-----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, B2jyFbN70uGVC3gwnKYXkqIm39PMoSTwJ9ci4AMuA/z17/2yVias0duHa35ReRkR dzr+OBhGssILjXaJr93VIw== 0000074818-07-000037.txt : 20071221 0000074818-07-000037.hdr.sgml : 20071221 20071221171728 ACCESSION NUMBER: 0000074818-07-000037 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20071219 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20071221 DATE AS OF CHANGE: 20071221 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: 071324131 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 form8k.txt 8-K ITEMS 1.01,2.01,2.03 AND 9.01 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): DECEMBER 19, 2007 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 (17CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c)) INTRODUCTORY COMMENT Throughout this Current Report on Form 8-K, the terms "we," "us," "our," the "Company," and "Orbit" refer to Orbit International Corp. and, unless the context indicates otherwise, our subsidiaries on a consolidated basis. ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. The information included below under Items 2.01 and 2.03 concerning loan agreements entered into between Orbit and its lender and various acquisition, employment and other ancillary agreements entered into in connection with the Company's acquisition of Integrated Consulting Services, Inc. ("ICS") on December 19, 2007, is incorporated by reference into this Item 1.01. ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS. On December 19, 2007, Orbit completed the acquisition of all of the issued and outstanding capital stock of ICS, effective December 31, 2007 (the "Effective Date"). In order to account for the acquisition on the Effective Date, the parties entered into a closing escrow agreement and no funds or documents will be released prior to the Effective Date which shall occur solely through the passage of time. The acquisition was pursuant to a Stock Purchase Agreement (the "SPA"), by and among the Company, ICS and the respective shareholders of ICS (the "Sellers"), which is attached as Exhibit 2.1 to this Current Report. Headquartered in Louisville, KY, ICS designs and manufactures combat systems and gun weapon systems, provides systems integration, production engineering, integrated logistics support and documentation control for leading defense industry prime contractors, as well as a number of U.S. Department of Defense procurement agencies. The new wholly-owned subsidiary of Orbit will be renamed Integrated Combat Systems, Inc. and along with its 23-member staff and management, will continue to operate its 23,000 square foot facility in Louisville, KY and become part of the Company's Electronics Group. The Sellers include Kenneth J. Ice, Michael R. Rhudy and Julie A. McDearman, who became President and Chief Operating Officer, Director of Production, and Director of Engineering and Logistics of ICS, respectively. There was no material relationship, other than in respect of this transaction, between the Sellers and Orbit or any of its affiliates, or any officer or director of Orbit or any associate of any such officer or director. The aggregate purchase price (the "Purchase Price") paid was $6.4 million, subject to post-closing adjustments, consisting of $5.4 million in cash, an aggregate of 119,682 shares of Orbit's common stock (the "Orbit Shares"), valued at $1.0 million, based on the volume weighted average closing price of the Company's common stock for the twenty consecutive trading days ending December 14, 2007. Orbit also issued contingent non-interest bearing subordinated promissory notes in the aggregate amount of $1,000,000 payable in one-third increments to the Sellers accordingly to their pro rata interests, provided ICS attains net revenue of no less than $7,000,000 in each of the 2008, 2009 and 2010 fiscal years. As more fully discussed in Item 2.03 below, in order to fund the cash portion of the Purchase Price, the Company entered into a $4.5 million term loan with its primary lender and used approximately $900,000 from its working capital. The Purchase Price is subject to a downward or upward adjustment, as the case may be, if ICS's net working capital computed as of December 31, 2007, by Orbit's auditors, is less than or greater than $750,000. Of the $5.4 million cash portion of the Purchase Price, Mr. Ice directed $150,000 of the Cash Purchase Price payable to him to be held in escrow as partial security against the payment and performance of the Sellers' obligations with respect to the indemnification provisions contained in the SPA. The $150,000 shall be released from escrow to Mr. Ice in the event there are no claims for indemnification submitted by any person (other than the Sellers) within one year following the closing of the acquisition. Under the SPA and upon the closing of the transaction, the Sellers entered into employment agreements with ICS. The full texts of the employment agreements for each of the Sellers, which are substantially identical, are filed as Exhibits 10.1, 10.2 and 10.3, respectively, to this Current Report and are incorporated herein by reference. The following discussion provides a summary of the material terms of the Sellers' employment agreements, which discussion is qualified in its entirety by reference to the entire text of such employment agreements. Each of the Sellers' employment agreements provides for the following: (i) a three-year term, which can be extended for an additional three-year period upon the mutual consent of the parties; (ii) an initial annual base salary of $180,000, $133,500 and $111,500 for Mr. Ice, Mr. Rhudy and Ms. McDearman, respectively, subject to cost of living increases and additional increases, if any, awarded at the sole discretion of the Company's board of directors; (iii) an annual incentive bonus that is derived from a bonus pool consisting of 5% of ICS's Pre-Tax-Income (as defined), which is to be shared equally by all senior management employees of ICS; (iv) use of a company or personally owned car with a $400 monthly allowance; (v) key man life insurance in the amount of $1 million (for Mr. Ice only); (vi) severance equal to each Seller's base salary plus bonuses paid for the immediately preceding calendar year, in the event such Seller is terminated other than for Cause or if the Seller resigns for Good Reason (as defined); and (vii) standard non-compete and non-solicitation provisions that extend for the term of such Seller's employment agreement. ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT. As stated above, the cash portion of the aggregate purchase price consisted of $5.4 million in cash. Of that amount, $4.5 million was funded by a five-year term loan (the "Loan") among the parties and Merrill Lynch Business Financial Services, Inc. ("MLBFS"), Orbit's principal lender. The Loan was made pursuant to a Term Loan and Security Agreement ("Loan Agreement") entered into on December 19, 2007, between Orbit and MLBFS. The collateral installment note for $4.5 million is payable in 60 consecutive monthly installments at an interest rate equal to the Applicable Margin (as defined in the Loan Agreement, which ranges from 1.0%-1.75% depending upon Orbit's funded debt to EBITDA ratio), plus the One-Month LIBOR (as defined). Orbit pledged all of its assets and those of all of its subsidiaries to MLBFS, and each subsidiary, including ICS, guaranteed the repayment of the loan. Orbit agreed to various financial covenant ratios customary for a transaction of this size. Orbit also entered into an amendment to its existing $3,000,000 credit facility with MLBFS secured by accounts receivable, inventory and plant and equipment. This facility was amended to reallocate the first $2,000,000 to ICS's operations and any amount available between $2,000,000 up to $3,000,000 for Orbit's operations. Orbit and the Sellers executed a Custody, Pledge and Security Agreement (the "Pledge Agreement") under which Orbit pledged to the Sellers all of the stock of ICS (the "ICS Shares") as collateral for its obligations to pay up to an additional $1,000,000 in annual earn-out payments to the Sellers over the next three years in the event ICS attains Net Revenues (defined in the SPA) equal to or greater than $7,000,000 in each of the 2008, 2009, and 2010 fiscal years. The annual earn-out payments are evidenced by contingent non-interest bearing promissory notes of Orbit (the "Notes"), which are secured by the Pledge Agreement. The ICS Shares are being pledged as collateral to ensure that Orbit honors its commitment to pay the annual earn-out payments to the Sellers under the Notes, including in the event the Company enters into a transaction or otherwise intentionally engages in a course of conduct that causes a material adverse change to ICS's business operations, other than in the ordinary course of business, and which results in the failure of ICS to achieve the minimum of $7,000,000 of Net Revenues in any earn-out year. Notwithstanding the foregoing, the Sellers have entered into an intercreditor agreement (the "Intercreditor Agreement") with MLBFS pursuant to which the Sellers agreed to subordinate their interests in the ICS Shares to the rights of MLBFS. For as long as Orbit's obligations under certain senior loan documents to MLBFS are outstanding, the ICS Shares will be held by MLBFS as bailee for the Sellers pursuant to the terms of the Pledge Agreement and the Intercreditor Agreement. Pursuant to the terms of the Pledge Agreement and the Intercreditor Agreement, upon the payment in full in cash of the Senior Debt (as defined) owed by Orbit to MLBFS under the Loan Agreement and the termination of the Senior Loan Documents (as defined), including the Loan Agreement, MLBFS shall deliver the remaining ICS Shares (if any) to a custodian, which shall hold certificates representing the ICS Shares for the benefit of the Sellers and release such ICS Shares only in accordance with the terms of the Pledge Agreement and the Intercreditor Agreement. ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES. (a) On December 19, 2007, Orbit issued an aggregate of 119,682 shares (the "Orbit Shares") of its common stock to the Sellers pursuant to the SPA as described under Item 2.01 above (the "ICS Acquisition"). (b) The Orbit Shares comprised $1,000,000 of the Purchase Price for the ICS Acquisition. (c) The Orbit Shares were issued pursuant to an exemption claimed by the Company under Section 4(2) of the Securities Act of 1933, as amended. The Sellers represented and warranted that they were sophisticated investors and had access to the same information that would be contained in a registration statement. (d) No convertible securities were issued. 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 Company will file the financial statements of ICS, the business acquired, as required by Item 9.01(a)(1) within seventy one days after the due date of December 27, 2007, 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 Company will file the pro forma financial information required by Item 9.01(b)(1) within seventy one days after the due date of December 27, 2007, for this Report concerning the closing of the transaction. (d) Exhibits. Exhibit Number Description 2.1 Stock Purchase Agreement, dated December 19, 2007, by and among Orbit International Corp., Integrated Consulting Services, Inc. and the respective shareholders of Integrated Consulting Services, Inc. 10.1 Employment Agreement, dated December 19, 2007, between Integrated Consulting Services, Inc. and Kenneth J. Ice. 10.2 Employment Agreement, dated December 19, 2007, between Integrated Consulting Services, Inc. and Michael R. Rhudy. 10.3 Employment Agreement, dated December 19, 2007, between Integrated Consulting Services, Inc. and Julie A. McDearman. 10.4 Custody, Pledge and Security Agreement, dated as of December 19, 2007, by and among Orbit International Corp. ("Pledgor"), Kenneth J. Ice, Michael R. Rhudy and Julie A. McDearman ("Pledgees"), and Phillips Nizer LLP ("Custodian"). 10.5 Form of Contingent Promissory Note (three substantially similar notes were issued) from Orbit International Corp. to Kenneth J. Ice. 10.6 Term Loan and Security Agreement, dated as of December 19, 2007, between Orbit International Corp. and Merrill Lynch Business Financial Services Inc. ("MLBFS"). - ------ 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: December 21, 2007 Orbit International Corp. By: /s/ Mitchell Binder ------------------- Mitchell Binder Executive Vice President and Chief Financial Officer EX-2.1 2 stockpurchaseagreement.txt STOCK PURCHASE AGREEMENT Exhibit 2.1 STOCK PURCHASE AGREEMENT BY AND AMONG ORBIT INTERNATIONAL CORP., AS BUYER, INTEGRATED CONSULTING SERVICES, INC. AND THE RESPECTIVE SHAREHOLDERS OF INTEGRATED CONSULTING SERVICES, INC., AS THE SELLERS December 19, 2007 - v - 1020647.22 - i - 1020647.22 Table of Contents ----------------- Item Page - ---- ---- Article I. Definitions 2 1.01 Specific Definitions 2 1.02 Other Definitional Provisions 2 Article II. Purchase and Sale 2 2.01 Purchase and Sale of Shares 2 2.02 Closing Purchase Price 2 2.03 Adjustment of the Purchase Price 2 2.04 Assumption of Liabilities 2 2.05 Closing 2 2.06 Closing Procedures and Deliveries 2 2.07 Conditions to Closing 2 2.08 Contingent Earn-Out Payment 2 2.09 Tax Matters 2 Article III. Representations and Warranties of the Sellers 2 3.01 Ownership of Shares 2 3.02 Authority; Binding Effect 2 3.03 No Violations 2 3.04 No Other Agreements to Purchase 2 3.05 Consents and Approvals 2 3.06 Brokers and Finders 2 3.07 Investment Representations 2 3.08 ICS Disclosure