or responsibilities of an executive level employee; (ii) a material breach of this Agreement by the Company or the Parent; (iii) a change in Employee's principal place of employment to a location at least twenty (20) miles from the Quakertown, Pennsylvania offices; (iv) a material and adverse change in the compensation and benefits provided to Employee under this Agreement; and/or (v) the Company or the Parent materially breaches the SPA and/or the Orbit Note. In order to be eligible for the severance benefits referred to in Paragraph 8(e) below, Employee shall be required to provide the Company with written notice of Good Reason to resign within twenty (20) days after Employee becomes aware of the circumstances constituting Good Reason. The Company shall have a period of ten (10) days after Employee provides such written notice within which to take measures to correct the circumstances constituting Good Reason. Should Employee fail to provide twenty (20) days written notice of Good Reason and/or should the Company correct the circumstances within ten (10) days after receiving written notice from the Employee, Good Reason for Employee's resignation shall cease to exist. (e) Severance. --------- (i) In the event the Company terminates Employee's employment, other than for the reasons set forth in Paragraphs 8(a), (b), or (c), or Employee resigns for Good Reason, Employer will pay to Employee a severance benefit. Severance shall be in an amount equal to Employee's Base Salary for the immediately preceding calendar year, plus bonuses paid to Employee for the immediately preceding calendar year (the "Severance Benefit"). The Severance Benefit will be subject to payroll deductions required by law and/or authorized by Employee. The Severance Benefit shall be payable in substantially equal installments on regularly scheduled paydays commencing with the regularly scheduled payday following the effective date of the termination of employment and continuing for one (1) year or the end of the Term of this Agreement, whichever is shorter. Should Employee resign where no Good Reason exists, or should Employee's employment terminate pursuant to Paragraphs 8 (a), (b), and/or (c), Employee shall not be entitled to the Severance Benefit. (ii) In the event the Company terminates Employee's employment pursuant to Paragraph 8(b) for the reason that Employee suffers from a disability, and in the event Employee is not receiving long-term disability benefits under either a group long-term disability insurance program maintained by the Company or a personal policy maintained by Employee at a rate of at least sixty-six and two-thirds (66 2/3%) percent of Employee's then current Base Salary, the Company will pay to Employee the difference between sixty-six and two-thirds (66 2/3%) percent of Employee's then current Base Salary and such amount Employee is receiving, if any, (less payroll deductions required by law and/or authorized by Employee) in substantially equal installments on regularly scheduled paydays commencing with the regularly scheduled payday following the effective date of the termination of employment and continuing for six (6) months. (iii) Employee will also be entitled, subject to the terms and conditions of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the Company's policies, to make a COBRA election to continue the medical and hospitalization benefits referred to in Paragraph 6(a) for Employee, his spouse, and his eligible dependents. In the event Employee elects COBRA coverage, the Employee will reimburse the Company for premium payments made on behalf of Employee to keep medical and/or hospitalization coverage in effect for a period of eighteen (18) months from the effective date of the termination of employment. (iv) Employee shall have no duty to seek other employment or to engage in self-employment in mitigation of the Severance Benefit and premium reimbursement provided for hereunder, and any compensation which Employee may receive in the course of any such employment or self-employment shall not reduce the Company's obligations hereunder. 9. Disclosure. Except as may be required or appropriate in connection ---------- with Employee's carrying out his duties under this Agreement, Employee will not, without the prior written consent of the Company, or unless otherwise required by law or any legal process, at any time, directly or indirectly, disclose or furnish to any other person, firm or corporation: (a) any of the Company's confidential non-public information concerning the methods of conducting or obtaining business, of manufacturing or advertising products, or of obtaining customers; (b) any of the Company's confidential non-public information acquired by Employee during the course of his employment by the Company, including without limiting the generality of the foregoing, the name of any customers or prospective customers of, or any person, firm or corporation who or which have or shall have traded or dealt with, the Company (whether such customers have been obtained by Employee or otherwise); and/or (c) any of the Company's confidential non-public information relating to the products, designs, processes, discoveries, materials, ideas, creations, inventions or properties of the Company. 10. Covenants Not to Compete. --------------------------- (a) During the Term, Employee agrees not to engage, directly or indirectly, in any business which is competitive with the business now, or at any time during the Term, conducted by the Company. (b) During the Term, or if the Employee is terminated for cause, until the scheduled expiration of the Term, Employee agrees not to directly or indirectly, on behalf of himself or any business in which he may, directly or indirectly, be engaged, recruit, solicit, induce (or attempt to induce), or have any part in, the diversion of any of the Company's employees or sales representatives from their relationships with the Company, or retain or employ any of the Company's employees or sales representatives (c) In addition, Employee shall not at any time, during or after the termination of this Employment Agreement, engage in any business which uses as its name, in whole or in part, Tulip Development Laboratory, Inc., TDL Manufacturing, Inc. and/or Orbit International Corp., or any other name used by the Company, and known by Employee to be so used, during or prior to the Term. For the purpose of this Paragraph 10, Employee will be deemed directly or indirectly engaged in a business if he participates in such business as proprietor, partner, joint venturer, stockholder, director, officer, lender, manager, employee, consultant, advisor or agent, or if he controls such business. Employee shall not for purposes of this paragraph be deemed a stockholder or lender if he holds less than two (2%) percent of the outstanding equity or debt of any publicly owned corporation engaged in the same or similar business to that of the Company, provided that Employee shall not be in a control position with regard to such corporation. 11. Inventions. As between Employee and the Company, all products, ---------- designs, processes, discoveries, materials, ideas, creations, inventions and properties, whether or not furnished by Employee, created, developed, invented, or used in connection with Employee's employment hereunder or prior to this Employment Agreement, will be the sole and absolute property of the Company for any and all purposes whatever in perpetuity, whether or not conceived, discovered and/or developed during regular working hours. Employee will not have, and will not claim to have, under this Employment Agreement or otherwise, any right, title or interest of any kind or nature whatsoever in or to any such products, designs, processes, discoveries, materials, ideas, creations, inventions and properties. 12. Arbitration. Any controversy arising out of or relating to this ----------- Employment Agreement, including any modification or amendment thereof, shall be resolved by arbitration, by a single arbitrator pursuant to the employment dispute resolution rules then obtaining of the American Arbitration Association. The venue for arbitration shall be in Quakertown, Pennsylvania. The parties consent to the application of the Pennsylvania or Federal Arbitration Statutes and to the jurisdiction of the Bucks County Court of the Commonwealth of Pennsylvania, and of the United States District Court for the Eastern District of Pennsylvania, for judgment on an award and for all other purposes in connection with said arbitration. Judgment upon the written award rendered may be entered by any Court having jurisdiction. Any provisional remedy which, but for this provision to arbitrate disputes, would be available at law, shall be available to the parties hereto pending the final word of the arbitrator. 13. Injunctive Relief. The parties hereto recognize that irreparable damage ------------------ may result to the Company and its business and properties if Employee fails or refuses to perform his obligations under this Employment Agreement and that the remedy at law for any such failure or refusal may be inadequate. Accordingly, notwithstanding the provisions of Paragraph 12 hereof to arbitrate disputes arising hereunder, it is understood that the Company has not waived its rights to seek any provisional remedies (including, without limitation, injunctive relief) and damages. The institution of any arbitration proceedings shall not bar injunctive relief, or any other provisional remedy, pending the final award of the arbitrators. 14. Absence of Restrictions. Employee represents and warrants that he ------------------------- is not a party to any agreement or contract pursuant to which there is any restriction or limitation upon his entering into this Employment Agreement or performing the services called for by this Employment Agreement. 15. Further Instruments. Employee will execute and deliver all such other -------------------- further instruments and documents as may be reasonably necessary, to carry out the purposes of this Employment Agreement, or to confirm, assign or convey to the Company any products, designs, processes, discoveries, materials, ideas, creations, inventions or properties referred to in Paragraph 11 hereof, including the execution of all patent, design patent, copyright, trademark or trade name applications. 16. Invalidity and Severability. If any provisions of this Employment ----------------------------- Agreement are held invalid or unenforceable, such invalidity or unenforceability shall not affect the other provisions of this Employment Agreement, and, to that extent, the provisions of this Employment Agreement are intended to be and shall be deemed severable. In particular and without limiting the foregoing sentence, if any provision of Paragraph 10 of this Employment Agreement shall be held to be invalid or unenforceable by reason of geographic or business scope or the duration thereof, such invalidity or unenforceability shall attach only to such provisions and shall not affect or render invalid or unenforceable any other provisions of this Employment Agreement, and any such provision of this Employment Agreement shall be construed as if the geographic or business scope or the duration of such provision had been more narrowly drawn so as not to be invalid or unenforceable. 17. Notices. Any notice required or permitted to be given under this ------- Employment Agreement shall be sufficient if in writing and if sent by registered or certified mail, telegram, or overnight courier as follows: As to Employee: Richard A. Hetherington - ---------------- Tulip Development Laboratory, Inc. 1765 Walnut Lane Quakertown, PA 18951 with a copy to: Jane P. Long, Esq. Fitzpatrick Lentz & Bubba, P.C. 4001 Schoolhouse Lane P.O. Box 219 Center Valley, PA 18034 As to the Company: Tulip Development Laboratory, Inc. - -------------------- c/o Orbit International Corp. 80 Cabot Court Hauppauge, New York 11788 Attn: Chief Executive Officer with a copy to: Elliot H. Lutzker, Esq. Robinson & Cole LLP 885 Third Avenue, Suite 2800 New York, NY 10022-4835 or to such other address as either party hereto may designate by notice given in accordance with this Employment Agreement. 18. Assignment. A party hereto may not assign this Employment Agreement ---------- or any rights or obligations hereunder without the consent of the other party hereto; provided, however, that upon the sale or transfer of all or --------- ------- substantially all of the assets of the Company, or upon the merger by the ---- Company into, or the combination with, another corporation, this Employment Agreement will inure to the benefit of and be binding upon the person, firm or corporation purchasing such assets, or the corporation surviving such merger or consolidation, as the case may be, and the Company shall require any such person, firm or corporation to expressly assume the Company's obligations and liabilities hereunder. The provisions of this Employment Agreement, where applicable, are binding upon the heirs of Employee and upon the successors and assigns of the parties hereto. 19. Waiver of Breach. Waiver by either party of a breach of any provision of ---------------- this Employment Agreement by the other shall not operate or be construed as a waiver of any subsequent breach by such other party. 20. Entire Employment Agreement. This document, together with the SPA and ----------------------------- Note, contains the entire agreement of the parties as to the subject matter hereof and supersedes and replaces all prior oral or written agreements between the parties. This Agreement may not be changed orally, but only by an amendment in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 21. Applicable Law. This Employment Agreement shall be construed, enforced --------------- and governed by and under the laws of the Commonwealth of Pennsylvania, without regard to conflict of laws principles. IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the day and year first above written. EMPLOYEE: /s/ Richard Hetherington -------------------------- Richard A. Hetherington TULIP DEVELOPMENT LABORATORY, INC. By: /s/ Dennis Sunshine --------------------- Dennis Sunshine Chief Executive Officer ORBIT INTERNATIONAL CORP. By: /s/ Dennis Sunshine --------------------- Dennis Sunshine Chief Executive Officer EX-10.2 3 doc3.txt EXHIBIT 10.2 CUSTODY, PLEDGE AND SECURITY AGREEMENT -------------------------------------- CUSTODY, PLEDGE AND SECURITY AGREEMENT, dated as of April 4, 2005 ("Agreement"), by and among ORBIT INTERNATIONAL CORP., a Delaware corporation -- ("Pledgor"), RICHARD A. HETHERINGTON, LARRY M. BATEMAN, JOANNE HETHERINGTON AND STEPHEN HILL (each, a "Pledgee" and collectively, the "Pledgees") and Robinson & Cole LLP a Connecticut limited liability partnership, as custodian (the "Custodian"). W I T N E S S E T H: ------------------- WHEREAS, Pledgees have sold all of the issued and outstanding capital stock of Tulip Development Laboratory, Inc. ("TDL, Inc.") and of TDL Manufacturing, Inc. ("TDLM") to Pledgor, (hereinafter collectively referred to as the "Pledged Shares") under a Stock Purchase Agreement dated December 13, 2004 (the "SPA"); WHEREAS, the Purchase Price to be paid to the Pledgees, is evidenced by, among other things, Subordinated Promissory Notes from Pledgor to each Pledgee, dated the date hereof (as amended, modified, restated or otherwise supplemented from time to time, the "Notes"), which Notes are secured by this Agreement; ----- WHEREAS, Pledgor has agreed to execute and deliver to Pledgees this Agreement pledging the Pledged Shares as collateral for its obligations under the Notes (the "Obligations"); ----------- WHEREAS, Pledgees have each entered into a Subordination Agreement with Merrill Lynch Business Financial Services, Inc. ("MLBFS"), pursuant to which they agreed not to take any action to foreclose or otherwise enforce their liens under such agreement without the prior written consent of MLBFS, which consent shall not be unreasonably withheld; and WHEREAS, capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Notes and/or the SPA. NOW, THEREFORE, in consideration of the premises and to induce Pledgees to sell the Pledged Shares to Pledgor, Pledgor does now hereby covenant and agree with the Pledgees as follows: 1. Pledge. Pledgor hereby pledges, assigns and delivers to Pledgees, ------ and grants to each Pledgee a continuing security interest in, the Pledged Shares which are or will be owned either beneficially or of record by Pledgor as more particularly described on Exhibit A attached hereto, together with all ---------- dividends, interest, proceeds and any other sums due or to become due thereon, all instruments, securities or other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for (as dividends, reclassification, readjustment or other changes in the capital structure of the issuers of such Pledged Shares, or otherwise) any or all of such Pledged Shares, all general intangibles associated therewith, and all proceeds thereof (collectively, including the Pledged Shares, the "Collateral") ---------- as security for the payment and performance of all indebtedness and obligations owing by Pledgor to Pledgees under the Notes and the SPA, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and any and all instruments, documents and agreements evidencing, securing or otherwise relating in any way to the Notes and the SPA, and further including all reasonable costs, expenses and attorneys' and other professional fees incurred by Pledgees in connection with the collection of said indebtedness or in the enforcement, defense, protection or preservation of this Agreement or any of the Collateral, including without limitation, all costs and expenses incurred in connection with any "workout" or default resolution negotiations involving legal counsel or other professionals and any re-negotiation or restructuring of any indebtedness of Pledgor under the Notes and the SPA (collectively, the "Secured Obligations"). -------------------- 2. Custody of the Pledged Shares. The Pledgees hereby appoint the Custodian ----------------------------- as their agent to receive and hold Pledged Shares for the benefit of the Pledgees. Such Pledged Shares, shall be beneficially owned by the Pledgor and registered in the name of Pledgor and delivered to the Custodian to be held for the benefit of Pledgees. The Custodian shall release such Pledged Shares only in accordance with Section 8 hereof. 3. Representations, Warranties and Covenants. Pledgor represents, warrants ------------------------------------------ and covenants to Pledgees that: (a) Pledgor has good and unencumbered title to the Collateral, free and clear of all claims, pledges, liens, security interests and other encumbrances of every nature whatsoever, except the pledge granted to Pledgees hereunder; (b) except as set forth in the Subordination Agreements to which Pledgor and Pledgees are both parties, Pledgor has the unrestricted right to make this pledge; (c) the Collateral is duly and validly pledged with Pledgees in accordance with law; (d) Exhibit A hereto correctly sets forth 100% --------- of the issued and outstanding Common Stock of TDL, Inc and TDLM owned by Pledgor; (e) Pledgor will defend Pledgees' right and security interest in and to the Collateral against the claims and demands of all persons whomsoever; (f) Pledgor will not sell, convey or otherwise dispose of any of the Collateral, nor will it create, incur or permit to exist any pledge, mortgage, lien, charge, encumbrance or any security interest whatsoever with respect to any of the Collateral or the proceeds thereof; (g) Pledgor has full power, authority and legal right to execute, deliver and perform its obligations under this Agreement, and to pledge, assign and grant a security interest in all of the Collateral pursuant to this Agreement; (h) no consent or approval or the taking of any other action in respect of any party or of any public authority is required as a condition to the validity or enforceability of this Agreement; (i) except as set forth in the SPA and evidenced by the Notes, the Pledged Shares have been fully paid for; (j) there are no contractual restrictions upon the voting rights or the transfer of the Pledged Shares; and (k) the execution, delivery and performance hereof, and the pledge and assignment of and granting of a security interest in the Collateral hereunder, have been duly authorized by all necessary action of Pledgor and do not contravene any law, rule or regulation or any judgment, decree or order of any tribunal or any agreement or instrument to which Pledgor is a party or by which Pledgor or any of Pledgor's property is bound or affected or constitute a default thereunder. 4. Delivery of Collateral, Power of Attorney. Pursuant to Section 2 above, ------------------------------------------ prior to the date hereof, and/or simultaneously herewith, Pledgor has delivered to Custodian all certificates evidencing the Pledged Shares, accompanied by stock powers duly executed in blank, for the use, benefit, security and protection of Pledgees as set forth herein, and upon and subject to the terms and conditions hereof. Pledgor hereby irrevocably grants to Pledgees powers of attorney, coupled with an interest, with respect to the Collateral for all purposes consistent with this Agreement. Said power of attorney shall include, but shall not be limited to, the right and power to transfer the Collateral into Pledgees' names or those of its nominees and to receive the income and any distributions thereon and hold the same as Collateral or apply the same to any Obligation, solely in the event an Event of Default has occurred; to execute in Pledgor's name instruments of conveyance or transfer with respect to all or any of the Collateral; and to take such other action to enforce any rights of Pledgees hereunder or with respect to any of the Collateral. 5. Dividends, Interest and Other Rights. Unless Pledgees otherwise agree in ------------------------------------ writing, if Pledgor receives: (a) any dividend in connection with any of the Pledged Shares, whether in cash or other property (b) any dividend or other distribution in cash or other property in connection with any recapitalization or reclassification of any of the Pledged Shares, liquidation or dissolution of TDL, Inc., TDLM, or otherwise, or (c) any stock certificate, option or rights, whether as an addition to, in substitution of or in exchange for, any of the Pledged Shares, or otherwise, the same shall constitute Collateral, and Pledgor agrees to accept the same in trust for Pledgees and to forthwith deliver the same to the Custodian, in the exact form received, with Pledgor's endorsement and/or assignment when necessary, to be held by the Custodian, as collateral security for the Secured Obligations. 6. Further Assurances. Pledgor agrees that at any time and from time to ------------------- time, at the expense of Pledgor, Pledgor will promptly execute and deliver to Pledgees all further proxies, stock powers, instruments and documents, and take all further action, that may be necessary or appropriate, or that Pledgees may request, in order to perfect (by control or otherwise) and protect any security interest granted or purported to be granted hereby or to enable Pledgees to exercise and enforce their rights and remedies hereunder with respect to any of the Collateral. 7. Voting Rights. Unless and until an Event of Default occurs and is -------------- continuing, Pledgor shall have the right: (a) to vote and give consents with respect to any of the Pledged Shares for all purposes not inconsistent with the provisions of this Agreement and/or the SPA, (b) to consent to and ratify action taken at or waive notice of any meeting with respect to any of the Pledged Shares with the same force and effect as if such shares were not subject to this Agreement, and (c) to generally be entitled to all rights and benefits of a holder of Common Stock of TDL, Inc. and TDLM, subject to the limitations set forth in this Agreement. 8. Release of PledgedShares. -------------------------- If full payment has been made of each of the Notes by or on behalf of the Pledgor in accordance with the terms of the Notes, together with the payment of accrued interest as set forth therein, the Pledgees agree, upon receipt by the Pledgees of such payment, to release from the lien of this Pledge Agreement, and to instruct the Custodian in writing to release and transfer to the order of the Pledgor, the Pledged Shares. 9. Rights of thePledgees. The Pledgees shall not be liable for any ----------------------- failure to collect or realize upon the Collateral or any guarantee therefor, or any part thereof, or for any delay in so doing, nor shall it be under any obligation to take any action whatsoever with regard thereto. If an Event of Default under the SPA has occurred and is continuing, the Pledgees may thereafter, without notice, exercise all rights, privileges or options pertaining to any Collateral as if they were the holder and absolute owner thereof, upon such terms and conditions as they may determine, all without liability except to account for property actually received by then, but the Pledgees shall have no duty to exercise any of the aforesaid rights, privileges or options and shall not be responsible for any failure to do so or delay in so doing. 10. Rights and Remedies. Upon the occurrence and during the continuance of -------------------- an Event of Default (as defined under the SPA or in the Notes), Pledgees at any time and from time-to-time thereafter: (a) may cause any or all of the Collateral to be registered in their own name or in the name of any nominee or nominees. (b) shall be entitled to collect and receive all interest, dividends, payments and other distributions of any character, declared or paid on any of the Collateral. (c) may vote any or all shares of any of the Pledged Shares and give all consents, waivers, and ratifications in respect thereof and otherwise act with respect thereto as though it was the absolute owner thereof. (d) may sell, assign, transfer and deliver at any time the whole, or from time to time any part, of the Pledged Shares or any rights or interests therein, at private sale or in any other manner in accordance with law, at such prices on such terms as Pledgees may deem to be in their best interests, and either for cash, on credit, or for future delivery, at the option of Pledgees, upon ten (10) days written notice, which Pledgor agrees is commercially reasonable, addressed to Pledgor at its last address on file with Pledgees. As an alternative to exercising the power of sale conferred upon it herein, Pledgee may proceed by suits at law or in equity, or both, to foreclose this Agreement and to sell the Pledged Shares, or any portion thereof, pursuant to a judgment or decree of a court or courts of competent jurisdiction. If any of the Pledged Shares or any rights or interests therein shall be disposed of at a private sale, Pledgees shall be relieved from all liability or claims for inadequacy of price. At any such sale Pledgees may purchase the whole or any part of the Pledged Shares or any rights or interests therein so sold. If any of the Pledged Shares or any rights or interests therein shall be sold on credit or for future delivery, the Pledged Shares or rights or interests so sold may be retained by Pledgees, until the selling price thereof shall be paid by the purchaser. Pledgees may, after compliance with applicable law, choose in lieu of sale to accept the Pledged Shares in satisfaction of any the Secured Obligations. (e) shall otherwise have all the rights and remedies of a secured party with respect to the Collateral as are provided under the Uniform Commercial Code in force in Pennsylvania on the date hereof and as may be amended from time to time, or under other applicable law, and Pledgees may set off or otherwise apply the Collateral against the payment of any of the Secured Obligations and shall have the right to take such other actions as are consistent with the power of attorney set forth in Section 4 hereof. 11. No Disposition, Etc. Without the prior written consent of the ---------------------- Pledgees, the Pledgor agrees that it will not sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Collateral, nor will it create, incur or permit to exist any pledge, lien, mortgage, hypothecation, security interest, charge, option or any other encumbrance with respect to any of the Collateral, or any interest therein, or any proceeds thereof, except for the lien and security interest provided for by this Pledge Agreement or permitted in the SPA. 12. Further Assurances. The Pledgor agrees that at any time and from time ------------------- to time upon the written request of the Pledgees, the Pledgor will execute and deliver such further documents and do such further acts and things as the Pledgees may reasonably request in order to effect the purposes of this Pledge Agreement. 13. No Waiver; Cumulative Remedies. The Pledgees shall not by any act, --------------------------------- delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder and no waiver shall be valid unless in writing, signed by the Pledgees, and then only to the extent therein set forth. A waiver by the Pledgees of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Pledgees would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of the Pledgees, any right, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 14. Amendments. None of the terms or provisions of this Pledge Agreement ---------- may be waived, altered, modified or amended except by an instrument in writing, duly executed by the Pledgees and, in the case of any amendment affecting the rights or obligations of the Custodian, duly executed by the Custodian. This Pledge Agreement and all obligations of the Pledgor hereunder shall be binding upon the successors and assigns of the Pledgor, and shall, together with the rights and remedies of the Pledgees hereunder, inure to the benefit of the Pledgees and their successors and assigns. 