Schedule 2 3.09 Organization and Qualification 2 3.10 Corporate Power; Binding Effect 2 3.11 Foreign Qualification 2 3.12 Subsidiaries 2 3.13 Capitalization 2 3.14 Financial Condition 2 3.15 Absence of Certain Changes 2 3.16 Properties, Leases, Etc 2 3.17 Indebtedness 2 3.18 Absence of Undisclosed Liabilities 2 3.19 Tax Matters 2 3.20 Litigation and Claims 2 3.21 Safety; Zoning; Real Estate; and Environmental Matters 2 3.22 Material Contracts 2 3.23 Tangible Property 2 3.24 Title to Assets; Permitted Liens 2 3.25 Employees; Labor Relations; Benefit Plans 2 3.26 Potential Conflicts of Interest 2 3.27 Patents, Trademarks, Business Name 2 3.28 Insurance 2 3.29 Governmental and Other Third-Party Consents 2 3.30 Employment of Officers 2 3.31 Compliance with Other Instruments, Laws, Etc 2 3.32 Compliance with Securities Laws 2 3.33 Questionable Payments 2 3.34 ICS Disclosure Schedule 2 Article IV. Representations and Warranties of Buyer 2 4.01 Organization and Standing 2 4.02 Corporate Power 2 4.03 Authorization; Binding Effect 2 4.04 Capitalization 2 4.05 Subsidiaries 2 4.06 Authority to Conduct Business 2 4.07 No Violation 2 4.08 Litigation 2 4.09 Full Disclosure 2 4.10 SEC Filings 2 4.11 Conduct of Business 2 4.12 Brokers 2 4.13 Consents 2 4.14 Common Stock 2 4.15 Orbit Shares 2 4.16 Absence of Undisclosed Liabilities 2 4.17 Sarbanes-Oxley Act 2 4.18 Orbit Disclosure Schedule 2 Article V. Indemnification 2 5.01 Indemnity in Favor of Buyer 2 5.02 Indemnity in Favor of Sellers 2 5.03 Indemnification Procedure 2 5.04 Survival 2 Article VI. Covenants of the Sellers 2 6.01 Access 2 6.02 Conduct of Business 2 6.03 Advice of Changes 2 6.04 Voting by Sellers 2 6.05 Conduct of Business Until the Effective Date 2 6.06 Cooperation on Tax Matters 2 6.07 Assignment and Assumption of Facility Leases 2 Article VII. Covenants of Buyer 2 7.01 Employment Agreement 2 7.02 Transfer of Orbit Shares to Sellers 2 7.03 Registration Rights Agreement 2 7.04 Assignment and Assumption of Lease 2 7.05 Cooperation of Buyer 2 7.06 SEC Filings 2 7.07 Certain Tax Matters 2 Article VIII. Conditions to Obligations of Buyer 2 8.01 Accuracy of Representations and Warranties and Compliance With Covenants 2 8.02 Good Standing; Qualification to do Business 2 8.03 Minimum Net Working Capital 2 8.04 Inventory 2 8.05 Review of Proceedings 2 8.06 No Legal Action 2 8.07 No Governmental Action 2 8.08 Consents 2 8.09 Personnel 2 8.10 Employment Agreements 2 8.11 Restrictive Covenants Agreement 2 8.12 General Release 2 8.13 Other Closing Documents 2 8.14 Other Agreements 2 8.15 Corporate Records 2 8.16 Opinion of Counsel 2 8.17 Board Approval 2 8.18 No Material Adverse Change 2 8.19 Tax Withholding Forms and Certificates 2 8.20 Section 338(h)(10) Election 2 8.21 Assignment and Assumption of Lease 2 8.22 Delivery of Cash into Escrow 2 8.23 Responsibility for Filing Tax Returns 2 8.24 Termination of Shareholders' Agreement 2 Article IX. Conditions to Obligations of the Sellers 2 9.01 Accuracy of Representations and Compliance with Covenants 2 9.02 Stock Certificates 2 9.03 Cash Purchase Price 2 9.04 Employment Agreements 2 9.05 Registration Rights Agreement 2 9.06 Opinion of Counsel 2 9.07 Assignment and Assumption of Lease 2 9.08 Board Approval 2 9.09 Other Closing Documents 2 9.10 No Legal Action 2 9.11 Other Agreements 2 9.12 Consents 2 9.13 Review of Proceedings 2 9.14 No Governmental Action 2 9.15 Release of Guaranties, Mortgages 2 9.16 Pre-Closing Assignment of the Certificates of Deposits 2 Article X. Miscellaneous 2 10.01 Termination 2 10.02 [Intentionally left blank] 2 10.03 Confidentiality 2 10.04 Expenses 2 10.05 Brokers and Finders 2 10.06 Further Actions 2 10.07 Availability of Equitable Remedies 2 10.08 Modification 2 10.09 Notices 2 10.10 Waiver 2 10.11 Disclosure Schedules; Effect of Investigation 2 10.12 Binding Effect 2 10.13 No Third-Party Beneficiaries 2 10.14 Severability 2 10.15 Headings 2 10.16 Governing Law; Jurisdiction; Venue 2 10.17 Counterparts 2 List of Schedules and Exhibits - ------------------------------ Schedules - --------- ICS Disclosure Schedule Orbit Disclosure Schedule Exhibits - -------- Exhibit 2.03 - Allocation of Purchase Price Exhibit 2.06(a)(i) - Form of Sellers' Closing Escrow Agreement Exhibit 2.06(a)(ii) - Form of Buyer's Closing Escrow Agreement Exhibit 2.06(d) - Form of Indemnity Escrow Agreement Exhibit 2.07(b) - Form of Registration Rights Agreement Exhibit 2.08(a) - Form of Buyer's Promissory Note Exhibit 2.08(b) - Form of Custody Pledge and Surety Agreement Exhibit 6.07 - Form of Assignment and Assumption of Lease Exhibit 7.01 - Form of Employment Agreement Exhibit 8.11 - Form of Restrictive Covenants Agreement Exhibit 8.12 - Form of General Release Exhibit 8.16 - Form of Opinion of Counsel for the Sellers Exhibit 9.06 - Form of Opinion of Counsel for Buyer - 56 - 1020647.22 1020647.22 STOCK PURCHASE AGREEMENT This Agreement is made as of December 19, 2007, by and among ORBIT INTERNATIONAL CORP., a Delaware corporation ("BUYER"), INTEGRATED CONSULTING SERVICES, INC. (d/b/a Integrated Combat Systems, Inc.) ("ICS"), a Kentucky corporation, and KENNETH J. ICE ("MR. ICE"), MICHAEL R. RHUDY ("MR. RHUDY") and JULIE A. MCDEARMAN ("MS. MCDEARMAN"), the sole shareholders of ICS (collectively referred to as the "SELLERS"). RECITALS WHEREAS, the Sellers own all of the issued and outstanding capital stock of ICS free and clear of all encumbrances (the "SHARES"); and WHEREAS, the Sellers desire to sell, and Buyer desires to purchase, all of the Sellers' right, title and interest in and to the Shares on the terms and conditions contained herein (the "SHARE PURCHASE"). NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE I. DEFINITIONS 1.01 Specific Definitions. As used in this Agreement, the following terms have the following meanings: "Accounts Receivable" has the meaning specified in Section 4.06(b) of this -------------------- Agreement. ---- "Affiliate" means any other person directly or indirectly controlling, --------- controlled by, or under direct or indirect common control with, Buyer or ICS (or -------- other referenced Person) and includes without limitation, (a) any person who is an officer, director, or direct or indirect beneficial holder of at least 5% of the then outstanding capital stock of Buyer or ICS (or other referenced Person), and any of the Family Members of any such Person, (b) any Person of which Buyer or ICS (or other referenced Person) and/or its Affiliates (as defined in clause (a) above), directly or indirectly, either beneficially own(s) at least 5% of the then outstanding equity securities or constitute(s) at least a 5% equity participant, and (c) in the case of a specified person who is an individual, Family Members of such person, or any Affiliate of any of them, or any Affiliates of any of the