15. The Custodian. -------------- (a) The Custodian shall have only the duties as expressly set forth herein and shall not be subject to any liability hereunder with respect to Collateral held in its custody, except for its negligence or willful misconduct. (b) The Pledgor agrees to indemnify the Custodian against any loss, liability or expense, incurred without negligence or willful misconduct on the part of the Custodian, arising out of or in connection with any of its duties as Custodian hereunder, including the costs and expenses of defending itself from any claim or liability in connection herewith. The provisions of this paragraph shall survive the termination of this Pledge Agreement. (c) In the event the Custodian shall resign or be removed under this Pledge Agreement, and a successor custodian shall be appointed by the Pledgees as the successor Custodian under this Pledge Agreement, upon the acceptance of any appointment as Custodian hereunder by a successor Custodian, such successor Custodian shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Custodian, and the resignation or removal of the retiring Custodian shall be effective as of such date. After the effective date of any retiring Custodian's resignation or removal as Custodian hereunder, the provisions of this Section shall remain applicable to it as to any actions taken or omitted to be taken by it while it was Custodian under this Pledge Agreement. (d) The Custodian has executed this Pledge Agreement solely as Custodian for the Pledgees in accordance with the terms hereof and hereby agrees not to exercise any right or remedy, including a right of set-off, it may have at any time with respect to any of the Collateral, except in accordance with the provisions of this Pledge Agreement or the written instructions of the Pledgees. 16. Headings. The captions in this Pledge Agreement are for -------- convenience of reference only and shall not define or limit the provisions hereof. 17. Counterparts. This Pledge Agreement and any amendments hereof may be ------------ executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Pledge Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. 18. Term. This Agreement shall terminate upon final and irrevocable payment ---- in full of the Secured Obligations. Upon termination of this Agreement, any Pledged Shares still pledged hereunder (and not yet disposed of) shall be delivered to Pledgor. 19. Applicable Law. This Agreement shall be governed by and construed --------------- according to the laws of the Commonwealth of Pennsylvania (but not its conflicts of law provisions). Pledgor hereby consents to service of process, and to be sued, in the Commonwealth of Pennsylvania and consents to the jurisdiction of the courts of the Commonwealth of Pennsylvania and the United States District Court for the Eastern District of Pennsylvania, as well as to the jurisdiction of all courts from which an appeal may be taken from such courts, for the purpose of any suit, action or other proceeding arising hereunder or out of any of the Secured Obligations or with respect to the transactions contemplated hereby, and expressly waives any and all objections Pledgor may have to venue in any such courts. Each of Pledgor and Pledgees further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth below shall be effective service of process for any action, suit or proceeding in Pennsylvania with respect to any matters to which it has submitted to jurisdiction in this Section 19. 20. Reasonable Care. Beyond the exercise of reasonable care with respect to --------------- the safe custody of the Collateral while held hereunder, under no circumstances shall Pledgees be deemed to assume any responsibility for or obligation or duty with respect to any part or all of the Collateral of any nature or kind or any matter or proceedings arising out of or relating thereto. Pledgee shall have no duty or liability to collect any sums due in respect thereof or to protect or preserve its or Pledgor's rights pertaining thereto, and shall be relieved of all responsibility for any of the Collateral upon surrendering the same to Pledgor. 21. Course of Conduct. No course of dealing between Pledgor and Pledgees ------------------- nor any failure to exercise, nor any delay in exercising, on the part of Pledgees, any right, power or privilege hereunder or under any of the Secured Obligations, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided and provided under any of the Secured Obligations are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law, including, without limitation, the rights and remedies of a secured party under the Uniform Commercial Code in force in New York on the date hereof and as may be amended from time to time. 22. Assignment. In the event of a sale or assignment by Pledgees of all or ---------- any of the Secured Obligations held by them, Pledgees may assign or transfer their rights and interests under this Agreement in whole or in part to the purchaser or purchasers of such Secured Obligations, whereupon such purchaser or purchasers shall become vested with all of the powers and rights given to Pledgees hereunder, and Pledgees shall thereafter be forever released and fully discharged from any liability or responsibility hereunder with respect to the rights and interest so assigned. 23. Notices. All notices, demands, requests, and other communications given ------- under this Agreement shall only be effective if they are (a) in writing, (b) sent by hand delivery, by facsimile transmission, by reputable express delivery service, or by certified or registered mail, postage prepaid, and (c) (i) when delivered to the addressee by hand, (ii) when received by the addressee as evidenced by a return receipt signed by the addressee or its agent, and (iii) in the case of facsimile transmissions, when transmitted, answer back received: To Pledgor: Orbit International Corp. 80 Cabot Court Hauppauge, New York 11788 Attention: Dennis Sunshine, President Facsimile: (631) 952-1396 With a copy to: Robinson & Cole LLP 885 Third Avenue 28th Floor New York, New York 10022-4834 Attention: Elliot H. Lutzker, Esq. Facsimile: (212) 451-2999 If to Pledgees: Richard A. Hetherington 5151 St. Joseph Road Coopersburg, PA 18038 Facsimile: (____) ____________ Joanne Hetherington 5151 St. Joseph Road Coopersburg, PA 18038 Facsimile: (____) ____________ With a copy to: Fitzpatrick Lentz & Bubba, P.C. 4001 Schoolhouse Lane P.O. Box 219 Center Valley, Pennsylvania 18034-0219 Attention: Jane P. Long, Esq. Facsimile: (610) 797-6663 If to Larry M. Bateman: Larry M. Bateman 22401 NE 14th Drive Sammamish, WA 98074 Facsimile: ( ) If to Stephen Hill: Stephen Hill 270 Aspen Lane Gilbertsville, PA 19525 Facsimile: ( ) To Custodian: Robinson & Cole LLP 885 Third Avenue, Suite 2800 New York, NY 10022 Attn: Elliot H. Lutzker Fax: (212) 451-2999 or to such other address (and/or facsimile transmission number) as Pledgor or Pledgees, as the case may be, shall have specified in the latest unrevoked notice sent to the other in accordance with this Section 23. 24. Marshalling. Pledgees shall not be required to marshal any present ----------- or future collateral security for (including, but not limited to, this Agreement and the Collateral), or other assurances of payment of, the Secured Obligations, or any of them, or to resort to such collateral security or other assurances of payment in any particular order. All of Pledgees' rights and remedies hereunder and in respect of such security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the extent that Pledgor lawfully may, Pledgor hereby agrees that Pledgor will not invoke any law relating to the marshalling of collateral that might cause delay in or impede the enforcement of Pledgees' rights under this Agreement or under any other instrument evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and to the extent that it lawfully may, Pledgor hereby irrevocably waives the benefits of all such laws. 25. Waiver and Consent. PLEDGOR HEREBY WAIVES NOTICE OF ACCEPTANCE OF THIS ------------------- AGREEMENT AS WELL AS PRESENTMENT, DEMAND, PAYMENT, NOTICE OF DISHONOR OR PROTEST AND ALL OTHER NOTICES OF ANY KIND IN CONNECTION WITH ANY OF THE SECURED OBLIGATIONS, EXCEPT FOR NOTICES SPECIFICALLY REQUIRED BY THE TERMS THEREOF. Pledgees may release, substitute, supersede, exchange or modify any other collateral security they may from time to time hold, and release, substitute, surrender or modify the liability of any third party, without giving Pledgor notice, and Pledgor hereby consents to the same and acknowledges that the Secured Obligations shall not be terminated by any such action by Pledgees. Pledgees shall be under no duty to first exhaust its rights against any such collateral security or any such third party before realizing on the Collateral and otherwise proceeding under this Agreement. 26. Expenses. Pledgor will upon demand pay to Pledgees the amount of any -------- and all reasonable expenses, including the fees and expenses of counsel and of any experts and agents, which Pledgees may incur in connection with (a) the custody, preservation or sale of, collection from or other realization upon any of the Collateral, (b) the exercise or enforcement of any of the rights of Pledgees hereunder, or (c) the failure by Pledgor to perform or observe any of the provisions hereof. 27. Binding Agreement. This Agreement shall be binding upon and inure to ------------------ the benefit of the parties hereto and their respective successors and assigns, and the term "Pledgees" shall be deemed to include any other holder or holders of any of the Secured Obligations. As used herein, plural or singular include each other, and pronouns of any gender are to be construed as masculine, feminine or neuter, as context requires. 28. Severability. In the event that any provision of this Agreement shall ------------ be determined to be superseded, invalid or otherwise unenforceable pursuant to applicable law, such determination shall not affect the validity of the balance of this Agreement, and the remaining provisions of this Agreement shall be enforced as if the invalid provisions were deleted. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. PLEDGEES: PLEDGOR: /s/ Richard Hetherington - -------------------------- Richard A. Hetherington ORBIT INTERNATIONAL CORP By: /s/ Dennis Sunshine --------------------- /s/ Joanne Hetherington Name: Dennis Sunshine - ------------------------- Title: President Joanne Hetherington /s/ Larry Bateman CUSTODIAN: - ------------------- Larry M. Bateman ROBINSON & COLE LLP By: /s/ Elliot Lutzker -------------------- /s/ Stephen Hill Name: Elliot H. Lutzker - ------------------ Stephen Hill ------ EXHIBIT A --------- PLEDGEE NAME PLEDGED SHARES ------------ -------------- Richard A. Hetherington 8,500 shares of TDL, Inc. Larry M. Bateman 1,500 shares of TDL, Inc. 1,000 shares of TDLM Joanne Hetherington 5,100 share of TDLM Stephen G. Hill 3,900 shares of TDLM EX-10.3 4 doc4.txt EXHIBIT 10.3 N E T L E A S E between RUDY'S THERMO-NUCLEAR DEVICES, Landlord and TDL MANUFACTURING, INC., TULIP DEVELOPMENT LABORATORY, INC. jointly and severally, Tenant Premises: -------- 1765 Walnut Lane, Quakertown, Milford Township, Bucks County, Pennsylvania ii i TABLE OF CONTENTS ----------------- ARTICLE 1 DEMISED PREMISES; TERM OF LEASE; POSSESSION 1 - ------------------------------------------------------------ ARTICLE 2 RENT 2 - ---------------- ARTICLE 3 PAYMENT OF TAXES, ASSESSMENTS, ETC. 5 - --------------------------------------------------- ARTICLE 4 SURRENDER; REMOVAL OF PERSONALTY 7 - ----------------------------------------------- ARTICLE 5 INSURANCE 8 - --------------------- ARTICLE 6 RIGHT TO PERFORM OTHER PARTIES' COVENANTS 10 - ---------------------------------------------------------- ARTICLE 7 REPAIRS, MAINTENANCE AND CONDITION OF THE DEMISED PREMISES 11 - ------------------------------------------------------------------------ ARTICLE 8 COMPLIANCE WITH LAWS 12 - ---------------------------------- ARTICLE 9 CHANGES, ALTERATIONS, ADDITIONS 15 - --------------------------------------------- ARTICLE 10 DISCHARGE OF LIENS 16 - --------------------------------- ARTICLE 11 NO WASTE 17 - ---------------------- ARTICLE 12 USE OF DEMISED PREMISES 17 - --------------------------------------- ARTICLE 13 ENTRY ON DEMISED PREMISES BY LANDLORD 18 - ------------------------------------------------------- ARTICLE 14 INDEMNIFICATION OF LANDLORD AND TENANT 19 - ------------------------------------------------------- ARTICLE 15 DAMAGE OR DESTRUCTION 20 - ------------------------------------ ARTICLE 16 CONDEMNATION 21 - ------------------------- ARTICLE 17 INTENTIONALLY OMITTED 23 - ----------------------------------- ARTICLE 18 ASSIGNMENTS, MORTGAGES AND SUBLEASES OF TENANT'S INTEREST 23 - ------------------------------------------------------------------------ ARTICLE 19 CONDITIONAL LIMITATIONS--DEFAULT PROVISIONS 25 - ---------------------------------------------------------- ARTICLE 20 SECURITY DEPOSIT 30 - ------------------------------ ARTICLE 21 CONDITION OF DEMISED PREMISES 30 - --------------------------------------------- ARTICLE 22 NOTICES 31 - -------------------- ARTICLE 23 HOLDOVER 31 - --------------------- ARTICLE 24 QUIET ENJOYMENT 31 - ----------------------------- ARTICLE 25 EXCAVATION AND SHORING 32 - ------------------------------------- ARTICLE 26 NO RENT ABATEMENT 32 - -------------------------------- ARTICLE 27 [INTENTIONALLY OMITTED] 33 - ------------------------------------- ARTICLE 28 ESTOPPEL CERTIFICATES 33 - ----------------------------------- ARTICLE 29 SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT 34 - ------------------------------------------------------------- ARTICLE 30 WAIVER OF JURY TRIAL AND COUNTERCLAIMS 35 - -------------------------------------------------------- ARTICLE 31 DEFINITION OF CERTAIN TERMS 35 - ------------------------------------------- ARTICLE 32 BROKERS 36 - -------------------- ARTICLE 33 CONSENT OF LANDLORD 36 - ---------------------------------- ARTICLE 34 PAYMENTS UNDER PROTEST 37 - ------------------------------------- ARTICLE 35 GOVERNING LAW; NON-RECORDATION 37 - --------------------------------------------- ARTICLE 36 NO ORAL MODIFICATION 37 - ----------------------------------- ARTICLE 37 COVENANTS TO BIND AND BENEFIT RESPECTIVE PARTIES 37 - ------------------------------------------------------------------- ARTICLE 38 CAPTIONS, TABLE OF CONTENTS AND INVALIDITY OF PARTICULAR PROVISIONS - ------------------------------------------------------------------------------- 37 ARTICLE 39 CONSTRUCTION OF THIS LEASE 38 - ------------------------------------------ NET LEASE THIS NET LEASE (the "Lease") is made as of this __ day of ________, 2005 between RUDY'S THERMO-NUCLEAR DEVICES, a Pennsylvania limited partnership having an address of ("LANDLORD") and TDL -------- MANUFACTURING, INC. AND TULIP DEVELOPMENT LABORATORY, INC., each a Pennsylvania corporation having its principal place of business at 1765 Walnut Lane, Quakertown, Pennsylvania 18951 (each, and jointly and severally, "TENANT"). ------ This Lease is granted and accepted upon the foregoing and upon the following covenants and conditions, and subject to the following restrictions, and each of the parties hereby expressly covenants and agrees to keep, perform and observe all the terms, covenants and conditions herein contained on its part to be kept, performed and observed. ARTICLE 1 DEMISED PREMISES; TERM OF LEASE; POSSESSION ------------------------------------------- SECTION1.1 Except for that portion of the premises identified as ---------- Landlord's Storage (as defined below), Landlord hereby demises and leases to -- Tenant, and Tenant hereby leases from Landlord, the following described premises (the "DEMISED PREMISES"): all that certain plot, piece or parcel of land known ----------------- by the street number 1765 Walnut Lane, Quakertown, Pennsylvania, lying and being in Milford Township, Bucks County, Commonwealth of Pennsylvania, as more particularly bounded and described on Exhibit A annexed hereto and made a part --------- hereof (the "LAND"), together with all of the buildings and improvements ---- constructed or to be constructed thereon (the "IMPROVEMENTS"), and together with ------------ all the right, title and interest, if any, of Landlord in and to any strips and gores of land adjoining the Demised Premises on any side thereof; any land lying in the bed of any street or avenue abutting the Demised Premises to the center line thereof; any easements or other rights in adjoining property inuring to Landlord by reason of ownership of the Demised Premises; and all fixtures and any replacements thereof, attached to or used in connection with the use, occupation and operation of the Demised Premises and all alterations, additions and improvements hereafter made to the Demised Premises, title to which may vest in Landlord; excepting however, approximately 1,200 square feet of the Demised Premises, currently occupied by Landlord, for continued storage of any maintenance materials and equipment as Landlord may designate, as more particularly described on Exhibit B annexed hereto and made a part hereof ---------- ("LANDLORD'S STORAGE"). --------------- SUBJECT, however, to the following (the "PERMITTED ENCUMBRANCES"): ----------------------- (a) All of the easements, covenants restrictions and other matters of record, to the extent that the same are in full force and effect, listed on Exhibit C attached hereto and made a part hereof; and ------ (b) Present and future zoning laws, ordinances, resolutions and regulations of the Township of Milford and all present and future ordinances, laws, regulations and orders of all boards, bureaus, commissions and bodies of any municipal, county, state or federal sovereigns now or hereafter having or acquiring jurisdiction of the Demised Premises and the use and improvement thereof. SECTION1.2 The term of this Lease (the "TERM") shall begin on ---------- ---- _______________, 2005 (the "COMMENCEMENT DATE") and shall end the last day of ----- ----------------- the calendar month in which shall occur the fifth (5th) anniversary of the Commencement Date (the "FIXED EXPIRATION DATE"), unless sooner terminated or ---------------------- extended as provided herein (the "EXPIRATION DATE"). ---------------- ARTICLE 2 RENT ---- SECTION2.1 A. Tenant shall pay to Landlord, in lawful money of the ---------- United States which shall be legal tender for payment of all debts, public and private, at the time of payment, in the manner and at the address of Landlord specified in this Article 2, during the Term an annual rent (the "NET RENT"), --------- -------- over and above the other payments to be made hereunder by Tenant, as follows: (i) From the Commencement Date through and including the last day of the calendar month in which shall occur the first anniversary of the Commencement Date, at the rate of $109,200.00, in equal monthly installments of $9,100.00; (ii) From the first day of the calendar month immediately following the last day of the calendar month in which such first anniversary occurred through and including the last day of the calendar month in which shall occur the second anniversary of the Commencement Date, at the rate of $111,384.00, in equal monthly installments of $9,282.00; (iii) From the first day of the calendar month immediately following the last day of the calendar month in which such second anniversary occurred through and including the last day of the calendar month in which shall occur the third anniversary of the Commencement Date at the rate of $113,616.00, in equal monthly installments of $9,468.00; (iv) From the first day of the calendar month immediately following the last day of the calendar month in which such third anniversary occurred, through and including the last day of the calendar month in which shall occur the fourth anniversary of the Commencement Date, at the annual rate of $117,024.00, in equal monthly installments of $9,752.00; and (v) From the first day of the calendar month immediately following the last day of the calendar month in which the fourth anniversary occurred, through and including the last day of the Term, at the annual rate of $120,528.00, in equal monthly installments of $10,044.00. B. Such Net Rent shall be paid, except as otherwise provided herein, without notice or demand, and without set-off, offset, credit, abatement or deduction of any kind whatsoever, in advance on the first day of each and every month of the Term. C. All Net Rent and all other sums due from Tenant to Landlord under this Lease (collectively, "RENT") shall be payable, at Tenant's election, either by ---- (a) wire transfer of funds to an account designated by Landlord from time to time or (b) a check drawn on a bank which is a member of the Pennsylvania Clearinghouse Association or a successor thereto. Until Tenant shall have been given notice otherwise by Landlord, Tenant shall pay Rent by check to Landlord at its address set forth in Article 22. ----------- SECTION2.2 If the Term hereof shall commence on any day other than the ---------- first day of a calendar month, Tenant shall pay Landlord on the Commencement Date proportionate amount of Net Rent due for the balance of such current month. SECTION2.3 It is the purpose and intent of Landlord and Tenant that this ---------- is a net lease which shall yield to Landlord the Net Rent specified in Section ------- 2.01.A hereof in each year during the Term of this Lease and that all costs, ----- expenses and obligations of every kind and nature whatsoever relating to the -- maintenance, operation and repair of the Demised Premises which may arise or -- become due during or out of the Term of this Lease shall be paid by Tenant, -- except as herein otherwise specifically provided; provided, however, that -- nothing herein contained shall be construed to require Tenant to pay (i) the -- principal of, or interest on, or any other payments with respect to any -- indebtedness secured by any mortgage which may now or hereafter affect the Land, -- the Improvements or any superior lease and the leasehold interest created thereby, and all renewals, extensions, supplements, amendments, modifications, consolidations and replacements thereof or thereto, substitutions therefor, and advances made thereunder (each, a "FEE MORTGAGE"), any rent on any underlying ------------ lease, or any other indebtedness of Landlord of any kind, or (ii) any tax, fee or other amount not payable by Tenant pursuant to Section 3.2 hereof, all of ----------- which amounts shall be payable by Landlord. SECTION2.4 A. All Impositions (as hereinafter defined) and other ---------- sums payable by Tenant pursuant to the terms of this Lease (collectively, the "ADDITIONAL RENT") shall constitute additional rent and shall be due and payable -------------- under this Lease at the time and in the manner herein provided for the payment of Net Rent, and in the event of nonpayment of same by Tenant, Landlord shall have all rights and remedies with respect thereto as Landlord has hereunder for the nonpayment of the Net Rent. The extension of time for payment of any installment of Rent, or the acceptance by Landlord of any money other than current legal tender of the United States of America, shall not be deemed a waiver of the rights of Landlord to insist upon having all other payments of Rent made in the manner and at the time herein specified. B. In the event Tenant shall fail to pay in good funds any installment of Rent on or before the tenth (10th) day after same is due, in order to partially defray Landlord's administrative expenses resulting therefrom, which Tenant acknowledges shall be difficult to measure, Tenant shall pay to Landlord a late charge of three (3%) percent of the amount then due. This late charge shall be deemed Additional Rent and shall, at Landlord's option, be added to the Rent for the month in which the Rent shall be due. The demand for and collection of the aforesaid late charges shall in no way be construed as a waiver of any and all remedies that Landlord may have, either by summary proceedings or otherwise, as a result of an Event of Default in payment of Rent. C. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent herein stipulated shall be deemed to be other than on account of the earliest stipulated Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such Rent or pursue any other remedy in this Lease. SECTION2.5 Tenant shall have the option to extend the term of this Lease ------- for one (1) additional period of five (5) years from and after the Fixed Expiration Date (the "OPTION TERM"), by written notice to Landlord at least ------------ ninety (90) days prior to the Fixed Expiration Date. In the event the option is so exercised, the term of the Lease shall be extended on the same terms and conditions, except that the Net Rent during the Option Term shall be as follows: (i) From the first day of the calendar month immediately following the last day of the calendar month in which such fifth anniversary occurred through and including the last day of the calendar month in which shall occur the sixth anniversary of the Commencement Date, at the rate of $122,938.56, in equal monthly installments of $10,244.88; (ii) From the first day of the calendar month immediately following the last day of the calendar month in which such sixth anniversary occurred through and including the last day of the calendar month in which shall occur the seventh anniversary of the Commencement Date, at the rate of $125,397.33, in equal monthly installments of $10,449.78; (iii) From the first day of the calendar month immediately following the last day of the calendar month in which such seventh anniversary occurred through and including the last day of the calendar month in which shall occur the eighth anniversary of the Commencement Date at the rate of $127,905.28, in equal monthly installments of $10,658.77; (iv) From the first day of the calendar month immediately following the last day of the calendar month in which such eighth anniversary occurred, through and including the last day of the calendar month in which shall occur the ninth anniversary of the Commencement Date, at the annual rate of $131,742.44, in equal monthly installments of $10,978.54; and (v) From the first day of the calendar month immediately following the last day of the calendar month in which the ninth anniversary occurred, through and including the last day of the Option Term, at the annual rate of $135,694.71, in equal monthly installments of $11,307.89. ARTICLE 3 PAYMENT OF TAXES, ASSESSMENTS, ETC. ----------------------------------- SECTION3.1 A. Tenant shall pay or cause to be paid (except as set ---------- forth in Section 3.2 hereof), before any fine, penalty, interest or cost may be ----------- added thereto for the non-payment thereof, all taxes, assessments, water and sewer rents, rates and charges, vault license fees or rentals, levies, license and permit fees and other governmental charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of any kind and nature whatsoever which at any time during Tenant's lease of the Demised Premises or during the Term of this Lease may be assessed, levied, imposed upon or become due and payable out of, or become a lien upon, the Demised Premises or any part thereof or appurtenance thereto (collectively, the "IMPOSITIONS", and individually, an ----------- "IMPOSITION"). If, by law, any Imposition may be paid in installments, Tenant ---------- may pay the same in the minimum installments permitted by the applicable - governmental entity. Tenant shall pay only such installments as shall become - due during Tenant's lease of the Demised Premises during the Term of this Lease. - All Impositions for the fiscal or tax years in which the Term of this Lease ends shall be apportioned so that Tenant shall pay only the portion thereof which corresponds with the portion of said year as is within the Term. B. Notwithstanding Section 3.1.A, following an Event of Default -------------- hereunder, or in the event any trustee, mortgagee or holder of any Fee Mortgage (each, a "FEE MORTGAGEE") shall require the following, then following receipt by ------------- Tenant from Landlord of notice to such effect, Tenant shall pay to Landlord, with each monthly installment of Net Rent, commencing with the next monthly installment of Net Rent coming due after said notice is received, a sum equal to one-twelfth (1/12th) of the annual amount of each Imposition next coming due as determined by Landlord, which such sums shall be adjusted by Landlord periodically to reflect actual increases or decreases in such Impositions next coming due, so that on the next date on which any installment of such Imposition shall be due by Landlord to the appropriate taxing authority, Landlord shall have previously collected from Tenant sufficient sums on account of such Imposition to enable Landlord to pay as and when same is due. If the actual amount of an Imposition is unknown, upon discovering the actual amount of such Imposition, Landlord shall make appropriate adjustments to the amount of such monthly installments. If at any time Landlord shall determine that the amount collected from Tenant on account of the next installment of a Imposition shall be deficient, then Tenant shall deposit with Landlord within ten (10) days of demand therefore, the amount of such deficiency. If at any time Landlord shall determine that the amount collected or estimated to be collected from Tenant on account of the Impositions next coming due is in excess of the amount actually due, Landlord shall apply the excess to the next monthly installment of Impositions coming due. C. Tenant shall be responsible for and shall pay, before delinquency, all municipal, county, state and federal taxes assessed during the term of this Lease against any personal property of any kind owned by or placed in, upon or about the Demised Premises by Tenant. SECTION3.2 Nothing herein contained shall require Tenant to pay any of ---------- the following (and the following shall not be deemed included within the term "Imposition"): municipal, state or federal income taxes, capital levy, gift, estate, succession or inheritance taxes of Landlord, corporate profit or franchise taxes imposed upon any corporate