foregoing. "Affiliated Group" has the meaning given to it in Section 1504 of the Code, and ----------------- in addition includes any analogous combined, consolidated, or unitary group, as defined under any applicable state, local, or foreign income Tax Law. "Agreement" means this Stock Purchase Agreement, as the same may be amended or --------- supplemented from time to time in writing and in accordance with the terms of this Agreement. "Ancillary Documents" means the Sellers' Closing Escrow Agreement, the Buyer's -------------------- Closing Escrow Agreement, the Indemnity Escrow Agreement, the Registration Rights Agreement, the Buyer's Promissory Note, the Pledge Agreement, the Assignment and Assumption of Leases, the Employment Agreements, the Restrictive Covenant Agreements and the General Releases. "Applicable Survival Period" has the meaning specified in Section 5.04 of this ---------------------------- Agreement. "Assets" means any and all real, personal or intangible property or goodwill ------ used in connection with ICS's business. -- "Assignment and Assumption of Lease" has the meaning specified in Section 6.07 ------------------------------------ of this Agreement. "Bank" has the meaning specified in Section 9.17 of this Agreement. ---- "Business Day" means any day other than a Saturday, a Sunday or a day on which ------------- banks in New York City are authorized or obligated by Law or executive order to close. "Buyer" has the meaning specified in the Preamble to this Agreement. ----- "Certificate of Deposit" has the meaning specified in Section 9.17 of this ------------------------ Agreement. ---- "Claims" has the meaning specified in Section 5.03(a) of this Agreement. ------ "Claim Notice" has the meaning specified in Section 5.03(a) of this Agreement. ------------- "Closing" has the meaning specified in Section 2.05 of this Agreement. ------- "Closing Balance Sheet" has the meaning specified in Section 8.03 of this ----------------------- Agreement. ----- "Closing Date" has the meaning specified in Section 2.05 of this Agreement. ------------- "Code" means the Internal Revenue Code of 1986, as amended. ---- "Common Stock" means the common stock, $.10 par value per share, of Buyer. ------------- "Consent" means waiver, permit, grant, franchise, concession, agreement, ------- license, exemption or order of, registration, certificate, clauses of ------ declaration or filing with, or report or notice to any person or entity, ------ including, but not limited to any Governmental Authority, which by its or their ------ terms is final and conclusive, from which there is no further appeal right, or any such appeal right has expired. "Contracts" means any agreements, contracts, leases, powers of attorney, notes, --------- loans, evidence of Indebtedness, purchase orders, letters of credit, settlement agreements, franchise agreements, undertakings, covenants not to compete, employment agreements, licenses, instruments, obligations, commitments, understandings, policies, purchase and sales orders, quotations and other executory commitments to which any Person is a party or to which any of the assets of the Person is subject, whether oral or written, express or implied. "Courier" has the meaning specified in Section 10.09 of this Agreement. ------- "Cut-Off Date" has the meaning specified in Section 3.14(a) of this Agreement. ------------- "Direct Claim" has the meaning specified in Section 5.03(a) of this Agreement. ------------- "Disclosure Schedule" has the meaning specified in Section 10.11 of this -------------------- Agreement. ------ "Effective Date" has the meaning specified in Section 2.01 of this Agreement. --------------- "Employee Benefit Plan" has the meaning specified in Section 3.25(i) of this ----------------------- Agreement. -- "Employment Agreement" has the meaning specified in Section 7.01 of this --------------------- Agreement. ------ "Environmental Conditions" means the introduction into the environment of any ------------------------- pollution, including, without limitation, any contaminant, irritant or pollutant - or other Hazardous Substance (whether upon the Premises, whether the pollution migrated from the Premises onto other property, and whether or not such pollution constituted at the time thereof a violation of any Environmental Law in connection with the release of any Hazardous Substance) as a result of which ICS has or may be liable to any person, or have or may reasonably be expected to become liable to any Person or by reason of which any Premises or any of the Assets may reasonably be expected to suffer or be subjected to any Lien. "Environmental Costs" means any and all costs and expenses (including, -------------------- without limitation, reasonable attorney, consultant and engineer fees and related expenses) for an environmental assessment, clean-up or remediation, or legal proceeding attendant thereto. "Environmental Laws" means any federal, state, district, or local Laws, ------------------- regulations, ordinances, orders, permits and judgments, consent orders and common Law relating to the protection of the environment, including any Law of strict liability, nuisance or with respect to conducting abnormally dangerous or hazardous activities including, without limitation, provisions pertaining to or regulating air pollution, water pollution, noise control, wetlands, water courses, natural resources, wildlife, Hazardous Substances, or any other activities or conditions which impact or relate to the environment or nature. Such Environmental Laws shall include, without limitation, the Comprehensive Environmental Response, Compensation, and Recovery Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Emergency Planning and Community Right to Know Act ("EPCRA"), 42 U.S.C. Section 11001 et seq., the Oil Pollution Act, 33 U.S.C. Section 2701 et seq., and the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., each as amended. "Environmental Liability" shall mean any and all liabilities, Losses, ------------------------ Claims, penalties, damages, Environmental Costs, expenses, remediation or inspection costs and any expenses (including, without limitation, reasonable attorney, consultant and engineer fees and expenses) of whatever kind or nature, known or unknown, contingent or otherwise, arising from or relating to compliance by ICS and/or the Sellers with any Environmental Law or arising under any theory of law or equity and relating to, or arising from, Environmental Conditions or the use, treatment, storage, disposal, transport, generation or handling of any Hazardous Substance during the ownership or occupancy of the Premises by ICS. "Environmental Permits" means all governmental permits, licenses, ---------------------- registrations, and authorizations required by any Environmental Law in order to --- operate the business as currently operated by ICS. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, ----- and the regulations and interpretations issued thereunder. "Escrow Indemnity Account" has the meaning specified in Section 2.06 of this -------------------------- Agreement. -- "Facility Leases" means the Lease Agreement dated March 15, 2004, between ---------------- Louisville/Jefferson County Redevelopment Authority, Inc. and ICS for the leased ----- Premises located at 163 Rochester Drive, Suite 100 and Suite 200, Louisville, KY 40214; the Lease Agreement dated April 1, 2004 between Louisville/Jefferson County Redevelopment Authority, Inc. and ICS for the leased premises located at 163 Rochester Drive, Building L, Louisville, KY 40214, and the Lease Agreement dated December 9, 2005 between General Booth Properties, LLC and ICS for the leased premises located at 2020 General Booth Blvd., Virginia Beach, VA. "Family Members" means, as applied to any individual, any parent, spouse, child, -------------- spouse of a child, brother or sister of the individual, and each trust or other entity such as a family limited partnership created for the benefit of one or more of such persons and each custodian of a property of one or more such persons and the estate of any such persons. "GAAP" means generally accepted accounting principles that are (i) consistent ---- with the principles promulgated or adopted by the Financial Accounting Standards - Board and its predecessors, (ii) applied on a basis consistent with prior periods, and (iii) such that, insofar as the use of accounting principles is pertinent, a certified public accountant could deliver an unqualified opinion with respect to financial statements in which such principles have been properly applied. "General Release" has the meaning specified in Section 8.12 of this Agreement. ---------------- "Good Faith Interim Amendments" means, all "good faith" interim amendments ------------------------------ intended to reflect (1) certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001; (2) Final Code Section 401(a)(9) regulations regarding minimum distribution requirements; (3) Code Section 401(a)(31)(B) requirements regarding certain mandatory direct rollover distributions, and (4) final regulations issued under Code Sections 401(k) and 401(m) for qualified plans which contain Code Section 401(k) provisions. "Governmental Authority" means any nation or government, any state or provincial ---------------------- or other political subdivision thereof, any province, city or municipality, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, any Governmental Authority, agency, department, board, commission or instrumentality of the United States, any State of the United States, or any political subdivision thereof, any government authority, agency, department, board, commission or instrumentality of the United States or any political subdivision thereof and any tribunal or arbitrator(s) of competent jurisdiction, and any self-regulatory organization. "GUST" means the Uruguay Round Agreements Act, the Small Business Jobs ---- Protection Act of 1996, the Taxpayer Relief Act of 1997, the Uniform Services Employment and Reemployment Rights Act, the Internal Revenue Service Restructuring and Reform Act of 1998, the Community Renewal Tax Relief Act of 2000 and all applicable rulings and regulations issued thereunder. "Hazardous Substances" means, collectively, any hazardous waste, as defined by --------------------- 42 U.S.C. 6903(5), any hazardous substances as defined by 42 U.S.C. 9601(14), any pollutant or contaminant as defined by 42 U.S.C. 9601(33), any toxic pollutant as defined by 33 U.S.C. 1362(13), or any toxic substance, methane gas, oil, or hazardous materials or other chemicals or substances regulated by any Environmental Laws. "ICS Disclosure Schedule" has the meaning specified in the introduction of ------------------------- Article III of this Agreement. ---- "ICS Financial Statements" has the meaning specified in Section 3.14 (a) of ------------------------ this Agreement. "ICS" has the meaning specified in the Preamble to this Agreement. --- "ICS Shares" has the meaning specified in the Recitals to this Agreement. ----------- "Indebtedness" means (a) all indebtedness for borrowed money, whether current or ------------ long-term, or secured or unsecured, (b) all indebtedness for the deferred purchase price of property or services represented by a note or security agreement, (c) all indebtedness created or arising under any conditional sale or other title retention agreement (even though the rights and remedies of the seller or lender under such agreement in the event of default may be limited to repossession or sale of such property), (d) all indebtedness secured by a purchase money mortgage or other lien to secure all or part of the purchase price of property subject to such mortgage or lien, (e) all obligations under leases that have been or must be, in accordance with GAAP, recorded as capital leases in respect of which ICS or the Sellers are liable as lessee, (f) any Liability in respect of bankers' acceptances or letters of credit, and (g) all indebtedness of any Person that is directly or indirectly guaranteed by ICS or that it has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a creditor against any loss. "Indemnified Party" has the meaning specified in Section 5.03 of this Agreement. ----------------- "Indemnifying Party" has the meaning specified in Section 5.03(a) of this ------------------- Agreement. ----- "Inventory" shall mean (a) all of ICS's inventory, wherever located, held for --------- resale to its customers or pursuant to GAAP should be reflected as inventory on - the Closing Balance Sheet and (b) all of the raw materials, work in process, spare parts, finished products, wrapping, supply and packaging items and similar items of ICS. "Knowledge" means (i) with respect to Buyer, the actual knowledge of the --------- executive officers of Buyer, and (ii) with respect to ICS or the Sellers, the ------ actual knowledge of Mr. Ice, Mr. Rhudy or Ms. McDearman, as applicable. - "Laws" means all laws, statutes, by-laws, ordinances, rules, regulations, orders ---- or decrees of any Governmental Authority. "Liabilities" means, any and all direct or indirect liability, Indebtedness, ----------- obligation, commitment, expense, claim, deficiency, guaranty or endorsement of -- or by any Person of any type, whether accrued, absolute, contingent, matured, unmatured, liquidated, unliquidated, known or unknown or otherwise, including, without limitation, Tax Liabilities, Liabilities in respect of products and Environmental Liabilities "Liens" means all liens, mortgages, easements, charges, restrictions, claims, ----- security