owner of the fee of the Demised Premises, income, profit, or revenue taxes, assessments or charges imposed upon the Rent payable by Tenant under this Lease, or transfer taxes imposed upon Landlord by reason of transfer of any interest of Landlord in the Demised Premises. Notwithstanding the foregoing, if at any time during the Term of this Lease the methods of taxation prevailing at the commencement of the Term hereof shall be altered so that in lieu of, in addition to or as a substitute for the whole or any part of the Impositions payable upon the date hereof, there shall be levied, assessed or imposed a tax, assessment, levy, imposition or charge, wholly or partially as a capital levy or otherwise, on the Rents received therefrom, or measured by or based in whole or in part upon the Demised Premises and imposed upon Landlord, then all such taxes, assessments, levies, impositions or charges or the part thereof so measured or based, computed as if the Demised Premises was Landlord's only property, shall be deemed to be included within the term "Impositions". Tenant shall, in addition to the foregoing, pay any new tax of a nature not presently in effect but which may be hereafter levied, assessed, or imposed upon Landlord or the Demised Premises, if such tax shall be based on or arise out of the ownership, use or operation of the Demised Premises. For the purpose of computing Tenant's liability for such type of tax, the Demised Premises shall be deemed the only property of Landlord. SECTION3.3 Upon request, Tenant shall furnish to Landlord no later than ---------- the date when any Imposition would become delinquent, official receipts of the appropriate taxing authority or other evidence satisfactory to Landlord or such Fee Mortgagee, evidencing the payment thereof. SECTION3.4 A. Tenant may, subject to Section 3.5, seek a reduction ---------- ----------- in the valuation of the Demised Premises for tax purposes and may contest in good faith by appropriate proceedings, at Tenant's expense, the amount or validity in whole or in part of any Imposition for any tax year during or prior to the Term of this Lease, and may defer payment thereof during such contest (except that Tenant shall not defer payment of real estate taxes and assessments and sewer rents), provided that (i) Tenant is diligently and in good faith contesting such Imposition by appropriate legal proceedings which shall operate to prevent the enforcement or collection of the same or the sale of the Demised Premises or any part thereof to satisfy such Impositions, (ii) Landlord would not be, by reason of such post-ponement or deferment, subject to any actual or threatened criminal sanctions or penalties or personal liability, as Landlord shall determine in its reasonable judgment, and (iii) no Fee Mortgage would by reason of such postpone-ment or deferment be, in the reasonable judgment of Landlord, in danger of being put in default or foreclosure, and provided further that if, in the reasonable opinion of Landlord, the Demised Premises or any part thereof or interest therein may be in danger of being sold, forfeited, foreclosed, terminated, cancelled or lost as a result of the nonpayment of such Imposition, Tenant shall promptly upon request of Landlord pay same. Tenant shall not, without the consent of Landlord, whose consent shall not be unreasonably withheld or delayed, settle any such claim or proceeding (i) in respect of any fiscal year on or after the fiscal year in which the Term of this Lease commences or (ii) the outcome of which will adversely affect the taxes due on the Demised Premises for any fiscal year on or after the fiscal year in which the Term of this Lease commences. As long as no Event of Default is then continuing, Landlord hereby designates Tenant as Landlord's attorney-in-fact, coupled with an interest, to the extent necessary to commence and prosecute to completion any such contest, and Landlord agrees to cooperate with Tenant in any such contest to the extent necessary, including signing any documents, all at Tenant's sole cost and expense. B. Tenant hereby assigns to Landlord all claims and proceedings arising from such attempts to reduce the valuation of the Demised Premises for tax purposes, provided that so long as no Event of Default is then continuing Landlord shall not exercise, and shall permit Tenant to exercise, all such rights in connection therewith. SECTION3.5 Landlord shall have the right to seek a reduction in the ---------- valuation of the Demised Premises assessed for tax purposes and to prosecute any action or proceeding theretofore commenced by Tenant, if such assessed valuation or valuations shall in whole or in part relate and pertain to any period of time subsequent to the expiration or termination of this Lease. To the extent to which any tax refund payable as a result of any such proceeding which Landlord or Tenant may institute, or payable by reason of compromise or settlement of any such proceeding, is based upon a payment made by anyone other than Landlord, Landlord shall be authorized to collect the same, subject, however, to Landlord's obligation to reimburse Landlord and Tenant forthwith for any reasonable expenses incurred by Landlord or Tenant in connection therewith, and, provided no Event of Default is then continuing hereunder, the net amount of such refund shall be apportioned between Landlord and Tenant based upon the portion of the fiscal period to which the refund relates which occurred during the Term. SECTION3.6 If any person or entity to whom any sum is directly payable ---------- by Tenant under any of the provisions of this Lease shall refuse to accept payment of such sum from Tenant, Tenant shall thereupon give written notice of such fact to Landlord and shall pay such sum directly to Landlord at the address specified in Article 22 hereof, and Landlord shall thereupon pay such sum to ----------- such person or entity. ARTICLE 4 SURRENDER; REMOVAL OF PERSONALTY -------------------------------- SECTION4.1 Tenant shall on the last day of the Term or upon any earlier ---------- termination of this Lease, surrender and deliver up possession of the Demised Premises to Landlord in good order, condition and repair, reasonable wear and tear and casualty pursuant to Article 15 excepted, free and clear of all ----------- tenancies and occupancies other than permitted subleases pursuant to Section ------- 18.3, and free and clear of all liens and encumbrances other than the Permitted - Encumbrances and those, if any, created or suffered by Landlord, without any payment or allowance whatever by Landlord on account of any improvements which may have been made to the Demised Premises by or on behalf of Tenant. SECTION4.2 All furnishings, moveable trade fixtures, equipment and other ---------- personal property shall be removed by Tenant at or prior to the termination of this Lease. Tenant shall repair any damage to the Demised Premises caused by such removal or pay or cause to be paid to Landlord the cost of repairing any damage arising from such removal and restoration. Any personal property of Tenant or any subtenant which shall remain in the Demised Premises after the termination of this Lease may be deemed to have been abandoned by Tenant or such subtenant and may be retained by Landlord as its property or be disposed of in such manner as Landlord may see fit, at Tenant's sole cost and expense. All Alterations made by Tenant and its subtenants in and to the Demised Premises shall remain on the Demised Premises upon the termination of this Lease unless Tenant, in its sole discretion, removes such Alterations at or prior to the Expiration Date. Tenant shall repair any damage caused to the Demised Premises caused by such removal. SECTION4.3 If this Lease shall terminate pursuant to Article 15 or 16 ---------- ---------------- hereof, then, notwithstanding Sections 4.2 and 4.3 hereof, Tenant or any ----------------------- subtenant shall have a reasonable time thereafter, not to exceed thirty (30) days, to remove any property which it shall be entitled to remove pursuant to Section 4.2 hereof. ---------- SECTION4.4 The provisions of this Article 4 shall survive any termination of - ---------- --------- this Lease. ARTICLE 5 INSURANCE --------- SECTION5.1 A. Tenant, at its sole cost and expense, shall maintain ---------- during the Term: (a) property insurance insuring the Building and Improvements against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, special extended peril (all risk), boiler, flood, earthquake, glass breakage and sprinkler leakage, and building ordinance coverage, with a deductible not in excess of $10,000 and in an amount sufficient to prevent the Landlord or the Tenant from becoming co-insurers, but in any event in an amount not less than the full insurable value thereof, naming Landlord as an additional insured and naming each Fee Mortgagee, as their respective interests may appear. Such insurance will provide, to the extent permissible under applicable laws, that no act or omission of Tenant shall affect or limit the obligation of the insurance company to pay the amount of the loss sustained. The term "full insurable value" shall be deemed to mean the actual replacement value less physical depreciation, with such extended coverage as shall from time to time be customary for premises similarly situated in Bucks County, Pennsylvania; (b) commercial general liability insurance including contractual liability coverage and coverage for bodily injury, property damage and personal injury occurring upon, in or about the Demised Premises and the adjoining sidewalks and passageways under which Tenant is named as the insured and Landlord and each Fee Mortgagee whose name has been provided by Landlord to Tenant are named as additional insureds, as their interests may appear. The minimum limits of liability shall be a combined single limit with respect to each occurrence of $1,000,000 with a $2,000,000 annual aggregate and a $2,000,000 umbrella; B. Landlord, at its sole cost and expense, shall maintain during the term: (a) property insurance insuring Landlord's Alterations, equipment and personal property located in the Landlord's Storage Area against all perils, included within the classification of fire, extended coverage, vandalism, malicious mischief, special extended peril (all risk), boiler, flood, earthquake, glass breakage and sprinkler leakage, with a deductible not in excess of $70,000 and in an amount sufficient to prevent Landlord or the Tenant from becoming co-insurers, but in any event in an amount not less than the full insurable value thereof. (b) commercial general liability insurance including contractual liability coverage and coverage for bodily injury, property damage and personal injury occurring upon, in or about the Demised Premises and the adjoining sidewalks and passageways under which Landlord is named as the insured and Tenant and each Fee Mortgagee whose name has been provided by Tenant to Landlord are named as additional insureds, as their interests may appear. The minimum limits of liability shall be a combined single limit with respect to each occurrence of $1,000,000 with a $2,000,000 annual aggregate and a $2,000,000 umbrella; SECTION5.2 A. All insurance provided for in this Article 5 shall be ---------- --------- effected under valid and enforceable policies, issued by insurers licensed to do business in the Commonwealth of Pennsylvania and having a general policy holder rating of "A" or better and a financial rating of at least vii A+ in Best's ------ Insurance Guide or any successor thereto (or if Best's Insurance Guide shall ------------ ---------------------- cease to exist, any equivalent standard generally accepted in the real estate community). All policies of insurance (or in lieu thereof certificates of insurance [form Accord 27 or Accord 25, as appropriate] unless any Fee Mortgage requires that policies be delivered to it) which evidence Tenant's insurance and evidence of the payment of all premiums of such policies will be delivered to Landlord prior to Tenant's occupancy of the Demised Premises and from time to time at Landlord's request made not more often than once per Lease Year. Evidence of each renewal or replacement of a policy (and certificates of insurance shall be deemed sufficient evidence thereof) shall be delivered by Tenant to Landlord at least thirty (30) days prior to the expiration of each such policy. All certificates obtained by Tenant will provide that should the policies be canceled prior to the respective expiration dates thereof, the issuing insurer will endeavor to mail thirty (30) day's written notice to the certificate holder. All commercial general liability and property insurance policies maintained by Tenant will be written as primary policies, not contributing with and supplemental to the coverage that Landlord or any Fee Mortgagee may carry. B. Nothing in this Article 5 shall prevent Tenant from taking out ---------- insurance of the kind and in the amounts provided for under this Article under a blanket insurance policy or policies covering other properties as well as the Demised Premises, provided, however, that any such policy or policies of blanket insurance (i) shall specify therein the amounts of the total insurance allocated to the Demised Premises, which amounts shall not be less than the amounts required by Section 5.1 hereof, and (ii) such amounts shall be sufficient to ------------ prevent Landlord or any Fee Mortgagee from becoming a co-insurer within the terms of the applicable policy or policies. C. The insurance policies required under this Lease to be furnished by Tenant to Landlord may, at the election of Tenant, be furnished and/or paid for by any subtenant or other person having an insurable interest in the Demised Premises, and Landlord shall accept such insurance as though it had been furnished by Tenant. SECTION5.3 Except with respect to the insurance required by Section ---------- ------- 5.1(b) hereof, neither Landlord nor Tenant shall take out separate insurance -- concurrent in form or contributing in the event of loss with the insurance required by this Article unless the other party is included therein as an additional insured, with loss payable as provided in this Lease. Each party shall immediately notify the other of the placing of any such separate insurance and shall cause the same to be delivered as required by Section 5.2 hereof. ----------- SECTION5.4 Upon the expiration of this Lease, the unearned premiums upon ---------- any such transferable insurance policies shall be apportioned if (a) Landlord requests an assignment of such insurance policies and such policies are transferred to Landlord, and (b) no Event of Default under this Lease shall be then continuing. SECTION5.5 So long as both Landlord's and Tenant's policies then in force - ---------- include mutual waivers of subrogation, Landlord and Tenant, to the fullest - --- extent permitted by law, each waive all right of recovery against the other and - --- agree to release the other from liability for loss or damage, to the extent such loss or damage is covered by valid and collectible insurance in effect at the time of such loss or damage. Landlord and Tenant shall use their best efforts to obtain waiver of subrogation clauses in all policies of insurance required by this Lease. ARTICLE 6 RIGHT TO PERFORM OTHER PARTIES' COVENANTS ----------------------------------------- SECTION6.1 If Tenant shall at any time fail to pay any Imposition in ---------- accordance with the provisions of Article 3 hereof, or to take out, pay for, --------- maintain or deliver any of the insurance policies or certificates therefor as provided for in Article 5 hereof, or shall fail to make any other payment or ---------- perform any other act on Tenant's part to be performed as in this Lease provided, then Landlord, after thirty (30) days' notice to Tenant (or such lesser notice as may be required under any other Section of this Lease, provided that no such notice shall be required in the event of an emergency) and without waiving or releasing Tenant from any obligation of Tenant contained in this Lease or from any default by Tenant, and without waiving Landlord's right to take such action as may be permissible under this Lease as a result of such default, may (but shall be under no obligation to): (a) pay any Imposition, including any interest and penalties due thereon, payable by Tenant pursuant to the provisions of Article 3 hereof, or --------- (b) take out, pay for and maintain any of the insurance policies provided for in Article 5 hereof, or ---------- (c) make any other payment or perform any other act on Tenant's part to be made or performed as in this Lease provided, and may enter upon the Demised Premises for any such purpose, and take all such action thereon, as may be necessary therefor. SECTION6.2 All reasonable sums so paid by Landlord and all reasonable ---------- costs and expenses incurred by Landlord, including reasonable attorneys' fees, in connection with the performance of any such act in this Article 6 shall --------- constitute Additional Rent payable by Tenant under this Lease and shall be paid by Tenant to Landlord within thirty (30) days of Landlord's notice to Tenant of payment accompanied by reasonably itemized receipts for all such payments. SECTION6.3 Tenant shall have the right to make such repairs which are ---------- required to be made by Landlord under the terms of this Lease on behalf of Landlord, and to be reimbursed by Landlord for the reasonable cost thereof, if Landlord fails to make such repairs pursuant to subsection (a) below. A. Landlord agrees to make repairs as required under the terms of this Lease and as follows: (i) If Landlord fails to undertake and commence the repairs required under this Lease, Tenant shall immediately notify Landlord in writing of the required and outstanding repairs. (ii) Landlord shall undertake and commence the required repairs within ten (10) days after receipt of written notice from Tenant and shall make all diligent efforts to complete such repairs in a timely manner. (iii) Anything in this Lease to the contrary notwithstanding, Landlord agrees that in the event of an emergency which: (a) poses the threat of imminent, severe damage to Tenant, Tenant's employees, Tenant's business or Tenant's property; and (b) necessitates prompt maintenance, repair, or replacement of items which are otherwise required by this Lease to be maintained, repaired, or replaced by Landlord, then Tenant may at its option proceed forthwith to make repairs. B. If Landlord fails to reimburse Tenant for such repair costs incurred by Tenant within ten (10) days after written request from Tenant therefor (which request must be supported by paid receipts), Tenant may deduct the cost thereof from the Rent otherwise payable hereunder. ARTICLE 7 REPAIRS, MAINTENANCE AND CONDITION OF THE DEMISED PREMISES ---------------------------------------------------------- SECTION7.1 Throughout the Term of this Lease, except to the extent of ---------- Landlord's obligations hereunder, Tenant, at its sole cost and expense, shall take good care of the Demised Premises and shall keep the same in good order and condition, except for reasonable wear and tear. Tenant shall not be responsible for structural repairs to the Demised Premises (including, without limitation, the roof, walls and foundation) or for replacements of the HVAC, plumbing, mechanical, electrical and other building system. SECTION7.2 Tenant shall put, keep and maintain all portions of the ---------- Demised Premises and the sidewalks, curbs, alleyways and passageways adjoining the same in a clean and orderly condition, free of dirt, rubbish, snow, ice and unlawful obstructions. SECTION7.3 Landlord shall not be required to furnish to Tenant any ---------- facilities or services of any kind whatsoever during the Term, such as, but not limited to, water, sewer, steam, heat, gas, hot water, electricity, light and power, and Tenant shall, at its sole cost and expense, pay or cause to be paid, prior to the imposition of any penalty or late charge, all charges for gas, oil, fuel, steam, sewer, electricity, telephone, heat, air conditioning, ventilation, refuse pickup, janitorial and maintenance service, security and all other utilities, materials, supplies and services consumed, furnished, used or made available in, at or upon the Demised Premises during the Term of this Lease, together with all taxes thereon, if any. Tenant shall keep and maintain in good repair all utility meters measuring utilities and services consumed at the Demised Premises. Tenant shall establish accounts in Tenant's name with the utility companies responsible for supplying utilities to the Demised Premises and Tenant shall be responsible for all deposits required by the utility companies to establish such accounts, provided that Tenant shall be entitled to receive such deposits back at the end of the Term. SECTION 7.4 Landlord, at is sole cost and expense, agrees to keep in good order, repair and condition and to: (i) make all necessary repairs and replacements to all structural components of the Demised Premises, including, without limitation, the walls, roof and foundation; (ii) replace all necessary components of the HVAC, plumbing, mechanical, electrical and other building systems; (iii) make all repairs and replacements to any part of the Demised Premises necessitated by Landlord's negligence or willful misconduct; (iv) to the extent not the obligation of the utility company, repair and replace, as necessary, all utility lines, pipes, ducts, conduits and the like in the Demised Premises or which serve the Demised Premises and (v) make all necessary repairs, replacements and alterations to comply with all Legal Requirements (as hereinafter defined) pursuant to the requirements of Article 8 herein. ARTICLE 8 COMPLIANCE WITH LAWS -------------------- SECTION8.1 Throughout the Term, Tenant, at its sole cost and expense, ---------- shall promptly comply with all present and future laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments, departments, commissions, boards and officers, and all orders, rules and regulations of the National Board of Fire Underwriters, or any other body or bodies exercising similar functions ("LEGAL REQUIREMENTS"), which may be ------------------ applicable to the Demised Premises, occurring after the Commencement Date herein and due solely to Tenant's particular use of the Demised Premises and the sidewalks, alleyways, passageways, curbs and vaults adjoining the same. SECTION8.2 Tenant shall observe and comply with the requirements of all ---------- policies of insurance required to be supplied by Tenant at any time during the Term with respect to the Demised Premises, whether or not such observance or compliance is required by reason of any condition, event or circumstance existing prior to or after the commencement of the term of this Lease, and Tenant shall, in the event of any violation or any attempted violation of the provisions of this Section by any subtenant, take steps, promptly upon knowledge of such violation or attempted violation, to remedy or prevent the same as the case may be. SECTION8.3 Tenant shall have the right, after prior written notice to ---------- Landlord, to contest by appropriate legal proceedings diligently conducted in good faith, in the name of Tenant or Landlord or both, without cost or expense to Landlord, the validity or application of any Legal Requirement, provided that (i) Tenant is diligently and in good faith contesting the same by appropriate legal proceedings which shall operate to prevent the enforcement of the same or the sale of the Demised Premises or any part thereof to satisfy the same, (ii) Landlord would not be, by reason of such post-ponement or deferment, subject to any actual or threatened criminal sanctions or penalties or personal liability, as Landlord shall determine in its reasonable judgment, and (iii) no Fee Mortgage would by reason of such postpone-ment or deferment be, in the reasonable judgment of Landlord, in danger of being put in default or foreclosure, and provided further that if, in the reasonable opinion of Landlord, the Demised Premises or any part thereof or interest therein may be in danger of being sold, forfeited, foreclosed, terminated, cancelled or lost as a result of such contest, Tenant shall promptly upon request of Landlord pay same. SECTION8.4 Landlord represents and warrants to Tenant that it has full ---------- right and authority to enter into this Lease and it has a current, valid certificate of occupancy for the Demised Premises permitting Tenant's use as contemplated herein. Landlord represents that the Demised Premises is in compliance with all Legal Requirements. Except to the extent of Tenant's obligations pursuant to Section 8.1 herein, Landlord shall, at its sole cost and ----------- expense, promptly comply with all present and future Legal Requirements. SECTION8.5 Tenant covenants not to discharge from the Demised Premises or - ---------- suffer the discharge of, nor to store upon the Demised Premises or suffer the - --- storage of, any Hazardous Materials (as hereinafter defined) in amounts in - -- excess of those permitted or recommended by any governmental or - -- quasi-governmental authority having jurisdiction thereof. In addition to and - -- not in limitation of the foregoing, Tenant covenants that (a) the Demised - -- Premises shall be kept free of all Hazardous Materials, whether placed, stored, - -- used, generated or disposed of in, on, under, within, or about the Demised Premises, in excess of amounts permitted by appropriate governmental authorities, and (b) all Hazardous Materials shall be handled in the manner required by any governmental. The Demised Premises shall not be used to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce, process, or in any manner to deal with, Hazardous Materials in excess of amounts permitted, or in a manner other than required, by any governmental authority. The Tenant shall comply with, and ensure compliance by all Tenant's agents, servants, employees and invitees with, all applicable Hazardous Materials Laws and shall keep the Demised Premises free and clear of any violations and liens imposed pursuant to such Hazardous Materials Laws. In the event Tenant receives any written notice from any governmental or quasi-governmental agency, or from any other person or entity with regard to health, safety, environment or Hazardous Materials on, under, from or affecting the Demised Premises, then Tenant shall immediately notify the Landlord. Tenant shall conduct and complete all investigations, studies, sampling, and testing and all remedial, removal, and other actions necessary to clean, remove or encapsulate all Hazardous Materials on, under, from or affecting the Demised Premises in accordance with all applicable Hazardous Materials Laws, to the extent that such Hazardous Materials are present at the Demised Premises as a result of the actions or omissions of Tenant. Tenant shall immediately, upon request of Landlord, provide unhampered access to all portions of the Demised Premises to all governmental and quasi-governmental authorities charged with inspecting the Demised Premises or charged with enforcing or concerned with Hazardous Materials Laws. Tenant shall protect, indemnify and save harmless the Landlord from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs, and expenses (including reasonable attorney's fees and expenses, investigation and laboratory fees, court costs, and litigation expenses) ("Claims") imposed upon or incurred by or asserted against the Landlord by reason of (1) the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release, or threatened release ("Release") by Tenant of any Hazardous Material on, under, from or affecting the Demised Premises; (2) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to the Release of such Hazardous Materials by Tenant; (3) any lawsuit brought or threatened or settlement reached in connection with the foregoing, provided, however, that Tenant will be given the opportunity, if available with no adverse effect to Landlord, to contest any such settlement or governmental order relating to such Hazardous Materials; or (4) any violation by Tenant of Hazardous Materials Laws which are based upon or in any way are related to such Hazardous Materials. Landlord shall protect, indemnify and save harmless Tenant from and against all Claims incurred by or asserted against Tenant by reason of (1) the Release of any Hazardous Material on, under, from or affecting the Demised Premises prior to the Commencement Date; (2) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to the Release of such Hazardous Materials prior to the Commencement Date; (3) any lawsuit brought or threatened or settlement reached in connection with the foregoing, provided, however, that Landlord will be given the opportunity, if available with no adverse effect to Tenant, to contest any such settlement or governmental order relating to such Hazardous Materials; or (4) any violation of Hazardous Materials Laws by Landlord which are based upon or in any way are related to such Hazardous Materials. This Section 8.5 shall survive the termination or ------------ expiration of this Lease. As used herein, the term "HAZARDOUS MATERIALS" shall ------------------- include, but is not limited to, any flammable explosives, gasoline, petroleum products, polychlorinated biphenyl, radioactive materials, hazardous wastes, hazardous or toxic substances, or related or similar materials, asbestos or any material containing asbestos, or any other substance or material as defined by any federal, state or local environmental law, ordinance, rule, or regulation governing the handling, use, storage or disposal of Hazardous Materials, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et. seq.), the Hazardous - Materials Transportation Act, as amended (49 U.S.C. Section 1801, et. seq.), the - Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et. seq.), the Pennsylvania Environmental Laws, and the regulations adopted and - publications promulgated pursuant to any of the foregoing (collectively, the - "HAZARDOUS MATERIALS LAWS"). ------------------------- ARTICLE 9 CHANGES, ALTERATIONS, ADDITIONS ------------------------------- SECTION9.1 A. Tenant shall have the right, from time to time during ---------- the Term hereof, to make alterations, additions, improvements, substitutions and replacements (collectively, "ALTERATIONS") of a nonstructural nature in and to ----------- the Demised Premises that Tenant may deem appropriate, costing not in excess of Two Hundred Fifty Thousand ($250,000.00) Dollars per Alteration. All Alterations shall be performed in accordance with all applicable Legal Requirements. B. Tenant shall have the right, from time to time during the Term hereof, to perform Alterations costing in excess of Two Hundred Fifty Thousand ($250,000.00) Dollars (each, a "MAJOR ALTERATION") with the prior written ----------------- consent of Landlord, not to be unreasonably withheld or delayed, provided that Tenant shall comply with the following: (i) Tenant shall furnish to Landlord and any Fee Mortgagee, prior to the commencement of such Major Alterations, reasonable evidence that such Major Alterations will be performed without any liens encumbering the Landlord's estate in the Demised Premises (as, for example, without limitation, furnishing to Landlord or such Fee Mortgagee any one of the following: a completion bond from a bank or other financial institution with assets of not less than $100,000,000, a letter of credit in the estimated amount of the cost of the Major Alterations to be performed (diminishing as the work is completed), or cash collateral or a funding commitment from a bank or other financial institution with assets of not less than $100,000,000); (ii) Landlord shall have approved the plans and specifications for such Major Alterations as provided in Section 9.2; ------------ (iii) Tenant shall have procured and paid for, so far as the same may be required from time to time in connection with any such Major Alterations, all permits, certificates and authorizations required by any Governmental Authority or any department, office, bureau, agency or instrumentality thereof now existing or hereafter created and having jurisdiction over the Demised Premises, and Tenant shall provide copies of same to Landlord. Landlord shall not unreasonably refuse to join in any application for such permit or authorization and shall reasonably cooperate with Tenant, without charge except to the extent Landlord's participation required is more than de minimis, in which case Tenant agrees to pay to Landlord, upon demand and as Additional Rent hereunder, Landlord's actual costs paid or incurred in connection therewith; (iv) Tenant shall procure from all contractors and submit to Landlord evidence of worker's compensation insurance and general liability and personal injury and property damage insurance in an amount not less than $1,000,000.00 combined single limit, on an occurrence basis, naming Landlord, all Fee Mortgagees and Tenant as additional insureds, and otherwise in form and substance reasonably satisfactory to Landlord; and C. Notwithstanding anything herein to the contrary, Tenant shall have the right not to be unreasonably withheld or delayed, to perform Alterations as may be necessary or desirable, to allow Tenant to sublease up to fifty (50%) percent of the rentable area of the Improvements, including without limitation the installation of windows, doors and demising walls, and changes to the mechanical, electrical, plumbing, air conditioning, ventilation, heating and other building systems, provided that, to the extent such Alterations are Major Alterations, Tenant complies with Section 9.01.B(i), (iii), and (iv) above and ----------------- ----- ---- provided further that any such Alterations shall, when completed, be of such a character as not to impair the value of the Demised Premises and shall (except for de minimis exceptions) be performed in accordance with all applicable Legal Requirements. SECTION9.2 Landlord agrees to deliver to Tenant, within fifteen (15) ---------- days after receipt of Tenant's written request therefor, either an approval of or a reasonably detailed objection to plans and specifications for Major Alterations and such other documents as may be required for the effectuation of the Tenant's rights under this Article 9 or in connection with any repairs or --------- restoration work, including, without limitation, those affecting variances, certificates of occupancy and all permits and authorizations, including permits for signs and projections, alterations, additions, improvements, substitutions and replacements. SECTION9.3 Any Alterations to the Demised Premises or to the present or ---------- any future building thereon, made by any present or future subtenant or subtenants of the Demised Premises with the permission of the Tenant, shall, for purposes of this Article 9 and of this Lease, be deemed made by the Tenant and --------- be governed by this Article 9 and the other applicable provisions of this Lease. --------- SECTION9.4 Prior to the commencement of any work on or the delivery of any - ---------- materials to the Demised Premises for the purpose of constructing Alterations or - -- any Major Alteration, Tenant shall execute and file a Stipulation Against Liens in accordance with Pennsylvania law and shall provide Landlord with a copy of the signed and filed Stipulation Against Liens. SECTION9.5 Tenant, at its sole cost and expense, shall have the right to - ---------- install, maintain, use, repair and replace satellite antennas and related - ---- equipment and cabling on the roof of the Demised Premises. Upon the expiration - ---- or earlier termination of this Lease, Tenant shall remove all satellite antennas from the roof and repair any punctures to the roof. SECTION9.6 Tenant, at Tenant's cost, shall have the right to cause the - ---------- Demised Premises to be identified by such name or by such signs as Tenant deems - ------ necessary, provided that the design, dimension, construction and location of such signage shall be in compliance with all Legal Requirements. ARTICLE 10 DISCHARGE OF LIENS ------------------ SECTION10.1 Tenant shall not create or permit to be created or to ----------- remain, and shall discharge, any mechanic's, laborer's or materialman's lien or - any conditional sale, title retention agreement or chattel mortgage, which might be or become a lien, encumbrance or charge upon the Demised Premises or any part thereof having any priority or preference over or ranking on a parity with the estate, rights and interest of Landlord in the Demised Premises or any part thereof. SECTION10.2 If any mechanic's, laborer's or materialman's lien shall at ----------- any time be filed against the Demised Premises or any part thereof, Tenant, within forty-five (45) days after notice of the filing thereof, shall cause the same to be discharged of record by payment, deposit, bond, order of a court of competent jurisdiction or otherwise. If Tenant shall fail to cause such lien to be discharged within the period aforesaid, then, in addition to any other right or remedy, Landlord may, after twenty (20) days' notice to Tenant, but shall not be obligated to, discharge the same either by paying the amount claimed to be due or by procuring the discharge of such lien by deposit or by bonding proceedings, and in any such event Landlord shall be entitled, if Landlord so elects, to compel the prosecution of an action for the foreclosure of such lien by the lien or and to pay the amount of the judgment in favor of the lien or with interest, costs and allowances. Any amount so paid by Landlord, and all reasonable costs and expenses incurred by Landlord in connection therewith, shall constitute Additional Rent payable by Tenant under this Lease and shall be paid by Tenant to Landlord on demand. ARTICLE 11 NO WASTE -------- Tenant shall not do or suffer any waste, damage, disfigurement or injury to the Demised Premises or any part thereof, but this shall not be deemed to prevent demolition or Alterations pursuant to other provisions of this Lease. ARTICLE 12 USE OF DEMISED PREMISES ----------------------- SECTION12.1 The Demised Premises may be used for any legal purpose. ----------- Tenant shall not use or allow the Demised Premises to be used for any unlawful or illegal business, use or purpose, or in violation of any certificate of occupancy for the use of the Demised Premises or any part thereof or any use which may, in law, constitute a public nuisance or would void any insurance then in force with respect thereto, or for any business, use or purpose deemed by Landlord in its reasonable discretion to be disreputable or extra hazardous, or in violation of any Legal Require-ments. Tenant shall, immediately upon the discovery of any such unlawful, illegal, disreputable or extra hazardous use take all neces-sary steps, legal and equitable, to compel the discontinuance of such use and to oust and remove any sub-tenants, occupants or other persons guilty of such unlawful, illegal, disreput-able or extra hazardous use. SECTION12.2 Tenant shall not suffer or permit the Demised Premises or ----------- any portion thereof to be used by the public without restriction or in such manner as would impair Landlord's title to the Demised Premises or any portion thereof, or in such manner would create a condition of adverse possession or prescription by the public, as such, or of implied dedication, of the Demised Premises or any portion thereof. Tenant hereby acknowledges that Landlord does not hereby consent, expressly or by implication, to the unrestricted use or possession of the whole or any portion of the Demised Premises by the public, as such. SECTION12.3 Landlord hereby represents and warrants to Tenant as ----------- follows: -- A. Landlord is the sole fee simple owner of the Demised Premises; B. The Demised Premises is not subjected to control or tax by any improvement, utility, beautification or similar private district or association; and C. There is no lease superior in right to this Lease. ARTICLE 13 ENTRY ON DEMISED PREMISES BY LANDLORD ------------------------------------- SECTION13.1 Tenant shall permit Landlord and its authorized ----------- representatives to enter the Demised Premises at all reasonable times during ------- usual business hours and upon 48 hours prior written notice and Tenant's approval (except in cases of emergency), and provided that such entry does not unreasonably disturb any subtenants or other occupants of the Demised Premises, for the purpose of (a) inspecting the same, (b) accessing Landlord's Storage, and (c) making any necessary repairs thereto and performing any work therein. Nothing herein shall imply any duty upon the part of Landlord to do any such work and performance thereof by Landlord shall not constitute a waiver of Tenant's default in failing to perform same. SECTION13.2 A. Landlord shall have the right to enter the Demised ----------- Premises at all reasonable times during usual business hours and upon reasonable prior notice for the purpose of showing same to prospective purchasers or mortgagees thereof and, during the six (6) months prior to the Expiration Date, for the purpose of showing the same to prospective tenants of the Demised Premises. B. If any part of the Demised Premises shall be used for "classified work" within the meaning of governmental regulations or is otherwise used for confidential purposes under any sublease with a subtenant, only persons permitted to do so under such regulations or procedures that govern such confidentiality may enter such portions of the Demised Premises. C. Tenant may require that Landlord and its guests be accompanied by representatives of Tenant or its agents, in which case Tenant will make representatives available for such purposes at reasonably mutually agreeable times. Landlord shall minimize any disruption to the Demised Premises and the subtenants by reason of any inspection or exhibiting of the Demised Premises under this Lease. ARTICLE 14 INDEMNIFICATION OF LANDLORD AND TENANT -------------------------------------- SECTION14.1 A. Except as a result of the negligence or willful ----------- misconduct of Landlord and its agents, employees and contractors or any breach of this Lease by Landlord or as otherwise set forth in Section 8.5, Tenant shall indemnify and save harmless Landlord against and from all liabilities, obligations, damages, penalties, claims, costs, charges and expenses, including reasonable attorneys' fees, which may be imposed upon or incurred by or asserted against Landlord by reason of any of the following: (i) any work or thing done in, on or about the Demised Premises or any part thereof by Tenant or any party other than Landlord; (ii) any use, non-use, possession, occupation, condition, operation, maintenance or management of the Demised Premises or any part thereof or any alley, sidewalk, curb, vault, passageway or space adjacent thereto; (iii) any negligence or intentional misconduct on the part of Tenant or any of its agents, contractors, servants, employees, subtenants, licensees or invitees; (iv) any failure on the part of Tenant to keep, observe, perform or comply with any of the covenants, agreements, terms or conditions contained in this Lease on its part to be kept, observed, performed or complied with; or (v) any accident, injury or damage to any person or property occurring in, on or about the Demised Premises or any part thereof, or any alley, sidewalk, curb, vault, passageway or space adjacent thereto. B. In case any action or proceeding is brought against Landlord by reason of any such claim, Tenant upon written notice from Landlord shall at Tenant's expense resist or defend such action or proceeding by counsel approved by Landlord in writing, which approval shall not be unreasonably withheld or delayed (it being agreed that counsel designated by any insurer shall be acceptable). If Tenant has supplied Landlord with insurance policies covering any of the aforementioned risks, no claim shall be made against Tenant unless and until the insurer shall fail or refuse to defend and/or pay all or any part thereof. C. Landlord shall indemnify, defend and save harmless Tenant against and from any and all liabilities, damages, penalties, costs, expenses, claims, suits or actions due to or arising out of (i) any breach, violation or non-performance of any covenant, condition or agreement in this Lease contained on the part of the Landlord to be fulfilled, kept, observed and performed; and (ii) any claim against Tenant arising from damage to property or any injury to persons (including death resulting at any time therefrom) in, on, or about the Demised Premises or the sidewalks adjacent thereto arising or accruing out of the gross negligence or willful misconduct of Landlord or Landlord's use of the Landlord Storage. D. Landlord and its respective agents shall not be liable for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain, snow or leaks from any part of the Demised Premises or from the pipes, appliances or plumbing works or from the roof, street or sub-surface, or from any other place or by dampness or by any other cause of whatsoever nature, unless caused by or due to the negligence or willful misconduct of Landlord, its agents, servants or employees, Landlord's use of the Landlord's Storage or Landlord's failure to perform its obligations hereunder. Tenant shall give immediate notice to Landlord in the event of any fire or accident at the Demised Premises. Neither Landlord, nor any partner of Landlord, nor a successor in interest to any of the foregoing, shall be under any personal liability with respect to any of the provisions of this Lease or any matter arising out of or in connection with this Lease or the Tenant's occupancy or use of the Demised Premises, and in the event of any breach or default with respect to Landlord's obligations under this Lease or any claim arising out of or in connection with this Lease or the Tenant's occupancy or use of the Demised Premises, Tenant shall look solely to the equity of such person or entity in the Demised Premises for the satisfaction of Tenant's remedies and in no event shall Tenant attempt to secure any personal judgment against Landlord, or any partner of Landlord, or successors thereto, or any partner, employee or agent of any of them by reason thereof. ARTICLE 15 DAMAGE OR DESTRUCTION --------------------- SECTION15.1 In case of damage to or destruction of any improvements on ----------- the Demised Premises or any part thereof by fire or otherwise, Tenant shall promptly give written notice thereof to Landlord, and, except as otherwise provided in Section 15.2 hereof, Tenant shall restore, repair, replace or ------------- rebuild the same, which restoration, repairs, replacements and/or rebuildings shall be made using materials at least equal in quality to the original work, with such changes or alterations as may be made at Tenant's election with Landlord's reasonable consent, all in conformity with and subject to the conditions of Article 9 hereof, except that the surety company bond as referred --------- to in Section 9.1 hereof shall be in an amount equal to the excess of the ------------ estimated cost of the work over the amount of insurance money. Such restorations, repairs, replacements, rebuilding or alterations shall be promptly commenced, but in no event later than six (6) months from the date of occurrence of such damage or destruction, which time shall be extended by a time commensurate with any delays due to adjustment of insurance, preparation of plans and specifications or other delays, and shall thereafter be prosecuted with reasonable diligence, unavoidable delays excepted. [Tenant expressly agrees that its obligations hereunder, including the payment of any and all Rent, shall continue as though said Demised Premises had not been damaged or destroyed and without abatement, suspension, diminution or reduction of any kind.] SECTION15.2 Anything in this Lease to the contrary notwithstanding, if ----------- at any time during the term hereof, the improvements on the Demised Premises shall be so damaged by fire or otherwise that the cost of replacement or restoration thereof shall exceed fifty percent (50%) of the then replacement value of the improvements so damaged, or if such damage or destruction occurs during the last one (1) year of the Term and the cost of replacement or restoration shall exceed the Base Construction Amount, or if any such damage or destruction would in the reasonable estimation of Tenant's engineer take more than eighteen (18) months to repair, then in any such event Tenant may elect to cancel this Lease by giving notice to Landlord within one hundred eighty (180) days after such damage or destruction, and this Lease shall come to an end on the date specified in such notice. In the event of any such termination, Tenant will not be required to perform any restoration. The net insurance proceeds (after deduction for any costs of collection) shall be paid to Landlord. SECTION15.3 A. All insurance money paid to Tenant (or, if required ----------- by the terms of any Fee Mortgage, to the Fee Mortgagee) on account of such damage or destruction, less the reasonable cost, if any, incurred in connection with adjustment of the loss and the collection thereof shall, unless this Lease is terminated as a result of such damage or destruction as provided in Section ------- 15.4, be applied by Tenant, as applicable, to the payment of the cost of the --- aforesaid restoration, repairs, replacement, rebuilding or alterations, -- including the cost of temporary repairs or for the protection of property -- pending the completion of permanent restoration, repairs, replacements, -- rebuilding or alterations (all of which temporary repairs, protection of -- property and permanent restoration, repairs, replacement, rebuilding or -- alterations are hereinafter collectively referred to as the "RESTORATION"). -- B. Notwithstanding anything to the contrary in this Lease, if the terms of any Fee Mortgage shall require that insurance proceeds be deposited with the Fee Mortgagee, Tenant shall deposit any moneys received by Tenant from insurance provided by Tenant with the Fee Mortgagee, pro-vided that the mortgagee is obligated to release such moneys to Tenant to restore the Demised Premises. SECTION15.4 If all or substantially all of the improvements on the ----------- Demised Premises are destroyed by fire or other casualty, Tenant shall have the right, at its option, either to restore, replace or rebuild the same as provided in this Lease, or to demolish the remainder of the same and to construct, in replacement thereof, a new building, subject in all respects to the provisions of Article 9 hereof, and Tenant shall in connection therewith duly and ---------- faithfully comply with all of such provisions. The surety company bond as ------ referred to in Section 9.5 hereof shall be in an amount equal to the excess of -- ----------- the estimated cost of the work over the amount of the insurance money. Any restored or new building shall be at least equal in value to the destroyed or damaged building. ARTICLE 16 CONDEMNATION SECTION16.1 In the event that the Demised Premises or any part thereof ----------- shall be taken in condemnation or by exercise of any right of eminent domain or by agreement among Landlord, Tenant and those authorized to exercise such right (any such matters being hereinafter referred to as a "TAKING"), Landlord, ------ Tenant, any Fee Mortgagee and any other person or entity having an interest in the award or awards shall have the right to participate in any such condemnation proceedings or agreement for the purpose of protecting their interests hereunder. Each party so participating shall pay its own expenses. SECTION16.2 If at any time during the Term there shall be a taking of ----------- all or substantially all of the Demised Premises, this Lease shall terminate and expire on the date of such taking and the Net Rent and any Additional Rent hereunder shall be apportioned and paid to the date of such taking. For the purpose of this Article "substantially all of the Demised Premises" shall be ----------------------------------------- deemed to have been taken if the part not so taken is insufficient for the economic use and reasonable continued operation thereof by Tenant, in Tenant's sole and absolute discretion. SECTION16.3 If this Lease shall terminate as a result of such taking: ----------- (a) Landlord shall be entitled to an award for (i) the value of its reversionary interest in the land and existing improvements taken, (ii) consequential damages for any diminution of Landlord's reversionary interest in the assemblage or plottage value of the land and existing improvements not so taken, and (iii) damages for the then present value of any loss of rentals that would have been payable under this Lease if this Lease had continued in full force and effect for the remainder of the Term thereof (but excluding any unexercised renewal options) with respect to the land taken and the improvements existing thereon (but not any Alterations or betterments made by Tenant or its subtenants). (b) Tenant shall be entitled to an award for the loss of the value of its interest in the leasehold including, without limitation, (a) damages for the value of all Alterations, improvements and betterments to the Demised Premises, (b) the loss of Tenant's leasehold interest in the land and all improvements thereon so taken and damages for the then present value of the loss of rentals on all rentable space in the Demised Premises for the remainder of the Term (calculated as if the Lease remained in full force and effect but excluding any unexercised renewal options); and (c) any costs of removal and relocation from the Demised Premises. (c) Any remainder of the award shall be payable to Landlord. SECTION16.4 If this Lease shall continue after any such taking, this ----------- Lease shall remain unaffected except as follows: (a) The Net Rent shall be reduced by an amount which bears the same proportion to the Net Rent immediately prior to the partial taking as the rental value of the part of the Demised Premises so taken shall bear to the rental value of the whole Demised Premises immediately prior to such taking. (b) Tenant shall, promptly after such taking and at its expense restore the improvements on the Land, with such changes as Tenant shall deem appropriate, subject to Landlord's consent, not to be unreasonably withheld or delayed, and Tenant shall be entitled to reimbursement for the entire cost thereof from the condemnation proceeds payable by the condemning authority. SECTION16.5 In the event of the taking of an easement or any other ----------- taking which shall be of an interest or estate in the land less than a fee simple (other than a taking for temporary use mentioned in Section 16.6 hereof), ------------ as a result of which the Demised Premises shall be insufficient for the economic use and reasonable continued operation thereof by Tenant, this Lease shall terminate and expire with the same force and effect as in the case of a taking pursuant to Section 16.2 hereof. Otherwise, such taking shall be deemed a taking ------------ insufficient to terminate this Lease, and the division of the award shall be governed by Section 16.3 in so far as that Section shall be applicable; ------------- provided, however, that if there shall be any payment or award predicated on a change in the grade of a street or avenue on which the Demised Premises abut, Tenant shall be entitled, after making such change or restoration as may be necessary and appropriate by reason of such change of grade, to reimbursement for the expense thereof to the extent of the net amount of any payment or award actually received. Any part of an award for change of grade which shall remain unexpended after such restoration shall be allocated between Landlord and Tenant, as their interests may appear. If any award shall include change of grade and any other item or element of damage, that part thereof shall be applied in accordance with this Section 16.6 which shall be specifically ------------- attributed to change of grade by the condemnation court (or condemnation commissioner or other body authorized to make the award) or, if not so attributed, shall be determined by agreement between the parties. SECTION16.6 In the event of a taking of all or a part of the Demised ----------- Premises for temporary use, this Lease shall continue without change, as between Landlord and Tenant, and Tenant shall be entitled to the award made for such temporary use; provided that (a) such award shall be apportioned between Landlord and Tenant as of the date of the expiration of the then current or any renewed term or terms of this Lease, and provided, further, that if any such award shall be in a lump sum or in installments covering a period of time greater than three months, Tenant shall be entitled to a sum equal to a maximum of three months' Net Rent and the balance of such award shall be deposited with Landlord or Fee Mortgagee for payment to Tenant in equal quarter-annual installments; and (b) Tenant shall be entitled to file and prosecute any claim against the condemnor for damages and to recover the same, for any negligent use, waste or injury to the Demised Premises throughout the balance of the then current term of this Lease. The amount of damages so recovered shall be paid to Landlord or its Fee Mortgagee and shall be distributed in the same manner as is provided in Section 15.2 hereof with respect to proceeds of insurance. - ------------- SECTION16.7 In case of any taking mentioned in this Article 16, the ----------- ---------- entire award shall be paid to Landlord for distribution to the parties entitled thereto pursuant to the provisions of this Article 16. ----------- ARTICLE 17 INTENTIONALLY OMITTED --------------------- ARTICLE 18 ASSIGNMENTS, MORTGAGES AND SUBLEASES OF TENANT'S INTEREST --------------------------------------------------------- SECTION18.1 Tenant shall not assign, mortgage, pledge, encumber or ----------- otherwise transfer all or any part of its interest in this Lease or the Demised Premises except to the extent specifically permitted by this Article 18. ---------- SECTION18.2 A. Tenant may, with Landlord's prior consent, not to be ----------- unreasonably withheld or delayed, assign all of its interest in this Lease. No assignment of this Lease shall be effective unless and until an executed counterpart of such assignment, in recordable form, under which the assignee shall have assumed this Lease and agreed to perform and observe the covenants and conditions in this Lease contained on Tenant's part to be performed and observed on and after the date of such assignment, is delivered to Landlord. Tenant shall not be released and shall remain liable in the event of any such assignment unless Landlord specifically agrees to such release. Landlord may collect Rent directly from any such assignee, provided that Landlord shall apply the net amount collected to the Rent reserved in this Lease. SECTION18.3 A. In the event (i) Tenant desires to sublet a portion ----------- of the Demised Premises, (ii) Tenant desires to assign this Lease, or (iii) Tenant desires to enter into a sublease the term of which shall extend beyond the Term of this Lease, then at least thirty (30) days prior to any such proposed assignment or subletting, Tenant shall submit to Landlord a statement containing the name and address of the proposed assignee or subtenant and all of the principal terms and conditions of the proposed assignment or subletting including but not limited to, the proposed commencement and expiration dates of the term of the sublease, the nature of the proposed assignee's or subtenant's business, and such financial and other information with respect to the proposed assignee or subtenant as Landlord may reasonably request. Landlord shall, within twenty (20) days of receipt thereof, provide notice to Tenant that Landlord has granted or withheld its consent to the proposed assignment or subletting, and if Landlord withholds its consent, the reasons therefor. Landlord shall not unreasonably withhold or