interests, options or other encumbrances of any nature. - "Material Adverse Change" means a change that has or could reasonably be ------------------------- expected to have a Material Adverse Effect. ---- "Material Adverse Effect" means any change, circumstance or event, including any ----------------------- change, circumstance or event as the result of an omission or failure to act pursuant to any regulation, that individually or in the aggregate with all other changes, circumstance or events of whatever character or nature, is or is reasonably likely to have a material adverse effect (i) on the business, properties, condition (financial or otherwise), Assets, Liabilities, results of operations or prospects of ICS, or (ii) on the consummation of the transactions contemplated by this Agreement in a timely manner. "Minimum Net Working Capital" has the meaning specified in Section 8.03 of this ---------------------------- Agreement. "Mr. Ice" has the meaning specified in the Preamble to this Agreement. -------- "Mr. Rhudy" has the meaning specified in the Preamble to this Agreement. ---------- "Ms. McDearman" has the meaning specified in the Preamble to this Agreement. -------------- "Net Revenues" has the meaning specified in Section 2.08 to this Agreement. ------------- "Net Working Capital" has the meaning specified in Section 8.03 of this --------------------- Agreement. ------- "Orbit Disclosure Schedule" has the meaning specified in the introduction of --------------------------- Article V of this Agreement. -- "Orbit Shares" has the meaning specified in Section 2.02(i) of this Agreement. ------------- "Ordinary Course of Business" shall mean the ordinary course of business of ICS ---------------------------- consistent with past custom and practice (including with respect to pricing, quantity and frequency). "Permits" means all permits, authorizations, approvals, registrations, licenses, ------- certificates, directives, orders or variances granted by or obtained from any Governmental Authority and used or required in connection with the business of ICS. "Permitted Liens" means (i) Liens created by Buyer, (ii) Liens for or in respect --------------- of Taxes, impositions, assessments, fees, water and sewer rents and other governmental charges levied or assessed or imposed against the leased real property which are not yet delinquent or are being contested in good faith by appropriate Proceedings, (iii) the rights of lessors and lessees under leases executed in the Ordinary Course of Business, (iv) the rights of licensors and licensees under licenses executed in the Ordinary Course of Business, or (v) Liens, and rights to Liens, of mechanics, warehousemen, carriers, repairmen and others arising by operation of Law and incurred in the Ordinary Course of Business, securing obligations not yet delinquent or being contested in good faith by appropriate Proceedings. "Person" or "person" (regardless of whether capitalized) means any natural ------ ------ person, entity, or association, including without limitation any corporation, ---- partnership, limited liability company, government (or agency or subdivision - thereof), trust, joint venture, or proprietorship. - "Personal Property" has the meaning specified in Section 3.23 of this Agreement. ----------------- "Premises" refers collectively to all the real property owned, leased or -------- operated by ICS or of which real property leased or operated by ICS is a part ------ unless otherwise provided in this Agreement (i.e., leased Premises). - "Prime Rate" means the fluctuating rate per annum announced from time to time in ---------- The Wall Street Journal as the prime rate, and in the absence of such announced rate the prime rate charged by Citibank, N.A. "Proceeding" means charge, complaint, action, order, writ, injunction, judgment ---------- or decree outstanding or claim, application, demand, suit, litigation, proceeding, labor dispute, arbitration or other alternative dispute resolution proceeding, hearing or investigation. "Proprietary Information" has the meaning specified in Section 3.27(a) of this ------------------------ Agreement. "Purchase Price" has the meaning specified in Section 2.02 of this Agreement. --------------- "Registration Rights Agreement" has the meaning specified in Section 2.07(b) of ------------------------------ this Agreement. "Representative" means any officer, director, member, shareholder, principal, -------------- attorney, agent, employee, accountant, consultant or other representative of - either ICS or Buyer. - "Restrictive Covenants Agreement" has the meaning specified in Section 8.11 of --------------------------------- this Agreement. "SEC" means the United States Securities and Exchange Commission. --- "SEC Documents" has the meaning specified in Section 4.10(a) of this Agreement. -------------- "Section 338(h)(10) Election" has the meaning specified in Section 2.09(a). ----------------------------- "Section 338(h)(10) Payment" has the meaning specified in Section 2.09(a). ---------------------------- "Securities Act" means the Securities Act of 1933, as amended, or any successor --------------- federal statute, and the rules and regulations of the SEC thereunder, all as the same are in effect at the relevant time of reference. "Sellers" has the meaning specified in the Preamble to this Agreement. ------- "Sellers CD Funds" has the meaning specified in Section 9.17 of this Agreement. ----------------- "Shares" has the meaning specified in the Recitals to this Agreement. ------ "Share Purchase" has the meaning specified in the Recitals to this Agreement. --------------- "Subsidiary" or "Subsidiaries" means with respect to any Person, any ---------- ------------ corporation, partnership, limited liability company, association, trust, joint ---------- venture or other entity or organization of which such Person, either alone or through or together with any other Subsidiary or Affiliate, owns, directly or indirectly, more than 25% of the stock or other equity interests, the holder of which is generally entitled to vote for the election of the board of directors or other governing body of such corporation, partnership, limited liability company, association, trust, joint venture or other entity or organization. "Tax" or "Taxes" means all Taxes, assessments, charges, duties, fees, levies, --- ----- imposts or other governmental charges, including, without limitation, all - federal, state, local, municipal, county, foreign and other income, franchise, - profits, capital gains, capital stock, capital structure, transfer, gross receipt, sales, use, transfer, service, occupation, ad valorem, property, excise, severance, windfall profits, premium, stamp, license, payroll, employment, social security, unemployment, disability, environmental (including Taxes under Code Section 59A), alternative, minimum, add-on, value-added, withholding and other Taxes, assessments, charges, duties, fees, levies, imposts or other governmental charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return), and all estimated Taxes, deficiency assessments, additions to Tax, additional amounts imposed by any Taxing or Governmental Authority (domestic or foreign), penalties, and interest, and shall include any Liability for such amounts as a result either of being (or having been) a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify any Person, and shall include any Liability for such amounts relating to any other Person if such Liability is imposed by reason of Law (including transferee or successor Liability). "Tax Return" means any return, declaration, report, claim for refund, ----------- information return, or other document (including any related or supporting --------- estimates, elections, schedules, statements, information or amendment thereto) ---- filed or required to be filed in connection with the determination, assessment, or collection of any Tax or the administration of any Laws, regulations, or administrative requirements relating to any Tax. "Third Party Claim" has the meaning specified in Section 5.03(a) of this ------------------- Agreement. ------ "United States" means the United States of America, its territories and -------------- possessions, any state of the United States, and the District of Columbia. ------- 1.02 Other Definitional Provisions. ------------------------------- (a) Any reference to an Article, Section, Schedule or Exhibit is a reference to an Article, Section, or an Exhibit to this Agreement. (b) Terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. (c) The words "include," "includes" and "including" mean include, includes ------- -------- --------- and including without limitation. ARTICLE II. PURCHASE AND SALE 2.01 Purchase and Sale of Shares. --------------------------- Subject to and upon satisfaction of the terms and conditions of this Agreement, effective as of the close of business on December 31, 2007 (the "Effective Date"), the Sellers shall sell, transfer, convey, assign and deliver to Buyer all shares of ICS stock owned by them, and Buyer shall purchase, acquire and accept from the Sellers the Shares which shall collectively constitute one hundred (100%) percent of the issued and outstanding shares of ICS capital stock on the Closing Date (as defined below). Although the execution of this Agreement and the Closing shall occur on the Closing Date, the parties have agreed that the Share Purchase shall be effectuated and accounted for on the Effective Date. 2.02 Closing Purchase Price. ------------------------ The aggregate consideration payable by Buyer for the Shares at the Closing shall, subject to a post-Closing adjustment as set forth in Section 8.03 of this Agreement, be Six Million Four Hundred Thousand Dollars ($6,400,000.00) (as adjusted, the "PURCHASE PRICE"), consisting of the following: (i) An aggregate number of shares of Common Stock of Buyer ("ORBIT SHARES") equal in value to One Million Dollars ($1,000,000.00) based on the volume weighted average closing price of Buyer's Common Stock for the twenty (20) consecutive trading days ending December 14, 2007; and (ii) Five Million Four Hundred Thousand Dollars ($5,400,000.00) in cash payable on the Closing Date by certified check or wired funds. In addition, the Sellers may receive Contingent Earn-Out Payments pursuant to Section 2.08 and a Section 338(h)(10) Payment pursuant to Section 2.09(a). 2.03 Adjustment of the Purchase Price. ------------------------------------ The Purchase Price will be allocated among the Sellers in accordance with Exhibit 2.03 annexed hereto. The Purchase Price shall be adjusted downward or ------------ upward (as the case may be) in the event ICS's Net Working Capital is less than or greater than the Minimum Net Working Capital, respectively, as set forth in Section 8.03 of this Agreement. 2.04 Assumption of Liabilities. --------------------------- Subject to the terms and conditions of this Agreement and on the basis of the representations, warranties, covenants and agreements contained herein, on the Effective Date, the Buyer shall assume and agree to pay, perform and discharge when due, all liabilities of ICS disclosed to Buyer, exclusive of any and all amounts due to Affiliates. 2.05 Closing. ------- The closing of the Share Purchase (the "CLOSING") will take place on December 19, 2007, the date hereof, at a location to be mutually agreed upon by the parties, at 10:00 a.m. (local time) as soon as reasonably practicable following the satisfaction, in Buyer's sole and absolute discretion, acting reasonably, of the conditions precedent set forth in Articles VIII and IX (the "CLOSING DATE"). 2.06 Closing Procedures and Deliveries. --------------------------------- (a) In order to satisfy the parties' desire to account for the Share Purchase on the Effective Date, in the event the Closing Date occurs prior to the Effective Date, the parties hereby agree to enter into a closing escrow agreement (the "Sellers' Closing Escrow Agreement") with Seiller Waterman LLC (the "Sellers' Closing Escrow Agent") and a closing escrow agreement (the "Buyer's Closing Escrow Agreement," and together with the Sellers' Closing Escrow Agreement, collectively referred to as the "Closing Escrow Agreements") with Phillips Nizer LLP ("Buyer's Closing Escrow Agent") in the forms attached hereto as Exhibit 2.06(a)(i) and Exhibit 2.06(a)(ii), respectively, to enable ------------------- ------------------- the Share Purchase to become automatically effective on the Effective Date solely through the passage of time, unless this Agreement is terminated prior to the Effective Date in accordance with Section 10.01 hereof. Buyer shall deposit with the Sellers' Closing Escrow Agent (i) $900,000 of the cash portion of the Purchase Price and (ii) the Orbit Shares, in accordance with the Sellers' Closing Escrow Agreement. Buyer shall deposit with Buyer's Closing Escrow Agent (i) $4,500,000 of the cash portion of the Purchase Price, (ii) the payoff balance on the existing Lines of Credit of ICS with the First Capital Bank of Kentucky, and (iii) executed copies of this Agreement and all Ancillary Documents delivered at the Closing, in accordance with Buyer's Closing Escrow Agreement. ICS and each Seller shall also deposit with Buyer's Closing Escrow Agent executed copies of this Agreement and all Ancillary Documents delivered at the Closing, in accordance with Buyer's Closing Escrow Agreement. Buyer shall deposit $150,000 of the cash portion of the Purchase Price with the Indemnity Escrow Agent in accordance with the Indemnity Escrow Agreement as discussed in Section 