delay its consent, provided that it shall not be deemed unreasonable for Landlord to withhold its consent to any sublease or assignment if: (1) the purposes for which the proposed subtenant or assignee intends to use the Demised Premises are uses not expressly permitted by this Lease or are prohibited by this Lease or are not in accordance with all applicable Legal Requirements; (2) the proposed sublease or assignment shall not prohibit any further assignment or subletting; (3) Tenant shall be in default beyond any cure periods in the performance of any of its obligations under this Lease either at the time Landlord's consent to such subletting or assignment is requested or at the commencement of the term of any proposed sublease or upon the effective date of any such assignment; (4) the sublease is for a term extending beyond the Expiration Date of this Lease. B. If Tenant obtains Landlord's consent to the assignment of this Lease or the subletting of the Demised Premises, prior to the effective date of such assignment or subletting, Tenant shall deliver to Landlord: (i) in the case of an assignment, a duplicate original instrument of the assignment theretofore approved by Landlord, duly executed by Tenant and assignee, in which the assignee assumes the observance and performance of, and agrees to be bound by, all of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed, and (ii) in the case of a subletting an executed duplicate original of the sublease theretofore approved by Landlord. No assignment or subletting shall be effective unless Tenant and assignee have complied with the requirements of this Section 18.3(B). ---------------- SECTION18.4 Tenant shall deliver to Landlord, on request, in duplicate, ----------- within ninety (90) days after the end of each fiscal year, a statement of income and expenses for such fiscal year, and a rent schedule showing all subleases and the duration of the respective terms thereof, with respect to the operation of the Demised Premises, which statement shall be certified by Tenant or an executive officer of Tenant as being true, correct and complete. SECTION18.5 A. If an Event of Default on the part of Tenant shall ----------- occur, effective as of the date of termination of this Lease pursuant to the last notice provided in Section 19.1 hereof (terminating this Lease twenty (20) ------------ days thereafter), Tenant shall be deemed to have assigned to Landlord all of its right, title and interest in and to all present and future subleases and all rents due and to become due thereunder, and shall deliver all security deposits held thereunder to Landlord. After the effective date of such assignment, Landlord shall apply any net amount collected by it from sublessees to the Net Rent or additional rent due under this Lease. No collection of rent by Landlord from an assignee of this Lease or from a sublessee shall constitute a waiver of any of the provisions of this Article or an acceptance of the assignee or sublessee as a tenant or a release of Tenant from performance by Tenant of its obligations under this Lease. In the event of the failure of any sublessee to pay rent to Landlord pursuant to the foregoing assignment after the occurrence of an Event of Default, any such rent thereafter collected by Tenant shall be deemed to constitute a trust fund for the benefit of Landlord. In the event, however, that Tenant shall have remedied such Event of Default, such assignment shall be and deemed to be terminated and Tenant shall be deemed to be reinstated with all of the rights with respect to said subleases and rents. B. Tenant shall not directly or indirectly collect or accept any payment of rent (other than additional rent) under any sublease more than one (1) month in advance of the date when the same shall become due, and such rent, in the case of any future sublease, shall be payable monthly, except that in case of a sublease where the sublessor is required to make tenant changes or alterations at such sublessor's expense, such sublessor may collect advance rent for an amount not in excess of one year's rent or the estimated cost of the work, whichever is less. ARTICLE 19 CONDITIONAL LIMITATIONS--DEFAULT PROVISIONS ------------------------------------------- SECTION19.1 If any one or more of the following events ("EVENTS OF ----------- --------- DEFAULT") shall occur: -- (a) if default shall be made in the due and punctual payment of any Net Rent or additional rent payable under this Lease or any part thereof, when and as the same shall become due and payable, and such default shall continue for a period of ten (10) days after written notice from Landlord to Tenant specifying the items in default, provided that upon the second (2nd) default in any twelve (12) month period, no notice shall be required; or (b) if default shall be made by Tenant in the performance or compliance with any of the agreements, terms, covenants or conditions in this Lease (other than those referred to in Section 19.01(a)) for a period of twenty (20) business days ---------------- after notice from Landlord to Tenant specifying the items in default, or in the case of a default or a contingency which cannot with due diligence be cured within said twenty (20) business day period, Tenant fails to proceed within said twenty (20) business day period to commence to cure the same and thereafter to prosecute the curing of such default with due diligence; or (c) subject to the provisions of Section 19.02 hereof, if Tenant shall file ------------- a voluntary petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall file any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy act or any other present or future federal, state or other bankruptcy or insolvency statute or law, or shall seek or consent to or acquiesce in the appointment of any bankruptcy or insolvency trustee, receiver or liquidator of Tenant or of all or any substantial part of its properties or of the Demised Premises; or (d) subject to the provisions of Section 19.02 hereof, if a proceeding is ------------- commenced against Tenant seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy act or any other present or future federal, state or other bankruptcy or insolvency statute or law and such proceeding shall not have been dismissed within ninety (90) days after notice from Landlord to Tenant of an intention to terminate this Lease for failure to remove the condition in question or if, within ninety (90) days after the appointment of any trustee, receiver or liquidator of Tenant or of all or substantially all of its properties or of the Demised Premises, such appointment shall not have been vacated or stayed on appeal or otherwise, or if, within ninety (90) days after the expiration of any such stay, such appointment shall not have been vacated, within ninety (90) days after notice (to be given not before the expiration of said ninety (90) days period) from Landlord to Tenant of an intention to terminate this Lease for failure to remove the condition in question; Then and in any such event Landlord at any time thereafter may give written notice to Tenant specifying such Event of Default and stating that this Lease and the Term hereby demised shall expire and terminate on the date specified in such notice, which shall be at least ten (10) days after the giving of such notice (provided that with respect to an Event of Default described in Section ------- 19.1(c) or (d), no such notice need be given), and upon the date specified in ------ --- such notice (or, if no notice is required, upon the expiration of the time - period set forth in Section 19.1(c) or (d)) this Lease and the Term hereby - demised and all rights of Tenant under this Lease, including any renewal - privileges whether or not exercised, shall expire and terminate, and Tenant - shall remain liable as hereinafter provided. - SECTION19.2 Upon any such expiration or termination of this Lease, ----------- Tenant shall quit and peacefully surrender the Demised Premises to Landlord, and Landlord, at any time after any such expiration or termination, may without further notice, following appropriate judicial proceedings, enter upon the Demised Premises and repossess the same, and dispossess Tenant and remove Tenant and all other persons and property from the Demised Premises and may have, hold and enjoy the Demised Premises and the right to receive all rental income therefrom. SECTION19.3 At any time or from time to time after any such expiration ----------- or termination, Landlord may relet the Demised Premises or any part thereof for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term of this Lease) and on such conditions (which may include concessions or free rent and alterations of the Demised Premises) as Landlord, in its discretion, may determine and may collect and receive the rents therefor. Landlord shall use commercially reasonable efforts to relet the Demised Premises. SECTION19.4 A. No such expiration or termination of this Lease shall ----------- relieve Tenant of its obligations hereunder, and such obligations shall survive any such expiration or termination. In the event of any such expiration or termination, whether or not the Demised Premises or any part thereof shall have been relet, Tenant shall pay to Landlord the Net Rent and all other charges required to be paid by Tenant up to the time of such expiration or termination of this Lease, and thereafter Tenant, until the end of what would have been the Term of this Lease in the absence of such expiration or termination, shall be liable to Landlord for, and shall pay to Landlord, as and for liquidated and agreed current damages for Tenant's default, the equivalent of the amount of the Net Rent and the other rent and charges which would be payable under this Lease by Tenant if this Lease were still in effect, less the net proceeds of any reletting effected pursuant to the provisions of Section 19.4 hereof, after ------------ deducting all Landlord's expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions attributable to the period expiring when the Term would have expired, operating expenses and reasonable attorneys' fees. B. Tenant shall pay such current damages (herein called the "DEFICIENCY") to Landlord monthly on the days on which the Net Rent would have been payable under this Lease if this Lease were still in effect, and Landlord shall be entitled to recover from Tenant each monthly deficiency as the same shall arise. SECTION19.5 Except as is herein otherwise provided Tenant, for and on ----------- behalf of itself and all-persons claiming through or under Tenant (including any leasehold mortgagee or other creditor), waives any and all right of redemption, re-entry or re-possession. The terms "ENTER", "RE-ENTER", "ENTRY" or "RE-ENTRY" ----- -------- ----- -------- as used in this Lease are not restricted to their technical legal meanings. SECTION19.6 No failure by Landlord or Tenant to insist upon the strict ----------- performance of any agreement, term, covenant or condition hereof or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such breach or of such agreement, term, covenant or condition. No agreement, term, covenant or condition hereof to be performed or complied with by either party, and no breach thereof, shall be waived, altered or modified except by a written instrument executed by the parties. No waiver of any breach shall affect or alter this Lease, but each and every agreement, term, covenant and condition hereof shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. SECTION19.7 [Intentionally Omitted] ----------- SECTION19.8 Each right and remedy provided for in this Lease shall be ----------- cumulative and in addition to every other right or remedy provided for in this Lease or now or hereafter existing, at law or in equity, and the exercise by Landlord or Tenant of any one or more of the rights or remedies provided for in this Lease or now or hereafter existing at law or in equity shall not preclude the simultaneous or later exercise by the party in question of any or all other rights or remedies provided for in this Lease or now or hereafter existing at law or in equity. SECTION19.9 A. Notwithstanding the provisions of this Lease to the ----------- contrary, in the event Tenant shall file a petition under Chapter 11 of the Bankruptcy Code, Tenant's trustee or Tenant, as debtor-in-possession, shall, unless otherwise ordered by the Bankruptcy Court, elect to assume this Lease at or prior to the earlier of: (i) 180 days after the date of filing of such petition, and (ii) confirmation of a plan under Chapter 11. In the absence of an election to assume within such time period, Tenant's trustee or Tenant, as debtor-in-possession, shall be deemed to have rejected this Lease. In the event Tenant, Tenant's trustee or Tenant, as debtor-in-possession, has failed to perform all of Tenant's obligations under this Lease within the time periods (subject to the notices and grace periods provided for herein) required for such performance, no election by Tenant's trustee or Tenant, as debtor-in-possession, to assume this Lease shall be effective unless each of the following conditions has been satisfied: (i) Tenant's trustee or Tenant, as debtor-in-possession, has cured all defaults under this Lease susceptible of being cured by the payment of money, or has provided Landlord with Assurance (as defined below) that it will cure all defaults susceptible of being cured by the payment of money within ten (10) days from the date of such assumption and that it will, promptly after the date of such assumption, commence to cure all other defaults under this Lease which are susceptible of being cured by the performance of any act and will diligently pursue completion of such curing; (ii) Tenant's trustee or Tenant, as debtor-in-possession, has compensated, or has provided Landlord with Assurance that within ten (20) days from the date of such assumption it will compensate, Landlord for any actual pecuniary losses incurred by Landlord arising from the default of Tenant, Tenant's trustee or Tenant, as debtor-in-possession, as indicated in any statement of actual pecuniary loss sent by Landlord to Tenant's trustee or Tenant, as debtor-in-possession, such statement, however, not to be deemed a binding and conclusive determination or computation of the amount of such loss; Tenant's trustee or Tenant, as debtor-in-possession, has provided Landlord with Assurance of the future performance of each of the obligations under this Lease of Tenant, Tenant's trustee or Tenant, as debtor-in-possession; and (iii) Such assumption will not breach or cause a default under any provision of any other lease, mortgage, financing agreement or other agreement by which Landlord is bound relating to the Demised Premises. B. For purposes of this paragraph, Landlord and Tenant acknowledge that "Assurance" shall mean either: (x) Tenant's trustee or Tenant, as debtor-in-possession, has and will continue to have reasonably sufficient unencumbered assets after the payment of all secured obligations and administrative expenses to reasonably assure Landlord that sufficient funds will be available to fulfill the obligations of Tenant under this Lease; or (y) Tenant's trustee or Tenant, as debtor-in-possession, has deposited with Landlord, as security, an amount equal to two (2) installments of Rent (at the rate then payable) which shall be applied to installments of Rent in the inverse order of their maturity; or (z) the Bankruptcy Court shall have entered an order granting to Landlord a valid and perfected first lien and security interest in property of Tenant, Tenant's trustee or Tenant, as debtor-in-possession, having a fair market value as determined by the Bankruptcy Court appraiser at least equal to two (2) installments of Rent (at the rate then payable). C. If Tenant's trustee or Tenant, as debtor-in-possession, has assumed this Lease pursuant to the terms and provisions of Subparagraph (1) of this Paragraph (b) for the purpose of assigning (or elects to assign) this Lease, this Lease may be so assigned only if the proposed assignee has provided adequate assurance of future performance of all of the terms, covenants and conditions of this Lease to be performed by Tenant. As used herein "adequate assurance of future performance" shall mean that each of the following conditions has been satisfied: (i) The proposed assignee shall have paid to Landlord an amount equal to six (6) months of basic annual Rent at the rate then payable; (ii) The proposed assignee has furnished Landlord with either: a current financial statement audited or reviewed by a certified public accountant indicating a net worth and working capital in amounts which Landlord reasonably determines to be sufficient to assure the future performance by such assignee of Tenant's obligations under this Lease; or a guarantee or guarantees, in form and substance reasonably satisfactory to Landlord, from one or more persons with a net worth equal to or in excess of $3,000,000.00 in the aggregate; (iii) Landlord has obtained all consents or waivers from others required under any lease, mortgage, financing arrangement or other agreement by which Landlord is bound to permit Landlord to consent to such assignment, Landlord to use its reasonable efforts to obtain such consents or waivers; and The proposed assignment will not release or impair any guaranty of the obligations of Tenant (including the proposed assignee) under this Lease. D. When, pursuant to the Bankruptcy Code, Tenant's trustee or Tenant, as debtor-in-possession, shall be obligated to pay reasonable use and occupancy charges for the use of the Demised Premises (as distinguished from Rent under this Lease while this Lease continues in force and effect), such charges shall be not less than the Rent payable by Tenant under this Lease. E. Neither the whole nor any portion of Tenant's interest in this Lease or its estate in the Demised Premises shall pass to any trustee, receiver, assignee for the benefit of creditors, or any other person or entity or otherwise by operation of law under the laws of any state having jurisdiction of the person or property of Tenant (excluding Section 18.2.B of this Lease) unless Landlord -------------- shall have consented to such transfer in writing. No acceptance by Landlord of rent or any other payments from any such trustee, receiver, assignee, or other person or entity shall be deemed to constitute such consent by Landlord nor shall it be deemed a waiver of Landlord's right to terminate this Lease and recover possession of the Demised Premises for any transfer of Tenant's interest under this Lease without such consent. ARTICLE 20 SECURITY DEPOSIT ---------------- SECTION20.1 Simultaneously with the execution and delivery of this ----------- Lease, Tenant shall deposit with Landlord the sum of Nine Thousand One Hundred and 00/100 ($9,100.00) Dollars as security for the performance and observance by Tenant of Tenant's covenants and obligations under this Lease. If the security is deposited in cash, Landlord shall provide notice to Tenant of the institution where such security is being held and of any transfers of the security. SECTION20.2 Upon the occurrence of an Event of Default, Landlord may ----------- use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any Rent as to which Tenant is in default or for any sum which Landlord may expend or may be required to expend by reason of Tenant's default. In the event Landlord applies or retains any portion or all of the security delivered hereunder, Tenant shall forthwith restore the amount so applied or retained so that at all times the amount deposited shall be not less than the security set forth in Section 20.1. ------------- SECTION20.3 Provided that no uncured Event of Default exists as of the ----------- Expiration Date, the security shall be returned to Tenant reasonably promptly after the date fixed as the end of the Term and after delivery to Landlord of possession of the Demised Premises. In the event of any sale, transfer or leasing of Landlord's interest in the Demised Premises, Landlord shall have the right to transfer the unapplied part of the security and the interest thereon, if any, to which Tenant is entitled, or any interest it may have in the Security Letter, as the case may be, to the vendee, transferee or lessee and Landlord shall thereupon be released by Tenant from all liability for the return or payment thereof, and Tenant shall look solely to the new landlord for the return or payment of same. The provisions of the preceding sentence shall apply to every sale, transfer or leasing of the Demised Premises, and any successor of Landlord may, upon a sale, transfer, leasing or other cessation of the interest of such successor in the Improvements, whether in whole or in part, pay over any unapplied part of said security or any interest it may have in the Security Letter, as the case may be, to any vendee, transferee or lessee of the Improvements, and shall thereupon be relieved of any liability with respect thereto. ARTICLE 21 CONDITION OF DEMISED PREMISES ----------------------------- Except as otherwise provided herein, no representations with respect to the condition or use of the Demised Premises were made by or on behalf of Landlord prior to or upon the execution of this Lease. Tenant has accepted and is in possession of the Demised Premises in their AS-IS CONDITION as of the date hereof. Any improvements existing on the Demised Premises on or prior to the Commencement Date shall continue to be owned in fee by the Landlord. ARTICLE 22 NOTICES ------- Any and all notices, demands, requests, submissions or other communications or documents required to be given, delivered or served or which may be given, delivered or served under or by the terms and provisions of this Lease or pursuant to law or otherwise, shall be in writing and shall be deemed sufficiently given or rendered if delivered by hand (against an affidavit of delivery) or by a nationally recognized overnight courier (against a receipt for delivery) or if sent by registered or certified mail (return receipt requested) addressed: if to Tenant, at Tenant's address set forth herein, Attn: Mr. Mitchell Binder, with a copy to Robinson & Cole, LLP, 885 Third Avenue, New York, NY 10022, Attn: Elliot H. Lutzer, or if to Landlord, at Landlord's address set forth herein, Attn: Mr. Richard Hetherington, with a copy to Fitzpatrick Lentz & Bubba, P.C., 4001 Schoolhouse Lane, Center Valley, Pennsylvania 18034, Attn: Jane P. Long, Esq., and to any Fee Mortgagee as Landlord may reasonably designate or to such other address(es) and with such other copies as either Landlord or Tenant may reasonably designate as its new address(es) or additional address(es) for such purposes by notice given to the other in accordance with the provisions of this Article 22. Any such bill, statement, consent, notice, ---------- demand, request or other communication shall be deemed to have been rendered or given (a) on the date it shall have been received, if delivered by hand, on the next business day after deposit with a reputable overnight delivery courier or (c) on the fourth (4th) day after mailing as provided above, if delivered by mail. Each party may have counsel deliver notices to each other with the same force and effect as if given by the party represented by such counsel. ARTICLE 23 HOLDOVER -------- Any holding over for a period after the expiration of the Term hereof shall be construed to be a tenancy from month-to-month at a rental factor equal to (a) One Hundred Fifty (150%) percent of the Net Rental due hereunder immediately prior to the expiration of the Term plus (b) all additional rents, as specified herein (pro-rated on a monthly basis), and shall otherwise be on the terms and conditions herein specified, so far as same are applicable. Notwithstanding the foregoing, and in addition thereto, Landlord's acceptance of the foregoing payments shall not limit its right to evict Tenant from the Demised Premises as a holdover. ARTICLE 24 QUIET ENJOYMENT --------------- Tenant, upon paying the Net Rent and all additional rent and other charges herein provided for and observing and keeping all covenants, agreements and conditions of this Lease on its part to be kept, observed and performed, shall quietly have and enjoy the Demised Premises during the Term without hindrance or molestation by anyone claiming by, through or under Landlord, subject to the exceptions, reservations and conditions of this Lease. In furtherance of the foregoing, Landlord shall not, during the Term of this Lease, change the zoning of the Demised Premises, apply for any variances, grant any easements or rights of way, change the site plan, subdivide to Demised Premises or take any other similar actions with respect to the Demised Premises, which has the effect of increasing the costs to Tenant of performing its obligations hereunder or operating its business therein. ARTICLE 25 EXCAVATION AND SHORING ---------------------- SECTION25.1 If any excavation shall be made or contemplated to be made ----------- for building or other purposes upon property or streets adjacent to or nearby the Demised Premises, Tenant shall either: (i) afford to the person or persons causing or authorized to cause such excavation the right to enter upon the Demised Premises for the purpose of doing such work as such person or persons shall consider to be necessary to preserve any of the walls or structures of the improvements on the Demised Premises from injury or damage and to support the same by proper foundations, or (ii) at Tenant's expense, do or cause to be done all such work as may be necessary to preserve any of the walls or structures of the improvements on the Demised Premises from injury or damages and to support the same by proper foundations. Tenant shall not, by reason of any such excavation or work, have any claim against Landlord for damages or indemnity or for suspension, diminution, abatement or reduction of rent under this Lease. SECTION25.2 Landlord hereby assigns to Tenant, without recourse, such ----------- rights, if any, as Landlord may have against any parties causing damage to the improvements on the Demised Premises as described in Section 25.1 hereof to sue for and recover amounts expended by Tenant as a result of such damage. ARTICLE 26 NO RENT ABATEMENT ----------------- SECTION26.1 A. No abatement, diminution or reduction of Net Rent, ----------- additional rent or charges shall be claimed by or allowed to Tenant or any person claiming under Tenant, under any circumstances, whether for inconvenience, discomfort, interruption of business, or otherwise, arising from the making of alterations, changes, additions, improvements or repairs to any building or buildings now on or which may hereafter be erected on the Demised Premises, by virtue or because of any present or future Legal Requirement or for any other cause or reason. B. "Abatement Event" shall mean any of the following, provided same substantially interferes with Tenant's use of the Demised Premises and Tenant as a result thereof vacates all, or a portion of the Demised Premises because Tenant can no longer use same for its business purposes: (i) any repair, maintenance or other work by Landlord done or not done in or about the Demised Premises; (ii) any default by Landlord under this Lease; or (iii) the presence of any Hazardous Materials at the Demised Premises not caused by Tenant. C. If an Abatement Event occurs and continues for five (5) consecutive days, all base Rent shall abate from the date the Abatement Event first occurred until its cessation. In the event of an Abatement Event that renders only part of the Demised Premises unusable, the abatement shall be calculated by multiplying the base rent and any additional rent by the proportion that the square footage of the portion of the Demised Premises so affected bears to the square footage of the entire Demised Premises, provided, however, if the interference is to Tenant's use of the Demised Premises and is such that the unaffected portion of the Demised Premises, if any, is not sufficient to allow Tenant to conduct effectively its business from such portion, the said base rent, additional rent and any other charges due hereunder shall totally abate until such interference ceases. ARTICLE 27 [INTENTIONALLY OMITTED] ARTICLE 28 ESTOPPEL CERTIFICATES --------------------- SECTION28.1 Tenant shall, without charge, at any time and from time to ----------- time, within fifteen (15) days after request by Landlord or any Fee Mortgagee, certify by commercially reasonable written instrument, duly executed, acknowledged and delivered to Landlord or Fee Mortgagee, or any other person, firm or corporation specified by Landlord: (a) that this Lease is unmodified and in full force and effect, or, if there have been any modifications, that the same is in full force and effect as modified and stating the modifications; (b) whether or not there are then existing any set-offs or defenses against the enforcement of any of the agreements, terms, covenants or conditions hereof and any modifications hereof upon the part of Tenant to be performed or complied with, and, if so, specifying the same; (c) the dates, if any, to which the Net Rent and additional rent and other charges hereunder have been paid in advance; (d) the date of expiration of the current term; (e) the Net Rent then payable under this Lease; and (f) such other information as may be reasonably requested. SECTION28.2 Landlord shall, without charge, at any time and from time to ----------- time, within fifteen (15) days after request by Tenant certify by commercially reasonable written instrument, duly executed, acknowledged and delivered to Tenant or any other person, firm or corporation specified by Tenant: (a) that this Lease is unmodified and in full force and effect, or, if there shall have been modifications, that the same is in full force and effect as modified and stating the modifications; (b) whether or not there are then existing any set-offs or defenses against the enforcement of any of the agreements, terms, covenants or conditions hereof and any modifications hereof upon the part of Tenant to be performed or complied with, and if so, specifying the same; (c) the dates, if any, to which the Net Rent and additional rent and other charges have been paid in advance; (d) the date of expiration of the current term; (e) the Net Rent then payable under this Lease; and (f) such other information as may be reasonably requested. ARTICLE 29 SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT --------------------------------------------- SECTION29.1 Landlord represents and warrants that, as of the date ----------- hereof, there are no Fee Mortgages affecting the Demised Premises. Nothing - herein contained shall limit Landlord's right to place any mortgage on the interests of Landlord in the Demised Premises including, without limitation, any modifications, consolidations, extensions, renewals and replacements thereof. SECTION29.2 A. This Lease shall be subject and subordinate to each ----------- and every Fee Mortgage now or hereafter existing from time to time, provided and upon the condition that Landlord shall obtain from each such Fee Mortgagee a subordination, non-disturbance and attornment agreement, in the standard form then-customarily employed by such Fee Mortgagee and otherwise reasonably acceptable to Tenant (or, if none, a form selected by Landlord which is reasonably satisfactory to Tenant and such Fee Mortgagee), and Tenant agrees to execute, acknowledge and deliver same with reasonable promptness. B. If the holder of any Fee Mortgage, or any designee of any such holder, shall succeed to the rights of Landlord under this Lease, whether through possession or foreclosure action or delivery of a new lease or deed, then at the request of such party so succeeding to Landlord's rights (herein called "SUCCESSOR LANDLORD"), Tenant shall automatically attorn to and recognize ------------------ such Successor Landlord as Tenant's landlord under this Lease and shall promptly execute and deliver any commercially reasonable instrument (herein called "ATTORNMENT AGREEMENT") that such Successor Landlord may reasonably request to ---------------- evidence such attornment. Upon such attornment this Lease shall continue in full force and effect as a direct lease between the Successor Landlord and Tenant upon all of the terms, conditions and covenants as are set forth in this Lease, except that the Successor Landlord shall not (a) be liable for any previous act or omission of Landlord under this Lease; (b) be subject to any offset, not expressly provided for in this Lease, which theretofore shall have accrued to Tenant against Landlord; (c) be bound by any previous modification of this Lease or by any previous prepayment of more than one month's Rent, unless such modification or prepayment shall have been expressly approved in writing by the holder of the Fee Mortgage; or (d) be obligated to make any improvements to, or perform any work at, or furnish any services to, the Demised Premises. SECTION29.3 If any act or omission of Landlord would give Tenant the ----------- right, immediately or after lapse of a period of time, to cancel or terminate this Lease, or to abate the payment of Rent or to claim a partial or total eviction, Tenant shall not exercise such right (a) until it has given written notice of such act or omission to Landlord and each Fee Mortgagee; provided the name and address of any such Fee Mortgagee shall previously have been furnished to Tenant, and (b) until ten (10) days shall have elapsed following the giving of such notice if the same can be remedied within such ten (10) day period or if the same cannot be remedied within ten (10) days until a reasonable period of time (but in not event more than sixty (60) days) has elapsed to cure provided such cure has commenced within the thirty (30) day period, and, further, provided the Fee Mortgagee shall with due diligence continue to remedy such act or omission. ARTICLE 30 WAIVER OF JURY TRIAL AND COUNTERCLAIMS -------------------------------------- SECTION30.1 Landlord and Tenant hereby waive trial by jury of any and ----------- all issues arising in any action or proceeding connected with this Lease or any negotiations in connection therewith. In case Landlord shall commence summary proceedings or an action for non-payment of rent or additional rent hereunder against Tenant, Tenant shall not interpose any counterclaim of any nature or description in any such proceeding or action, but shall be relegated to an independent action at law. ARTICLE 31 DEFINITION OF CERTAIN TERMS --------------------------- SECTION31.1 For purposes of this Lease, unless the context otherwise ----------- requires: (a) The term "LANDLORD" as used herein shall mean only the owner for -------- the time being of the Demised Premises, so that in the event of a sale, transfer, conveyance or other termination of Landlord's interest in the Demised Premises Landlord shall be and hereby is entirely freed and relieved of all liability of Landlord hereunder, arising and accruing under this Lease from and after the date of such sale transfer conveyance, or other termination of Landlord's interest in the Demised Premises and in such event Landlord shall remit to the trustee acting or to act pursuant to Section 5.8 hereof any funds ----------- held by Landlord (other than any security deposit) in which Tenant has an interest, but if there shall then be no such trustee Landlord may remit such funds to the successor owner of the Demised Premises and shall remit to the successor owner any security deposit or security letter of credit deposited with Landlord. Landlord shall remain liable for any such moneys not so remitted. It shall be deemed and construed without further agreement between the parties or their successors in interest, or between the parties and such successor owner of the Demised Premises, that such successor owner has assumed and agreed to carry out any and all agreements, covenants and obligations of Landlord hereunder. (b) Any reference herein to "THE TERMINATION OF THIS LEASE" shall be deemed ----------------------------- to include any termination hereof by expiration, or pursuant to Article 15, 16 ---------- -- or 19 hereof, or otherwise. -- (c) The term "FEE MORTGAGE", whether or not used in combination with other ------------ qualifying words, shall include a deed of trust to a trustee to secure an issue of bonds, debentures, notes or other obligations, and the term "FEE MORTGAGEE", ------------- when used with reference to a mortgage, shall include the trustee under a deed of trust and, when appropriate, the holder or holders of the bonds, debentures, notes or other obligations secured thereby. (d) The term "UNAVOIDABLE DELAYS" shall mean delays due to strikes, acts of ------------------ God, scarcity of labor or materials, governmental restrictions, enemy action, civil commotion, fire, casualty or other causes beyond the reasonable control of Tenant. ARTICLE 32 BROKERS ------- Landlord and Tenant each represent and warrant to the other that it has not dealt with any broker or other person in connection with this Lease. In executing and delivering this Lease, Landlord and Tenant have each relied upon the foregoing representation and warranty. Landlord and Tenant shall each indemnify and hold the other harmless from and against any and all claims for commissions, fees, reimbursement for expenses or other compensation by reason of its breach of the foregoing representation and warranty and for any and all costs incurred by the other in connection with such claims, including, without limitation, reasonable attorneys' fees and disbursements. This provision shall survive the expiration or earlier termination of this Lease. ARTICLE 33 CONSENT OF LANDLORD ------------------- Where any provision of this Lease requires the consent or approval of Landlord, except as may be set forth herein to the contrary, Landlord agrees that Landlord will not unreasonably withhold or delay such consent or approval. Where any provision of this Lease requires Tenant to do anything to the satisfaction of Landlord, Landlord agrees that Landlord will not unreasonably refuse to state Landlord's satisfaction of such action by Tenant. ARTICLE 34 PAYMENTS UNDER PROTEST ---------------------- In case of any dispute between Landlord and Tenant with respect to the amount of money payable by Tenant to Landlord under the provisions of this Lease, Tenant may make payment under protest and, in such event, may assert and prosecute a claim or claims for the recovery of the sum, or any part thereof, that shall have been so paid by Tenant under protest. ARTICLE 35 GOVERNING LAW; NON-RECORDATION ------------------------------ This Lease shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, and any action or proceeding hereunder shall be brought and maintained only within the County of Bucks, Commonwealth of Pennsylvania. Tenant expressly warrants and represents that it will not record this Lease. At the request of either party the other party shall execute a statutory form memorandum, notice of short form of lease which shall be recorded in the land records of County of Bucks, Commonwealth of Pennsylvania. ARTICLE 36 NO ORAL MODIFICATION -------------------- All prior understandings and agreements between the parties are merged with this Lease which fully and completely sets forth the understanding of the parties; and this Lease may not be changed or terminated orally or in any manner other than by an agreement in writing and signed by the party against whom enforcement of the change or termination is sought. ARTICLE 37 COVENANTS TO BIND AND BENEFIT RESPECTIVE PARTIES ------------------------------------------------ The covenants and agreements herein contained shall bind and inure to the benefit of Landlord, its successors and assigns, and Tenant, its successors and assigns. All references to "Landlord" and "Tenant" shall also include their respective successors and assigns unless the context shall otherwise require. ARTICLE 38 CAPTIONS, TABLE OF CONTENTS AND INVALIDITY OF PARTICULAR PROVISIONS ------------------------------------------------------------------- SECTION38.1 The captions of this Lease are for convenience and reference ----------- only and in no way define, limit or describe the scope or intent of this Lease nor in any way affect this Lease. SECTION38.2 The table of contents preceding this Lease but under the ----------- same cover is for the purpose of convenience and reference only and is not to be deemed or construed in any way as part of this Lease, nor as supplemental thereto or amendatory thereof. SECTION38.3 If any term or provision of this Lease or the application ----------- thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. ARTICLE 39 CONSTRUCTION OF THIS LEASE -------------------------- This Lease shall be given a fair and reasonable construction in accordance with the intentions of the parties hereto, and without regard to or aid of canons requiring construction against the party drawing this Lease. [NEXT PAGE SIGNATURE PAGE] IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed by their duly authorized officers and their respective corporate seals to be hereunto affixed, intending to be legally bound hereby. RUDY'S THERMO-NUCLEAR DEVICES By: No Load, Inc., its general partner ATTEST: /s/ Joanne Hetherington By: /s/ Richard Hetherington - ------------------------- --------------------------- Name: Richard Hetherington --------------------- Title: President --------- ATTEST: TDL MANUFACTURING, INC. /s/ Elliot Lutzker By: /s/Dennis Sunshine - -------------------- ------------------- Name: Dennis Sunshine ---------------- Title: CEO --- ATTEST: TULIP DEVELOPMENT LABORATORY, INC. ------------------------------------- /s/ Elliot Lutzker By: /s/ Dennis Sunshine - -------------------- --------------------- Name: Dennis Sunshine ---------------- Title: CEO --- - ------ EXHIBIT A --------- Legal Description ----------------- EXHIBIT B --------- Landlord's Storage ------------------ EXHIBIT C --------- Permitted Encumbrances ---------------------- EX-10.4 5 doc5.txt Exhibit 10.4 MERRILL LYNCH TERM LOAN AND SECURITY AGREEMENT TERM LOAN AND SECURITY AGREEMENT DATED AS OF April 4, 2005, between ORBIT INTERNATIONAL CORP., a corporation organized and existing under the laws of the State of Delaware having its principal office at 80 Cabot Court, Hauppauge, NY 11788 ("Customer"), and MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing under the laws of the State of Delaware having its principal office at 222 North LaSalle Street, Chicago, IL 60601 ("MLBFS"). In consideration of the mutual covenants of the parties hereto, Customer and MLBFS hereby agree as follows: Article I. DEFINITIONS 1.1 Specific Terms. In addition to terms defined elsewhere in this Loan Agreement, when used herein the following terms shall have the following meanings: "Acquisition" shall mean Customer's acquisition of stock of Tulip Development Laboratory, Inc. and TDL Manufacturing Inc., pursuant to the Acquisition Documents. "Acquisition Documents" shall mean that certain Stock Purchase Agreement by and between Customer, as buyer, and Tulip Development Laboratory, Inc. and TDL Manufacturing Inc. and the respective Shareholders of Tulip Development Laboratory, Inc. and TDL Manufacturing Inc., as (jointly and severally) seller, dated December 13, 2004, and the ancillary agreements described in (or set forth as) schedules thereto. "Bankruptcy Event" shall mean any of the following: (i) a proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, liquidation, winding up or receivership law or statute shall be commenced, filed or consented to by any Credit Party; or (ii) any such proceeding shall be filed against any Credit Party and shall not be dismissed or withdrawn within sixty (60) days after filing; or (iii) any Credit Party shall make a general assignment for the benefit of creditors; or (iv) any Credit Party shall generally fail to pay or admit in writing its inability to pay its debts as they become due; or (v) any Credit Party shall be adjudicated a bankrupt or insolvent; or (vi) any Credit Party shall take advantage of any other law or procedure for the relief of debtors or shall take any action for the purpose of or with a view towards effecting any of the foregoing; or (vii) a receiver, trustee, custodian, fiscal agent or similar official for any Credit Party or for any substantial part of any of their respective property or assets shall be sought by such Credit Party or appointed. "Business Day" shall mean any day other than a Saturday, Sunday, federal holiday or other day on which the New York Stock Exchange is regularly closed. "Business Guarantor" shall mean every Guarantor that is not a natural person. "Certificate of Compliance" shall mean, as applicable, that duly executed certificate, substantially the same form as Exhibit B attached hereto to the extent such certificate shall be applicable, of the president, chief financial officer or chief executive officer of Customer, certifying as to the matters set forth in such certificate. "Closing Date" shall mean the date upon which all conditions precedent to MLBFS' obligation to make the Loan shall have been met to the satisfaction of MLBFS. "Collateral" shall mean all Accounts, Chattel Paper, Contract Rights, Inventory, Equipment, Fixtures, General Intangibles, Deposit Accounts, Documents, Instruments, Investment Property and Financial Assets of Customer, howsoever arising, whether now owned or existing or hereafter acquired or arising, and wherever located; together with all parts thereof (including spare parts), all accessories and accessions thereto, all books and records (including computer records) directly related thereto, all proceeds thereof (including, without limitation, proceeds in the form of Accounts and insurance proceeds), and the additional collateral described in Section 3.6 (b) hereof. "Commitment Expiration Date" shall mean April 22, 2005. "Commitment Fee" shall mean a fee of $35,000.00 due to MLBFS in connection with this Loan Agreement. "Consolidated Entities" shall mean Customer, Behlman Electronics, Inc., Orbit Instrument of California, Inc., Tulip Development Laboratory, Inc., and TDL Manufacturing, Inc. "Credit Party" and "Credit Parties" shall mean, individually or collectively, the Customer, all Guarantors, and all Pledgors. "Default" shall mean either an "Event of Default" as defined in Section 3.5 hereof, or an event which with the giving of notice, passage of time, or both, would constitute such an Event of Default. "Default Rate" shall mean an annual interest rate equal to the lesser of: (i) two percentage points over the Interest Rate; or (ii) the highest interest rate allowed by applicable law. "Event of Loss" shall mean the occurrence whereby any tangible Collateral is damaged beyond repair, lost, totally destroyed or confiscated. "GAAP" shall mean the generally accepted accounting principles in effect in the United States of America from time to time. "General Funding Conditions" shall mean each of the following conditions to each loan or advance by MLBFS hereunder: (i) no Default or Event of Default shall have occurred and be continuing or would result from the making of any such loan or advance hereunder by MLBFS; (ii) there shall not have occurred and be continuing any material adverse change in the business or financial condition of any Credit Party; (iii) all representations and warranties of all of the Credit Parties herein or in any of the Loan Documents shall then be true and correct in all material respects; (iv) MLBFS shall have received this Loan Agreement and all of the other Loan Documents, duly executed and filed or recorded where applicable, all of which shall be in form and substance satisfactory to MLBFS; (v) the Commitment Fee shall have been paid in full; (vi) MLBFS shall have received, as and to the extent applicable, copies of invoices, bills of sale, loan payoff letters and/or other evidence satisfactory to it that the proceeds of the Loan will satisfy the Loan Purpose; (vii) MLBFS shall have received evidence satisfactory to it as to the ownership of the Collateral and the perfection and priority of MLBFS' liens and security interests thereon, as well as the ownership of and the perfection and priority of MLBFS' liens and security interests on any other collateral for the Obligations furnished pursuant to any of the Loan Documents; (viii) MLBFS shall have received evidence satisfactory to it of the insurance required hereby or by any of the Loan Documents; and (ix) any additional conditions specified in the "Term Loan Approval" letter executed by MLBFS with respect to the transactions contemplated hereby shall have been met to the satisfaction of MLBFS. "Guarantor" shall mean each Person obligated under a guaranty, endorsement or other undertaking by which such Person guarantees or assumes responsibility in any capacity for the payment or performance of any of the Obligations. "Loan" shall mean a sixty-month term installment loan in an amount equal to the lesser of: (A) 100% of the amount required by Customer to satisfy or fulfill the Loan Purpose, (B) the aggregate amount which Customer shall request be advanced by MLBFS on account of the Loan Purpose, or (C) $5,000,000.00. "Loan Agreement" shall mean this agreement as titled in the initial paragraph hereof and shall specifically include that number to be designated by MLBFS as the Customer's "Loan No" in reference to this Loan Agreement, and which number and designation MLBFS shall provide to Customer upon the initial invoice generated by MLBFS. At all times thereafter, such numerical loan number shall be included and be deemed to be a part of the title of this Loan Agreement. "Loan Documents" shall mean this Loan Agreement, any indenture, any guaranty of any of the Obligations and all other security and other instruments, assignments, certificates, certifications and agreements of any kind relating to any of the Obligations, whether obtained, authorized, authenticated, executed, sent or received concurrently with or subsequent to this Loan Agreement, or which evidence the creation, guaranty or collateralization of any of the Obligations or the granting or perfection of liens or security interests upon any Collateral or any other collateral for the Obligations, including any modifications, amendments or restatements of the foregoing. "Loan Purpose" shall mean the purpose for which the proceeds of the Loan will be used; to wit: to finance the stock acquisition of Tulip Development Laboratory, Inc. and TDL Manufacturing, Inc "Location of Tangible Collateral" shall mean the address of Customer set forth at the beginning of this Loan Agreement, together with any other address or addresses set forth on an exhibit hereto as being a Location of Tangible Collateral. "Obligations" shall mean all liabilities, indebtedness and obligations of Customer to MLBFS, howsoever created, arising or evidenced, whether now existing or hereafter arising, whether direct or indirect, absolute or contingent, due or to become due, primary or secondary or joint or several, and, without limiting the generality of the foregoing, shall include principal, accrued interest (including without limitation interest accruing after the filing of any petition in bankruptcy), all advances made by or on behalf of MLBFS under the Loan Documents, collection and other costs and expenses incurred by or on behalf of MLBFS, whether incurred before or after judgment, and all present and future liabilities, indebtedness and obligations of Customer under the Note and the Loan Documents. "Permitted Liens" shall mean with respect to the Collateral: (i) liens for current taxes not yet due and payable, other non-consensual liens arising in the ordinary course of business for sums not due, and, if MLBFS' rights to and interest in the Collateral are not materially and adversely affected thereby, any such liens for taxes or other non-consensual liens arising in the ordinary course of business being contested in good faith by appropriate proceedings; (ii) liens in favor of MLBFS; (iii) liens which will be discharged with the proceeds of the Loan; and (iv) any other liens expressly permitted in writing by MLBFS. "Person" shall mean any natural person and any corporation, partnership (general, limited or otherwise), limited liability company, trust, association, joint venture, governmental body or agency or other entity having legal status of any kind. "Pledgor" shall mean each Person who at any time provides collateral, or otherwise now or hereinafter agrees to grants MLBFS a security interest in any assets as security for Customer's Obligations. "UCC" shall mean the Uniform Commercial Code of Illinois as in effect in Illinois from time to time. 1.2 Other Terms. Except as otherwise defined herein, all terms used in this Loan Agreement which are defined in the UCC shall have the meanings set forth in the UCC; and (iii) accounting terms not defined herein shall have the meaning ascribed to them in GAAP. 1.3 UCC Filing. Customer hereby authorizes MLBFS to file a record or records (as defined or otherwise specified under the UCC), including, without limitation, financing statements, in all jurisdictions and with all filing offices as MLBFS may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to MLBFS herein. Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as MLBFS may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to the MLBFS herein. Article II. THE LOAN 2.1 Commitment. Subject to the terms and conditions hereof, MLBFS hereby agrees to make the Loan to Customer for the Loan Purpose, and Customer agrees to borrow all amounts borrowed to satisfy the Loan Purpose from MLBFS. The entire proceeds of the Loan shall be disbursed on the Closing Date either directly to the applicable third party or parties on account of the Loan Purpose or to reimburse Customer for amounts directly expended by it; all as directed by Customer in a Closing Certificate to be executed by Customer and delivered to MLBFS prior to the Closing Date. 2.2 Note. The Loan will be evidenced by and repayable in accordance with that certain Collateral Installment Note made by Customer payable to the order of MLBFS and issued pursuant to this Loan Agreement (the "Note"). The Note is hereby incorporated as a part hereof as if fully set forth herein. 2.3 Conditions of MLBFS' Obligation. The Closing Date and MLBFS' obligation to make the Loan on the Closing Date are subject to the prior fulfillment of each of the following conditions: (a) MLBFS shall have received a written request from Customer that the Loan be funded in accordance with the terms hereof, together with a written direction from Customer as to the method of payment and payee(s) of the proceeds of the Loan, which request and direction shall have been received by MLBFS not less than two Business Days prior to any requested funding date; (b) MLBFS shall have received a copy of invoices, bills of sale, payoff letters or other applicable evidence reasonably satisfactory to it that the proceeds of the Loan will satisfy or fulfill the Loan Purpose; (c) the Commitment Expiration Date shall not then have occurred; and (d) each of the General Funding Conditions shall then have been met or satisfied to the reasonable satisfaction of MLBFS. 2.4 Use of Loan Proceeds. The proceeds of the Loan shall be used by Customer solely for a Loan Purpose, or, with the prior written consent of MLBFS, for other lawful business purposes of Customer not prohibited hereby. Customer agrees that under no circumstances will the proceeds of the Loan be used: (a) for personal, family or household purposes of any person whatsoever, or (b) to purchase, carry or trade in securities, or repay debt incurred to purchase, carry or trade in securities, or (c) unless otherwise consented to in writing by MLBFS, to pay any amount to Merrill Lynch and Co., Inc. or any of its subsidiaries, other than Merrill Lynch Bank USA, Merrill Lynch Bank & Trust Co. or any subsidiary of either of them (including MLBFS and Merrill Lynch Credit Corporation). 2.5 Commitment Fee. In consideration of the agreement by MLBFS to extend the Loan to Customer in accordance with and subject to the terms hereof, Customer has paid or shall, on or before the Closing Date pay, the Commitment Fee to MLBFS. Customer acknowledges and agrees that the Commitment Fee has been fully earned by MLBFS, and that it will not under any circumstances be refundable. Article III. GENERAL PROVISIONS 3.1 REPRESENTATIONS AND WARRANTIES Customer represents and warrants to MLBFS that: (a) Organization and Existence. Customer is a corporation, duly organized and validly existing in good standing under the laws of the State of Delaware and is qualified to do business and in good standing in each other state where the nature of its business or the property owned by it make such qualification necessary; and, where applicable, each Business Guarantor is duly organized, validly existing and in good standing under the laws of the state of its formation and is qualified to do business and in good standing in each other state where the nature of its business or the property owned by it make such qualification necessary. (b) Execution, Delivery and Performance. Each Credit Party has the requisite power and authority to enter into and perform the Loan Documents. The Customer holds all necessary permits, licenses, certificates of occupancy and other governmental authorizations and approvals required in order to own or operate the Customer's business, except where the, absence of such would not materially and adversely affect (i) Customer's interest in the Collateral or the liens and security interests of MLBFS hereunder or under any of the Loan Documents, or (ii) the financial condition of Customer or its continued operations. The execution, delivery and performance by Customer of this Loan Agreement and by each of the other Credit Parties of such of the other Loan Documents to which it is a party: (i) have been duly authorized by all requisite action, (ii) do not and will not violate or conflict with any law, order or other governmental requirement, or any of the agreements, instruments or documents which formed or govern any of the Credit Parties, and (iii) do not and will not breach or violate any of the provisions of, and will not result in a default by any of the Credit Parties under, any other agreement, instrument or document to which it is a party or is subject. (c) Notices and Approvals. Except as may have been given or obtained, no notice to or consent or approval of any governmental body or authority or other third party whatsoever (including, without limitation, any other creditor) is required in connection with the execution, delivery or performance by any Credit Party of such of this Loan Agreement, the Note and the other Loan Documents to which it is a party. (d) Enforceability. The Loan Documents to which any Credit Party is a party are the respective legal, valid and binding obligations of such Credit Party, enforceable against it or them, as the case may be, in accordance with their respective terms, except as enforceability may be limited by bankruptcy and other similar laws affecting the rights of creditors generally or by general principles of equity. (e) Collateral. Except for priorities afforded to any Permitted Liens: (i) Customer has good and marketable title to the Collateral, (ii) none of the Collateral is subject to any lien, encumbrance or security interest, and (iii) upon the filing of all Uniform Commercial Code financing statements authenticated or otherwise authorized by Customer with respect to the Collateral in the appropriate jurisdiction(s) and/or the completion of any other action required by applicable law to perfect its liens and security interests, MLBFS will have valid and perfected first liens and security interests upon all of the Collateral. (f) Financial Statements. Except as expressly set forth in Customer's or any Business Guarantor's financial statements, all financial statements of Customer and each Business Guarantor furnished to MLBFS have been prepared in conformity with generally accepted accounting principles, consistently applied, are true and correct in all material respects, and fairly present the financial condition of it as at such dates and the results of its operations for the periods then ended (subject, in the case of interim unaudited financial statements, to normal year-end adjustments); and since the most recent date covered by such financial statements, there has been no material adverse change in any such financial condition or operation. All financial statements furnished to MLBFS of any Guarantor other than a Business Guarantor are true and correct in all material respects and fairly represent such Guarantor's financial condition as of the date of such financial statements, and since the most recent date of such financial statements, there has been no material adverse change in such financial condition. (g) Litigation; Compliance With All Laws. No litigation, arbitration, administrative or governmental proceedings are pending or, to the knowledge of Customer, threatened against any Credit Party, which would, if adversely determined, materially and adversely affect (i) such Credit Party's interest in the Collateral or the liens and security interests of MLBFS hereunder or under any of the Loan Documents, or (ii) the financial condition of such Credit Party or its continued operations. Each Credit Party is in compliance in all material respects with all laws, regulations, requirements and approvals applicable to such Credit Party. (h) Tax Returns. All federal, state and local tax returns, reports and statements required to be filed by any Credit Party have been filed with the appropriate governmental agencies and all taxes due and payable by any Credit Party have been timely paid (except to the extent that any such failure to file or pay will not materially and adversely affect (i) either the liens and security interests of MLBFS hereunder or under any of the Loan Documents, (ii) the financial condition of any Credit Party, or (iii) its continued operations). (i) Collateral Location. All of the tangible Collateral is located at a Location of Tangible Collateral. (j) No Default. No "Default" or "Event of Default" (each as defined in this Loan Agreement or any of the other Loan Documents) has occurred and is continuing. (k) No Outside Broker. Except for employees of MLBFS, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") or one of their affiliates, Customer has not in connection with the transactions contemplated hereby directly or indirectly engaged or dealt with, and was not introduced or referred to MLBFS by, any broker or other loan arranger. (l) Each of the foregoing representations and warranties: (i) has been and will be relied upon as an inducement to MLBFS to make the Loan, and (ii) is continuing and shall be deemed remade by Customer on the Closing Date. 3.2 FINANCIAL AND OTHER INFORMATION (a) Customer shall furnish or cause to be furnished to MLBFS during the term of this Loan Agreement all of the following: (i) Certificate of Compliance. Within 45 days after the close of each fiscal quarter of Customer, a Certificate of Compliance, duly executed by an authorized officer of Customer, in the form of Exhibit B attached hereto, or such other form as reasonably required by MLBFS from time to time; (ii) Interim Financial Statements. Within 45 days after the close of each fiscal quarter of Customer, a copy of the interim financial statements of the Consolidated Entities for such fiscal quarter (including in reasonable detail both a balance sheet as of the close of such fiscal period, and statement of profit and loss for the applicable fiscal period); (iii) A/R Agings. Within 15 days after the close of each fiscal month of Customer, a copy of the Accounts Receivable Aging of the Consolidated Entities as of the end of such fiscal month; (iv) Backlog Reports. Within 45 days after the close of each fiscal quarter of Customer, a copy of the Sales Backlog Report of the Consolidated Entities as of the end of such fiscal quarter; (v) SEC Reports. Customer shall furnish or cause to be furnished to MLBFS not later than 10 days after the date of filing with the Securities and Exchange Commission ("SEC"), a copy of each 10-K, 10-Q and other report required to be filed with the SEC during the term hereof by the Consolidated Entities; and (vi) Other Information. Such other information as MLBFS may from time to time reasonably request relating to Customer, any Credit Party or the Collateral (b) General Agreements With Respect to Financial Information. Customer agrees that except as otherwise specified herein or otherwise agreed to in writing by MLBFS: (i) all annual financial statements required to be furnished by Customer to MLBFS hereunder will be prepared by either the current independent accountants for Customer or other independent accountants reasonably acceptable to MLBFS, and (ii) all other financial information required to be furnished by Customer to MLBFS hereunder will be certified as correct in all material respects by the party who has prepared such information, and, in the case of internally prepared information with respect to Customer or any Business Guarantor, certified as correct by their respective chief financial officer. 3.3 OTHER COVENANTS Customer further agrees during the term of this Loan Agreement that: (a) Financial Records; Inspection. Each Credit Party (other than any Individual Guarantor) will: (i) maintain at its principal place of business complete and accurate books and records, and maintain all of its financial records in a manner consistent with the financial statements heretofore furnished to MLBFS, or prepared on such other basis as may be approved in writing by MLBFS; and (ii) permit MLBFS or its duly authorized representatives, upon reasonable notice and at reasonable times, to inspect its properties (both real and personal), operations, books and records. (b) Taxes. Each Credit Party will pay when due all of its respective taxes, assessments and other governmental charges, howsoever designated, and all other liabilities and obligations, except to the extent that any such failure to file or pay will not materially and adversely affect either the liens and security interests of MLBFS hereunder or under any of the Loan Documents, the financial condition of any Credit Party or its continued operations. (c) Compliance With Laws and Agreements. No Credit Party will violate (i) any law, regulation or other governmental requirement, any judgment or order of any court or governmental agency or authority; (ii) any agreement, instrument or document which is material to its operations or to the operation or use of any Collateral, in each case as contemplated by the Loan Documents; or (iii) any agreement, instrument or document to which it is a party or by which it is bound, if any such violation will materially and adversely affect either the liens and security interests of MLBFS hereunder or under any of the Loan Documents , the financial condition of any Credit Party, or its continued operations. (d) No Use of Merrill Lynch Name. No Credit Party will directly or indirectly publish, disclose or otherwise use in any advertising or promotional material, or press release or interview, the name, logo or any trademark of MLBFS, MLPF&S, Merrill Lynch and Co., Incorporated or any of their affiliates. (e) Notification By Customer. Customer shall provide MLBFS with prompt written notification of: (i) any Default; (ii) any material adverse change in the business, financial condition or operations of any Credit Party; (iii) any information which indicates that any financial statements of any Credit Party fail in any material respect to present fairly the financial condition and results of operations purported to be presented in such statements; (iv) any threatened or pending litigation involving any Credit Party; (v) any casualty loss, attachment, lien, judicial process, encumbrance or claim affecting or involving $25,000 or more of any Collateral; and (vi) any change in Customer's outside accountants. Each notification by Customer pursuant hereto shall specify the event or information causing such notification, and, to the extent applicable, shall specify the steps being taken to rectify or remedy such event or information. (f) Entity Organization. Each Credit Party which is an entity will (i) remain (A) validly existing and in good standing in the state of its organization and (B) qualified to do business and in good standing in each other state where the nature of its business or the property owned by it make such qualification necessary, and (ii) maintain all governmental permits, licenses and authorizations. Customer shall give MLBFS not less than 30 days prior written notice of any change in name (including any fictitious name) or chief executive office, place of business, or as applicable, the principal residence. (g) Merger, Change in Business. Except upon the prior written consent of MLBFS, Customer shall not cause or permit any Credit Party to: (i) be a party to any merger or consolidation with, or purchase or otherwise acquire all or substantially all of the assets of, or any material stock, partnership, joint venture or other equity interest in, any Person, or sell, transfer or lease all or any substantial part of its assets; (ii) engage in any material business substantially different from its business in effect as of the date of application by Customer for credit from MLBFS, or cease operating any such material business; or (iii) cause or permit any other Person to assume or succeed to any material business or operations of such Credit Party. (h) No Change In Management. Customer will maintain experienced and competent professional senior management, including two of the following three senior management, Dennis Sunshine, Bruce Reissman and Mitchell Binder. (i) No New Products, Services Or Ventures. Except upon the prior written consent of MLBFS, Customer shall not directly or indirectly initiate, create, or acquire any additional or new product lines or services other than in the ordinary course of business and, business ventures, companies or divisions. (j) No Loans/Guarantees To Any Party. Except upon the prior written consent of MLBFS, Customer shall not directly or indirectly lend any moneys to, or guaranty the debt of, any person or entity. (k) Minimum Tangible Net Worth. As of December 31, 2004, the Consolidated Entities "tangible net worth" shall exceed $6,500,000. After December 31, 2004 and as of the close of each fiscal year of the Consolidated Entities thereafter, the Consolidated Entities "tangible net worth" shall be not less than $500,000.00 higher than the tangible net worth of the Consolidated Entities required hereunder as of the close of the immediately preceding fiscal year of the Consolidated Entities (so that as of December 31, 2005, such tangible net worth shall be not less than $7,000,000.00, as of December 31, 2006, such tangible net worth shall be not less than $7,500,000, etc.). For the purposes hereof, the term "tangible net worth" shall mean the Consolidated Entities net worth as shown on the Consolidated Entities regular consolidated financial statements prepared in a manner consistent with the terms hereof, but excluding an amount equal to: (i) any assets which are ordinarily classified as "intangible" in accordance with generally accepted accounting principles, and (ii) any amounts now or hereafter directly or indirectly owing to the Consolidated Entities by officers, shareholders or affiliates of the Consolidated Entities. (l) Total Debt To EBITDA. For purposes hereof, the Consolidated Entities "Total Debt to EBITDA Ratio" shall mean the ratio of (a) all debt for borrowed money including all outstanding and unused availability under any revolving credit facility, and including debt to MLBFS, to (b) income before interest (including payments in the nature of interest under capital leases), taxes, depreciation, amortization, and other non-cash charges; all as determined on a trailing 12-month basis as set forth in the Consolidated Entities' regular quarterly financial statements prepared in accordance with GAAP. The Consolidated Entities' Total Debt to EBITDA Ratio shall for each period set forth below not exceed the ratios set forth below opposite such period: Period Ratio December 31, 2004 - December 30, 2005 3.50 : 1.00 December 31, 2005-December 30, 2006 3.00 : 1.00 December 31, 2006 and thereafter 2.50 : 1.00 (m) Fixed Charge Coverage. The Consolidated Entities' "Fixed Charge Coverage Ratio" shall at all times exceed 1.25 to 1. For purposes hereof, "Fixed Charge Coverage Ratio" shall mean the ratio of: (a) income before interest (including payments in the nature of interest under capital leases), taxes, depreciation, amortization, and other similar non-cash charges, minus any internally financed capital expenditures, to (b) the sum of (i) any dividends and other distributions paid or payable to shareholders, any taxes paid in cash, and interest expense, as determined on a trailing 12-month basis, plus (ii) the aggregate principal scheduled to be paid or accrued over the next 12 month period and the aggregate rental under capital leases scheduled to be paid or accrued over the next 12 month period; all as set forth in the Consolidated Entities' regular quarterly financial statements prepared in accordance with GAAP. (n) Completion of Acquisition. Upon the making of the Loan and the use thereof for the Loan Purpose, the Acquisition will have been consummated in accordance with the terms of the Acquisition Documents without any amendments thereto or waivers by the parties thereunder (except as consented to by MLBFS in writing) and in compliance with applicable law. (o) Subsidiaries. Customer does not have any subsidiaries other than the Credit Parties. (p) Solvency. Neither Customer nor any Guarantor, is entering into the transactions contemplated hereby and by the Additional Agreements, or intends to make any transfer or incur any obligations hereunder or thereunder, with actual intent to hinder, delay or defraud either present or future creditors. After giving effect to the making of the Loan pursuant hereto and the application of the proceeds thereof to the Loan Purpose; (i) each of Customer and each Business Guarantor expects the cash available to it, after taking into account all other anticipated uses of the cash of such person (including the payments on or in respect of "debt" referred to in clause (iii) of this paragraph), will be sufficient to satisfy all final judgments for money damages which have been docketed against such person or which may be rendered against such person in any action in which such person is a defendant (taking into account the reasonably anticipated maximum amount of any such judgment and the earliest time at which such judgment might be entered); (ii) the sum of the present fair saleable value of the assets of the Customer and each Business Guarantor on a consolidated basis will exceed the probable liability of such person on its "debts" (including any guaranties made by it or other contingent liabilities); (iii) neither the Customer nor any Business Guarantor will have incurred or intends to, or believes that it will, incur debts beyond its ability to pay such "debts" as such "debts" mature (taking into account the timing and amounts of cash to be received by such person from any source, and of amounts to be payable on or in respect of "debts" of such person and the amounts referred to in clause (i)); and (iv) the Customer and each Business Guarantor will have sufficient capital with which to conduct its present and proposed business and the property of each such person does not constitute unreasonably small capital with which to conduct its present or proposed business. For purposes hereof, the term "debt" shall mean any liability on a claim, and the term "claim" shall mean (a) any right to payment whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed (other than those being disputed in good faith), undisputed, legal, equitable, secured or unsecured, or (b) any right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured. 3.4 COLLATERAL (a) Pledge of Collateral. To secure payment and performance of the Obligations, Customer hereby pledges, assigns, transfers and sets over to MLBFS, and grants to MLBFS first liens and security interests in and upon all of the Collateral, subject only to priorities afforded to Permitted Liens. (b) Liens. Except upon the prior written consent of MLBFS, Customer shall not create or permit to exist any lien, encumbrance or security interest upon or with respect to any Collateral now owned or hereafter acquired other than Permitted Liens. (c) Performance of Obligations. Customer shall perform all of its obligations owing on account of or with respect to the Collateral; it being understood that nothing herein, and no action or inaction by MLBFS, under this Loan Agreement or otherwise, shall be deemed an assumption by MLBFS of any of Customer's said obligations. (d) Sales and Collections. Customer shall not sell, transfer or otherwise dispose of any Collateral, except that so long as no Event of Default shall have occurred and be continuing, Customer may in the ordinary course of its business: (i) sell any Inventory normally held by Customer for sale, (ii) use or consume any materials and supplies normally held by Customer for use or consumption, and (iii) collect all of its Accounts. (e) Account Schedules. Upon the request of MLBFS, which may be made from time to time, Customer shall deliver to MLBFS, in addition to the other information required hereunder, a schedule identifying, for each Account and all Chattel Paper subject to MLBFS' security interests hereunder, each account debtor by name and address and amount, invoice or contract number and date of each invoice or contract. Customer shall furnish to MLBFS such additional information with respect to the Collateral, and amounts received by Customer as proceeds of any of the Collateral, as MLBFS may from time to time reasonably request. (f) Alterations and Maintenance. Except upon the prior written consent of MLBFS, Customer shall not make or permit any material alterations to any tangible Collateral which might materially reduce or impair its market value or utility. Customer shall at all times (i) keep the tangible Collateral in good condition and repair, reasonable wear and tear excepted, (ii) protect the Collateral against loss, damage or destruction and (iii) pay or cause to be paid all obligations arising from the repair and maintenance of such Collateral, as well as all obligations with respect to any Location of Tangible Collateral (e.g., all obligations under any lease, mortgage or bailment agreement), except for any such obligations being contested by Customer in good faith by appropriate proceedings. (g) Location. Except for movements required in the ordinary course of Customer's business, Customer shall give MLBFS 30 days' prior written notice of the placing at or movement of any tangible Collateral to any location other than a Location of Tangible Collateral. In no event shall Customer cause or permit any material tangible Collateral to be removed from the United States without the express prior written consent of MLBFS. Customer will keep its books and records at its principal office address specified in the first paragraph of this Loan Agreement. Customer will not change the address where books and records are kept, or change its name or taxpayer identification number. Customer will place a legend acceptable to MLBFS on all Chattel Paper that is Collateral in the possession or control of Customer from time to time indicating that MLBFS has a security interest therein. (h) Insurance. Customer shall insure all of the tangible Collateral under a policy or policies of physical damage insurance for the full replacement value thereof against such perils as MLBFS shall reasonably require and also providing that losses will be payable to MLBFS as its interests may appear pursuant to a lender's or mortgagee's long form loss payable endorsement and containing such other provisions as may be reasonably required by MLBFS. Customer shall further provide and maintain a policy or policies of commercial general liability liability insurance naming MLBFS as an additional party insured. Customer and each Business Guarantor shall maintain such other insurance as may be required by law or is customarily maintained by companies in a similar business or otherwise reasonably required by MLBFS. All such insurance policies shall provide that MLBFS will receive not less than 10 days prior written notice of any cancellation, and shall otherwise be in form and amount and with an insurer or insurers reasonably acceptable to MLBFS. Customer shall furnish MLBFS with a copy or certificate of each such policy or policies and, prior to any expiration or cancellation, each renewal or replacement thereof. (i) Event of Loss. Customer shall at its expense promptly repair all repairable damage to any tangible Collateral. In the event that there is an Event of Loss and the affected Collateral had a value prior to such Event of Loss of $25,000.00 or more, then, on or before the first to occur of (i) 90 days after the occurrence of such Event of Loss, or (ii) 10 Business Days after the date on which either Customer or MLBFS shall receive any proceeds of insurance on account of such Event of Loss, or any underwriter of insurance on such Collateral shall advise either Customer or MLBFS that it disclaims liability in respect of such Event of Loss, Customer shall, at Customer's option, either replace the Collateral subject to such Event of Loss with comparable Collateral free of all liens other than Permitted Liens (in which event Customer shall be entitled to utilize the proceeds of insurance on account of such Event of Loss for such purpose, and may retain any excess proceeds of such insurance), or permanently prepay the Obligations by an amount equal to the actual cash value of such Collateral as determined by either the insurance company's payment (plus any applicable deductible) or, in absence of insurance company payment, as reasonably determined by MLBFS; it being further understood that any such permanent prepayment shall cause an immediate permanent reduction in the Loan in the amount of such prepayment and shall not reduce the amount of any future reductions in the Loan that may be required hereunder. Notwithstanding the foregoing, if at the time of occurrence of such Event of Loss or any time thereafter prior to replacement or line reduction, as aforesaid, an Event of Default shall have occurred and be continuing hereunder, then MLBFS may at its sole option, exercisable at any time while such Event of Default shall be continuing, require Customer to either replace such Collateral or prepay the Obligations, as aforesaid. (j) Notice of Certain Events. Customer shall give MLBFS immediate notice of any attachment, lien, judicial process, encumbrance or claim affecting or involving $100,000.00 or more of the Collateral. (k) Indemnification. Customer shall indemnify, defend and save MLBFS harmless from and against any and all claims, liabilities, losses, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) of any nature whatsoever which may be asserted against or incurred by MLBFS arising out of or in any manner occasioned by (i) the ownership, collection, possession, use or operation of any Collateral, or (ii) any failure by Customer to perform any of its obligations hereunder; excluding, however, from said indemnity any such claims, liabilities, etc. arising directly out of the willful wrongful act or gross negligence (but not imputed) of MLBFS. This indemnity shall survive the expiration or termination of this Loan Agreement as to all matters arising or accruing prior to such expiration or termination. 3.5 EVENTS OF DEFAULT The occurrence of any of the following events shall constitute an "Event of Default" under this Loan Agreement: (a) Failure to Pay. Customer shall fail to pay when due any amount owing by Customer to MLBFS under the Note or this Loan Agreement, or shall fail to pay when due any other Obligations, and any such failure shall continue for more than five (5) Business Days after written notice thereof shall have been given by MLBFS to Customer. (b) Failure to Perform. Any Credit Party shall default in the performance or observance of any covenant or agreement on its part to be performed or observed under this Loan Agreement, the Note or any of the other Loan Documents (not constituting an Event of Default under any other clause of this Section), and such default shall continue unremedied for ten (10) Business Days (i) after written notice thereof shall have been given by MLBFS to Customer, or (ii) from Customer's receipt of any notice or knowledge of such default from any other source. (c) Breach of Warranty. Any representation or warranty made by any Credit Party contained in this Loan Agreement, the Note or any of the other Loan Documents shall at any time prove to have been incorrect in any material respect when made. (d) Default Under Other ML Agreement. A default or event of default by any Credit Party shall occur under the terms of any other agreement, instrument or document with or intended for the benefit of MLBFS, MLPF&S or any of their affiliates, and any required notice shall have been given and required passage of time shall have elapsed. (e) Bankruptcy Event. Any Bankruptcy Event shall occur. (f) Material Impairment. Any event shall occur which shall reasonably cause MLBFS to in good faith believe that the prospect of full payment or performance by the Credit Parties of any of their respective liabilities or obligations under this Loan Agreement, the Note or any of the other Loan Documents or such Guarantor is a party has been materially impaired. The existence of such a material impairment shall be determined in a manner consistent with the intent of Section 1-208 of the UCC. (g) Default Under Other Agreements. Any event shall occur which results in any default of any material agreement involving any Credit Party or any agreement evidencing any indebtedness of any Credit Party of $100,000.00 or more. (h) Collateral Impairment. The loss, theft or destruction of any Collateral, the occurrence of any material deterioration or impairment of any Collateral or any material decline or depreciation in the value or market price thereof (whether actual or reasonably anticipated), which causes any Collateral, in the sole opinion of MLBFS, to become unsatisfactory as to value or character, or any levy, attachment, seizure or confiscation of the Collateral which is not released within ten (10) Business Days. (i) Contested Obligation. (i) Any of the Loan Documents shall for any reason cease to be, or are asserted by any Credit Party not to be a legal, valid and binding obligations of any Credit Party, enforceable in accordance with their terms; or (ii) the validity, perfection or priority of MLBFS' first lien and security interest on any of the Collateral is contested by any Person; or (iii) any Credit Party shall or shall attempt to repudiate, revoke, contest or dispute, in whole or in part, such Credit Party's obligations under any Loan Document. (j) Judgments. A judgment shall be entered against any Credit Party in excess of $100,000 and the judgment is not paid in full and discharged, or stayed and bonded to the satisfaction of MLBFS. (k) Change in Control/Change in Management. (i) Any direct or indirect sale, conveyance, assignment or other transfer of or grant of a security interest in any ownership interest of any Credit Party which results, or if any rights related thereto were exercised would result, in any change in the identity of the individuals or entities previously in control of any Credit Party; or (ii) the owner(s) of the controlling equity interest of any Credit Party on the date hereof shall cease to own and control such Credit Party; or (iii) the Person (or a replacement who is reasonably satisfactory to MLBFS ) who is the chief executive officer or holds such similar position, or any senior manager of such Credit Party on the date hereof shall for any reason cease to be the chief executive officer or senior manager of the Credit Party. (l) Withdrawal, Death, etc. The incapacity, death, withdrawal, dissolution, or the filing for dissolution of: (i) any Credit Party; or (ii) any controlling shareholder, partner, or member of any Credit Party. 3.6 REMEDIES (a) Remedies Upon Default. Upon the occurrence and during the continuance of any Event of Default, MLBFS may at its sole option do any one or more or all of the following, at such time and in such order as MLBFS may in its sole discretion choose: (i) Termination. MLBFS may without notice terminate its obligation to extend any credit to or for the benefit of Customer (it being understood, however, that upon the occurrence of any Bankruptcy Event all such obligations shall automatically terminate without any action on the part of MLBFS). (ii) Acceleration. MLBFS may declare the principal of and interest and any premium on the Note, and all other Obligations to be forthwith due and payable, whereupon all such amounts shall be immediately due and payable, without presentment, demand for payment, protest and notice of protest, notice of dishonor, notice of acceleration, notice of intent to accelerate or other notice or formality of any kind, all of which are hereby expressly waived; provided, however, that upon the occurrence of any Bankruptcy Event all such principal, interest, premium and other Obligations shall automatically become due and payable without any action on the part of MLBFS. (iii) Exercise Other Rights. MLBFS may exercise any or all of the remedies of a secured party under applicable law and in equity, including, but not limited to, the UCC, and any or all of its other rights and remedies under the Loan Documents. (iv) Possession. MLBFS may require Customer to make the Collateral and the records pertaining to the Collateral available to MLBFS at a place designated by MLBFS which is reasonably convenient to Customer, or may take possession of the Collateral and the records pertaining to the Collateral without the use of any judicial process and without any prior notice to Customer. (v) Sale. MLBFS may sell any or all of the Collateral at public or private sale upon such terms and conditions as MLBFS may reasonably deem proper, whether for cash, on credit, or for future delivery, in bulk or in lots. MLBFS may purchase any Collateral at any such sale free of Customer's right of redemption, if any, which Customer expressly waives to the extent not prohibited by applicable law. The net proceeds of any such public or private sale and all other amounts actually collected or received by MLBFS pursuant hereto, after deducting all costs and expenses incurred at any time in the collection of the Obligations and in the protection, collection and sale of the Collateral, will be applied to the payment of the Obligations, with any remaining proceeds paid to Customer or whoever else may be entitled thereto, and with Customer and each Guarantor remaining jointly and severally liable for any amount remaining unpaid after such application. (vi) Delivery of Cash, Checks, Etc. MLBFS may require Customer to forthwith upon receipt, transmit and deliver to MLBFS in the form received, all cash, checks, drafts and other instruments for the payment of money (properly endorsed, where required, so that such items may be collected by MLBFS) which may be received by Customer at any time in full or partial payment of any Collateral, and require that Customer not commingle any such items which may be so received by Customer with any other of its funds or property but instead hold them separate and apart and in trust for MLBFS until delivery is made to MLBFS. (vii) Notification of Account Debtors. MLBFS may notify any account debtor that its Account or Chattel Paper has been assigned to MLBFS and direct such account debtor to make payment directly to MLBFS of all amounts due or becoming due with respect to such Account or Chattel Paper; and MLBFS may enforce payment and collect, by legal proceedings or otherwise, such Account or Chattel Paper. (viii) Control of Collateral. MLBFS may otherwise take control in any lawful manner of any cash or non-cash items of payment or proceeds of Collateral and of any rejected, returned, stopped in transit or repossessed goods included in the Collateral and endorse Customer's name on any item of payment on or proceeds of the Collateral. (b) Set-Off. MLBFS shall have the further right upon the occurrence and during the continuance of an Event of Default to set-off, appropriate and apply toward payment of any of the Obligations, in such order of application as MLBFS may from time to time and at any time elect, any cash, credit, deposits, accounts, financial assets, investment property, securities and any other property of Customer which is in transit to or in the possession, custody or control of MLBFS, MLPF&S or any agent, bailee, or affiliate of MLBFS or MLPF&S. Customer hereby collaterally assigns and grants to MLBFS a continuing security interest in all such property as Collateral and as additional security for the Obligations. Upon the occurrence and during the continuance of an Event of Default, MLBFS shall have all rights in such property available to collateral assignees and secured parties under all applicable laws, including, without limitation, the UCC. (c) Power of Attorney. Effective upon the occurrence and during the continuance of an Event of Default, Customer hereby irrevocably appoints MLBFS as its attorney-in-fact, with full power of substitution, in its place and stead and in its name or in the name of MLBFS, to from time to time in MLBFS' sole discretion take any action and to execute any instrument which MLBFS may deem necessary or advisable to accomplish the purposes of this Loan Agreement and the other Loan Documents, including, but not limited to, to receive, endorse and collect all checks, drafts and other instruments for the payment of money made payable to Customer included in the Collateral. The powers of attorney granted to MLBFS in this Loan Agreement are coupled with an interest and are irrevocable until the Obligations have been indefeasibly paid in full and fully satisfied and all obligations of MLBFS under this Loan Agreement have been terminated. (d) Remedies are Severable and Cumulative. All rights and remedies of MLBFS herein are severable and cumulative and in addition to all other rights and remedies available in the Note, the other Loan Documents, at law or in equity, and any one or more of such rights and remedies may be exercised simultaneously or successively. (e) No Marshalling. MLBFS shall be under no duty or obligation to (i) preserve, protect or marshall the Collateral; (ii) preserve or protect the rights of any Credit Party or any other Person claiming an interest in the Collateral; (iii) realize upon the Collateral in any particular order or manner, (iv) seek repayment of any Obligations from any particular source; (v) proceed or not proceed against any Credit Party pursuant to any guaranty or security agreement or against any Credit Party under the Loan Documents, with or without also realizing on the Collateral; (vi) permit any substitution or exchange of all or any part of the Collateral; or (vii) release any part of the Collateral from the Loan Agreement or any of the other Loan Documents, whether or not such substitution or release would leave MLBFS adequately secured. (f) Notices. To the fullest extent permitted by applicable law, Customer hereby irrevocably waives and releases MLBFS of and from any and all liabilities and penalties for failure of MLBFS to comply with any statutory or other requirement imposed upon MLBFS relating to notices of sale, holding of sale or reporting of any sale, and Customer waives all rights of redemption or reinstatement from any such sale. Any notices required under applicable law shall be reasonably and properly given to Customer if given by any of the methods provided herein at least 5 Business Days prior to taking action. MLBFS shall have the right to postpone or adjourn any sale or other disposition of Collateral at any time without giving notice of any such postponed or adjourned date. In the event MLBFS seeks to take possession of any or all of the Collateral by court process, Customer further irrevocably waives to the fullest extent permitted by law any bonds and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession, and any demand for possession prior to the commencement of any suit or action. 3.7 MISCELLANEOUS (a) Non-Waiver. No failure or delay on the part of MLBFS in exercising any right, power or remedy pursuant to this Loan Agreement, the Note or any of the other Loan Documents shall operate as a waiver thereof, and no single or partial exercise of any such right, power or remedy shall preclude any other or further exercise thereof, or the exercise of any other right, power or remedy. Neither any waiver of any provision of this Loan Agreement, the Note or any of the other Loan Documents, nor any consent to any departure by Customer therefrom, shall be effective unless the same shall be in writing and signed by MLBFS. Any waiver of any provision of this Loan Agreement, the Note or any of the other Loan Documents and any consent to any departure by Customer from the terms of this Loan Agreement, the Note or any of the other Loan Documents shall be effective only in the specific instance and for the specific purpose for which given. Except as otherwise expressly provided herein, no notice to or demand on Customer shall in any case entitle Customer to any other or further notice or demand in similar or other circumstances. (b) Disclosure. Customer hereby irrevocably authorizes MLBFS and each of its affiliates, including without limitation MLPF&S, to at any time (whether or not an Event of Default shall have occurred) obtain from and disclose to each other, and to any third party in connection with Section 3.7 (h) herein, any and all financial and other information about Customer. Customer further irrevocably authorizes MLBFS to contact, investigate, inquire and obtain consumer reports, references and other information on Customer from consumer reporting agencies and other credit reporting services, former or current creditors, and other persons and sources (including, without limitation, any Affiliate of MLBFS) and to provide to any references, consumer reporting agencies, credit reporting services, creditors and other persons and sources (including, without limitation, Affiliates of MLBFS) all financial, credit and other information obtained by MLBFS relating to the Customer. (c) Communications. Delivery of an agreement, instrument or other document may, at the discretion of MLBFS, be by electronic transmission. Except as required by law or otherwise provided herein or in a writing executed by the party to be bound, all notices demands, requests, accountings, listings, statements, advices or other communications to be given under the Loan Documents shall be in writing, and shall be served either personally, by deposit with a reputable overnight courier with charges prepaid, or by deposit in the United States mail by certified mail return receipt required. Notices may be addressed to Customer as set forth at its address shown in the preamble hereto, or to any office to which billing or account statements are sent; to MLBFS at its address shown in the preamble hereto, or at such other address designated in writing by MLBFS. Any such communication shall be deemed to have been given upon, in the case of personal delivery the date of delivery, one Business Day after deposit with an overnight courier, two (2) Business Days after deposit in the United States by certified mail (return receipt required), or receipt of electronic transmission (which shall be presumed to be three hours after the time of transmission unless an error message is received by the sender), except that any notice of change of address shall not be effective until actually received. (d) Fees, Expenses and Taxes. Customer shall upon demand pay or reimburse MLBFS for: (i) all UCC, real property or other filing, recording and search fees and expenses incurred by MLBFS in connection with the verification, perfection or preservation of MLBFS' rights hereunder or in any Collateral or any other collateral for the Obligations; (ii) any and all stamp, transfer, mortgage, intangible, document, filing, recording and other taxes and fees payable or determined to be payable in connection with the borrowings hereunder or the execution, delivery, filing and/or recording of the Loan Documents and any other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith; and (iii) all fees and out-of-pocket expenses (including attorneys' fees and legal expenses) incurred by MLBFS in connection with the preparation, execution, administration, collection, enforcement, protection, waiver or amendment of this Loan Agreement, or under any of the other Loan Documents and such other instruments or documents, and the rights and remedies of MLBFS thereunder and all other matters in connection therewith. The obligations of Customer under this paragraph shall survive the expiration or termination of this Loan Agreement and the discharge of the other Obligations. (e) Right to Perform Obligations. If Customer shall fail to do any act or thing which it has covenanted to do under this Loan Agreement or any of the Loan Documents, or any representation or warranty on the part of Customer contained in this Loan Agreement or any of the Loan Documents shall be breached, MLBFS may, in its sole discretion, after 5 Business Days written notice is sent to Customer (or such lesser notice, including no notice, as is reasonable under the circumstances), do the same or cause it to be done or remedy any such breach, and may expend its funds for such purpose. Any and all reasonable amounts so expended by MLBFS shall be repayable to MLBFS by Customer upon demand, with interest at the "Interest Rate" (as that item is defined in the Note) during the period from and including the date funds are so expended by MLBFS to the date of repayment, and all such amounts shall be additional Obligations. The payment or performance by MLBFS of any of Customer's obligations hereunder shall not relieve Customer of said obligations or of the consequences of having failed to pay or perform the same, and shall not waive or be deemed a cure of any Default. (f) Late Charge. Any payment required to be made by Customer pursuant to this Loan Agreement or any of the Loan Documents not paid within ten (10) days of the applicable due date shall be subject to a late charge in an amount equal to the lesser of: (i) 5% of the overdue amount, or (ii) the maximum amount permitted by applicable law. Such late charge shall be payable on demand. (g) Further Assurances. Customer agrees to do such further acts and things and to execute and deliver to MLBFS such additional agreements, instruments and documents as MLBFS may reasonably require or deem advisable to effectuate the purposes of this Loan Agreement, the Note or any of the other Loan Documents, or to establish, perfect and maintain MLBFS' security interests and liens upon the Collateral, including, but not limited to: (i) executing financing statements or amendments thereto when and as reasonably requested by MLBFS; and (ii) if in the reasonable judgment of MLBFS it is required by local law, causing the owners and/or mortgagees of the real property on which any Collateral may be located to execute and deliver to MLBFS waivers or subordinations reasonably satisfactory to MLBFS with respect to any rights in such Collateral. (h) Binding Effect. This Loan Agreement, the Note and the other Loan Documents shall be binding upon, and shall inure to the benefit of MLBFS, Customer and their respective successors and assigns. MLBFS reserves the right, at any time while the Obligations remain outstanding, to sell, assign, syndicate or otherwise transfer or dispose of any or all of MLBFS' rights and interests under the Loan Documents. MLBFS also reserves the right at any time to pool the Loan with one or more other loans originated by MLBFS or any other Person, and to securitize or offer interests in such pool on whatever terms and conditions MLBFS shall determine. Customer consents to MLBFS releasing financial and other information regarding Credit Parties, the Collateral and the Loan in connection with any such sale, pooling, securitization or other offering. Customer shall not assign any of its rights or delegate any of its obligations under this Loan Agreement, the Note or any of the other Loan Documents without the prior written consent of MLBFS. Unless otherwise expressly agreed to in a writing signed by MLBFS, no such consent shall in any event relieve Customer of any of its obligations under this Loan Agreement, the Note or any of the other Loan Documents. (i) Interpretation; Construction. (i) Captions and section and paragraph headings in this Loan Agreement are inserted only as a matter of convenience, and shall not affect the interpretation hereof; (ii) no provision of this Loan Agreement shall be construed against a particular Person or in favor of another Person merely because of which Person (or its representative) drafted or supplied the wording for such provision; and (iii) where the context requires: (a) use of the singular or plural incorporates the other, and (b) pronouns and modifiers in the masculine, feminine or neuter gender shall be deemed to refer to or include the other genders. (j) Governing Law. This Loan Agreement, the Note and, unless otherwise expressly provided therein, each of the other Loan Documents, shall be governed in all respects by the laws of the State of Illinois, not including its conflict of law provisions. (k) Severability of Provisions. Whenever possible, each provision of this Loan Agreement, the Note and the other Loan Documents shall be interpreted in such manner as to be effective and valid under applicable law. Any provision of this Loan Agreement, the Note or any of the other Loan Documents which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Loan Agreement, the Note and the other Loan Documents or affecting the validity or enforceability of such provision in any other jurisdiction. (l) Term. This Loan Agreement shall become effective when accepted by MLBFS at its office in Chicago, Illinois, and subject to the terms hereof, shall continue in effect so long thereafter as there shall be any moneys owing hereunder or under the Note, or there shall be any other Obligations outstanding. Customer hereby waives notice of acceptance of this Loan Agreement by MLBFS. (m) Exhibits. The exhibits to this Loan Agreement are hereby incorporated and made a part hereof and are an integral part of this Loan Agreement. (n) Counterparts. This Loan Agreement may be executed in one or more counterparts which, when taken together, constitute one and the same agreement. (o) Jurisdiction; Waiver. Customer acknowledges that this Loan Agreement is being accepted by MLBFS in partial consideration of MLBFS' right and option, in its sole discretion, to enforce the Loan Documents in either the State of Illinois or in any other jurisdiction where Customer or any Collateral may be located. Customer irrevocably submits itself to jurisdiction in the State of Illinois and venue in any state or federal court in the County of Cook for such purposes, and Customer waives any and all rights to contest said jurisdiction and venue and the convenience of any such forum, and any and all rights to remove such action from state to federal court. Customer further waives any rights to commence any action against MLBFS in any jurisdiction except in the County of Cook and State of Illinois. Customer agrees that all such service of process shall be made by mail or messenger directed to it in the same manner as provided for notices to Customer in this Loan Agreement and that service so made shall be deemed to be completed upon the earlier of actual receipt or three (3) days after the same shall have been posted to Customer or Customer's agent. Nothing contained herein shall affect the right of MLBFS to serve legal process in any other manner permitted by law or affect the right of MLBFS to bring any action or proceeding against Customer or its property in the courts of any other jurisdiction. Customer waives, to the extent permitted by law, any bond or surety or security upon such bond which might, but for this waiver, be required of MLBFS. Customer further waives the right to bring any non-compulsory counterclaims. (p) Jury Waiver. MLBFS and Customer hereby each expressly waive any and all rights to a trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other party with respect to any matter relating to, arising out of or in any way connected with the Loan, the Obligations, this Loan Agreement, any of the other Loan Documents and/or any of the transactions which are the subject matter of this Loan Agreement. (q) Integration. This Loan Agreement, together with the other Loan Documents, constitutes the entire understanding and represents the full and final agreement between the parties with respect to the subject matter hereof, and may not be contradicted by evidence of prior written agreements or prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements of the parties. Without limiting the foregoing, Customer acknowledges that: (i) no promise or commitment has been made to it by MLBFS, MLPF&S or any of their respective employees, agents or representatives to make any Loan on any terms other than as expressly set forth herein, or to make any other loan or otherwise extend any other credit to Customer or any other party; and (ii) except as otherwise expressly provided herein, this Loan Agreement supersedes and replaces any and all proposals, letters of intent and approval and commitment letters from MLBFS to Customer, none of which shall be considered a Loan Document. No amendment or modification of any of the Loan Documents to which Customer is a party shall be effective unless in a writing signed by both MLBFS and Customer. (r) Survival. All representations, warranties, agreements and covenants contained in the Loan Documents shall survive the signing and delivery of the Loan Documents, and all of the waivers made and indemnification obligations undertaken by Customer shall survive the termination, discharge or cancellation of the Loan Documents. (s) Customer's Acknowledgments. The Customer acknowledges that the Customer: (i) has had ample opportunity to consult with counsel and such other parties as deemed advisable prior to signing and delivering this Loan Agreement and the other Loan Documents; (ii) understands the provisions of this Loan Agreement and the other Loan Documents, including all waivers contained therein; and (iii) signs and delivers this Loan Agreement and the other Loan Documents freely and voluntarily, without duress or coercion. This Loan Agreement and the other Loan Documents are executed under seal and are intended to take effect as sealed instruments. IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and year first above written. ORBIT INTERNATIONAL CORP. By: /s/ Dennis Sunshine /s/ Mitchell Binder Signature (1) Signature (2) Dennis Sunshine Mitchell Binder Printed Name Printed Name President Vice President Title Title Accepted at Chicago, Illinois: MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. By: EXHIBIT A ATTACHED TO AND HEREBY MADE A PART OF TERM LOAN AND SECURITY AGREEMENT DATED AS OF APRIL 4, 2005 BETWEEN MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. AND ORBIT INTERNATIONAL CORP. Additional Locations of Tangible Collateral: 80 Cabot Court Hauppauge, NY 11788 EX-10.5 6 doc6.txt MERRILL LYNCH EXHIBIT 10.5 $5,000,000.00 April 4, 2005 COLLATERAL INSTALLMENT NOTE FOR VALUE RECEIVED, ORBIT INTERNATIONAL CORP., a corporation organized and existing under the laws of the State of Delaware ("Customer") hereby promises to pay to the order of MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing under the laws of the State of Delaware ("MLBFS"), in lawful money of the United States, the principal sum of Five Million Dollars ($5,000,000.00), or if more or less, the aggregate amount advanced by MLBFS to Customer pursuant to the Loan Agreement (the "Loan Amount"); together with interest on the unpaid balance of the Loan Amount, from the Closing Date until payment, at the Interest Rate, as follows: 1. DEFINITIONS. (a) In addition to terms defined elsewhere in this Note, as used herein, the following terms shall have the following meanings: (i) "Closing Date" shall mean the date of advancement of funds hereunder. (ii) "Excess Interest" shall mean any amount or rate of interest (including the Default Rate and, to the extent that they may be deemed to constitute interest, any prepayment fees, late charges and other fees and charges) payable, charged or received in connection with any of the Loan Documents which exceeds the maximum amount or rate of interest permitted under applicable law. (iii) "Interest Rate" shall mean a variable per annum rate equal to the sum of (i) 2.25% per annum, and (ii) the interest rate from time to time published in the "Money Rates" section of The Wall Street Journal as the one-month London Interbank Offered Rate (the "One-Month LIBOR"). Notwithstanding anything to the contrary, if more than one rate is so published, then the interest rate shall be the highest of such published rates. The Interest Rate will change as of the date of publication in The Wall Street Journal of a One-Month LIBOR that is different from that published on the preceding Business Day. In the event that The Wall Street Journal shall, for any reason, fail or cease to publish the One-Month LIBOR, MLBFS will choose a reasonably comparable index or source to use as the basis for the Interest Rate. (iv) "Loan Agreement" shall mean that certain TERM LOAN AND SECURITY AGREEMENT dated as of the date hereof between Customer and MLBFS, as the same may have been or may hereafter be amended or supplemented. (v) "Note" shall mean this COLLATERAL INSTALLMENT NOTE. (b) Capitalized terms used herein and not defined herein shall have the meaning set forth in the Loan Agreement. Without limiting the foregoing, the terms "Loan Documents", "Bankruptcy Event" and "Event of Default" shall have the respective meanings set forth in the Loan Agreement. 2. PAYMENT AND OTHER TERMS. Customer shall pay the indebtedness under this Note in 60 consecutive monthly installments commencing on the first day of the second calendar month following the Closing Date and continuing on the first day of each calendar month thereafter until this Note shall be paid in full. The first 59 such installments shall each be in an amount equal to the sum of (i) accrued interest, and (ii) 1/84th of the Loan Amount (with the first such installment including interest accrued from the date of funding), and the 60th installment shall be a balloon in an amount equal to the sum of all accrued interest hereunder, the then unpaid principal balance hereof and all other sums then payable hereunder. Each payment received hereunder shall be applied first to any fees and expenses of MLBFS payable by Customer under the terms of the Loan Agreement (including, without limitation, late charges), next to accrued interest at the Interest Rate, with the balance applied on account of the unpaid principal hereof, or in such other manner as the holder hereof may hereinafter determine from time to time for the allocation of such payments thereof. Any part of the principal hereof or interest hereon or other sums payable hereunder or under the Loan Agreement not paid within ten (10) days of the applicable due date shall be subject to a late charge equal to the lesser of (i) 5% of the overdue amount, or (ii) the maximum amount permitted by law. All interest shall accrue daily on the outstanding balance and be computed on the basis of actual days elapsed over a 360-day year. All sums payable hereunder shall be payable at 2356 Collections Center Drive, Chicago, Illinois 60693, or at such other place or places as the holder hereof may from time to time appoint in writing. Customer may prepay this Note at any time in whole or in part without premium or penalty. Any partial prepayment shall be applied to installments of the Loan Amount in inverse order of maturity. This Note is the Collateral Installment Note referred to in, and is entitled to all of the benefits of the Loan Agreement and any Loan Documents. If Customer shall fail to pay when due any installment or other sum due hereunder, and any such failure shall continue for more than five (5) Business Days after written notice thereof shall have been given by the holder hereof to Customer, or if any other Event of Default shall have occurred and be continuing, then at the option of the holder hereof (or, upon the occurrence of any Bankruptcy Event, automatically, without any action on the part of the holder hereof), and in addition to all other rights and remedies available to such holder under the Loan Agreement, any Loan Documents, and otherwise, the entire Loan Amount at such time remaining unpaid, together with accrued interest thereon and all other sums then owing by Customer under the Loan Agreement, may be declared to be and thereby become immediately due and payable. It is expressly understood, however, that nothing contained in the Loan Agreement, any other agreement, instrument or document executed by Customer, or otherwise, shall affect or impair the right, which is unconditional and absolute, of the holder hereof to enforce payment of all sums due under this Note at or after maturity, whether by acceleration or otherwise, or shall affect the obligation of Customer, which is also unconditional and absolute, to pay the sums payable under this Note in accordance with its terms. Except as otherwise expressly set forth herein or in the Loan Agreement, Customer hereby waives presentment, demand for payment, protest and notice of protest, notice of dishonor, notice of acceleration, notice of intent to accelerate and all other notices and formalities in connection with this Note. Wherever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Note. Notwithstanding any provision to the contrary in this Note, the Loan Agreement or any of the Loan Documents, no provision of this Note, the Loan Agreement or any of the Loan Documents shall require the payment or permit the collection of any Excess Interest. Notwithstanding any provision to the contrary in any of the Loan Documents, no provision of the Loan Documents shall require the payment or permit the collection of Excess Interest. If any Excess Interest is provided for, or is adjudicated as being provided for, in this Note, the Loan Agreement or any of the Loan Documents, then: (a) Customer shall not be obligated to pay any Excess Interest; and (b) If any Excess Interest is provided for, or is adjudicated as being provided for, in, then: (i) Customer shall not be obligated to pay any Excess Interest; and (ii) any Excess Interest that MLBFS may have received under any of the Loan Documents shall, at the option of MLBFS, be applied as a credit against the then unpaid principal balance of this Note, or accrued interest hereon not to exceed the maximum amount permitted by law or refunded to the payor thereof,. Upon the occurrence and during the continuance of any Default, but without limiting the rights and remedies otherwise available to MLBFS hereunder or waiving such Default, the interest payable by Customer hereunder shall at the option of MLBFS accrue and be payable at the Default Rate. The Default Rate, once implemented, shall continue to apply to the Obligations under this Note, the Loan Agreement or any of the Loan Documents and be payable by Customer until the date MLBFS gives written notice (which shall not be unreasonably delayed or withheld) that such Default has been cured to the satisfaction of MLBFS. This Note shall be construed in accordance with the laws of the State of Illinois and may be enforced by the holder hereof in any jurisdiction in which the Loan Agreement may be enforced. IN WITNESS WHEREOF, this Note has been executed by Customer as of the day and year first above written. ORBIT INTERNATIONAL CORP. By: /s/ Dennis Sunshine /s/ Mitchell Binder Signature (1) Signature (2) Dennis Sunshine Mitchell Binder Printed Name Printed Name President Vice President Title Title -----END PRIVACY-ENHANCED MESSAGE-----