2.06(d) below. (b) Transfer and Delivery of Shares. To effect the sale and transfer of the Shares, at the Closing, each of the Sellers shall transfer and deliver to the Sellers' Closing Escrow Agent, in accordance with the Sellers' Closing Escrow Agreement, share certificates representing the Shares, free and clear of any Liens of any nature whatsoever, duly endorsed in blank for transfer, or accompanied by irrevocable stock powers duly executed in blank, in either case by the holders of record of such Shares. The Sellers shall take such actions as may be necessary to cause the transfer of such Shares to be registered upon the books of ICS, and to enter Buyer or its nominee(s) as the holder of the Shares and to issue one or more share certificates to Buyer or its nominee(s) representing the Shares as directed by Buyer. The Sellers' Closing Escrow Agent shall subsequently transfer the Shares to Merrill Lynch Business Financial Services, Inc., Buyer's principal lender ("MLBFS") on the Effective Date in accordance with the terms of this Agreement and the Sellers' Closing Escrow Agreement. (c) Payment of Cash Portion of Closing Purchase Price. At the Closing, Buyer shall (i) transfer payment of $900,000 of the cash portion of the Purchase Price to the Sellers' Closing Escrow Agent, in accordance with the Sellers' Closing Escrow Agreement; (ii) transfer payment of $4,350,000 of the cash portion of the Purchase Price to Buyer's Closing Escrow Agent, in accordance with the Buyer's Closing Escrow Agreement; and (iii) transfer payment of $150,000 of the cash portion of the Purchase Price to the Indemnity Escrow Agent, in accordance with the Indemnity Escrow Agreement as discussed in Section 2.06(d) below. Buyer's Closing Escrow Agent and the Sellers' Closing Escrow Agent shall pay to each of the Sellers on the Effective Date their allocated pro rata cash portions of the Purchase Price in accordance with the Closing Escrow Agreements, subject to Section 2.06(d) of this Agreement. Subject to Section 2.06(d) hereof, the cash portion of the Purchase Price shall be transferred by Buyer's Closing Escrow Agent and the Sellers' Closing Escrow Agent to each of the Sellers on the Effective Date by a certified check and/or by wire transfer of immediately available funds to accounts designated by each of the Sellers in writing prior to the Closing Date. (d) Delivery of Cash into Escrow. Notwithstanding the provisions of Section 2.06(c) above, at Closing, Mr. Ice shall direct Buyer to deposit in escrow (the "INDEMNITY ESCROW ACCOUNT") with Phillips Nizer LLP, as escrow agent (the "INDEMNITY ESCROW AGENT"), One Hundred Fifty Thousand ($150,000) Dollars (the "ESCROW COLLATERAL"). Payment of the Escrow Collateral by Buyer shall be made from the cash portion of the Purchase Price to be received by Mr. Ice in accordance with the terms and conditions of Exhibit 2.06(a)(i) and Exhibit ------------------ ------- 2.06(a)(ii) hereof. The Escrow Collateral shall be held in escrow, in an ------ interest bearing escrow account, by the Indemnity Escrow Agent pursuant to, and - released from the Indemnity Escrow Account, in accordance with, the provisions hereinafter set forth and the escrow agreement to be entered into at the Closing by and among Buyer, Mr. Ice and the Indemnity Escrow Agent, substantially in the form attached hereto as Exhibit 2.06(d) (the "INDEMNITY ESCROW AGREEMENT"). The --------------- Escrow Collateral is to be held by the Indemnity Escrow Agent as partial security against the payment and performance of the Sellers' obligations with respect to the indemnification provisions of Article V. The Escrow Collateral shall be released from the Indemnity Escrow Account to Mr. Ice in the event there are no Claims (defined in Section 5.03(a) hereof) for indemnification submitted by any Person (other than the Sellers) within one year following the Closing Date. If the aggregate amount of Claims during the one year period is less than the Escrow Collateral the remaining amount shall be delivered to Mr. Ice. In the event that the aggregate Claims by Buyer exceed the Escrow Collateral, the Sellers shall remain liable, pro rata, to the Buyer for such excess payment, subject to the limitations imposed in Section 5.03, below. Any Escrow Collateral not released to Mr. Ice shall be released and transferred to Buyer in accordance with the terms of the Indemnity Escrow Agreement. (e) Certificates; Opinions and Documents. At the Closing, Buyer and the Sellers shall deliver the certificates, opinions of counsel and documents described in Articles VIII and IX of this Agreement required to be delivered at Closing as conditions to Closing. (f) Other Closing Transactions. At the Closing, each of the parties hereto shall have taken such other actions reasonably required hereby to be performed by it prior to or on the Closing Date, including, without limitation, satisfying the conditions set forth in Articles VIII and IX of this Agreement. (g) No Waiver at Closing. Buyer or the Sellers may elect to close the transactions contemplated by this Agreement notwithstanding the breach of any representation, warranty or covenant by the other party, whether or not disclosed. 2.07 Conditions to Closing. ----------------------- (a) Due Diligence. Buyer shall have completed prior to the execution of this Agreement, a due diligence period (the "DUE DILIGENCE PERIOD") to conduct the necessary due diligence, together with members of the staff of Cove Partners LLC and their respective Representatives and agents, to satisfy themselves that ICS will attain the revenue and profitability that has been provided to Buyer in its projections and that its business will not undergo any Material Adverse Change in the future. Notwithstanding the foregoing, in the event that Buyer shall not have completed to its satisfaction, its environmental due diligence, including an Environmental Due Diligence Site Assessment and Limited Compliance Review of the Premises, conducted by ERM Consulting & Engineering, Inc., prior to the Closing Date, it shall continue to have access to the Premises through the Effective Date for the sole purpose of conducting such environmental due diligence. (b) Registration of Orbit Shares. Within a reasonable time following the Closing but in no event later than nine (9) months thereafter, Buyer shall at its sole cost, prepare and file with the SEC a registration statement to register the Orbit Shares in accordance with the terms of the Registration Rights Agreement, substantially in the form annexed hereto as Exhibit 2.07(b) --------------- ("REGISTRATION RIGHTS AGREEMENT"). Notwithstanding the foregoing, in the event that each of the Sellers shall become able to sell all of their Orbit shares pursuant to Rule 144(k) of the Securities Act, as non-affiliates of the Buyer, then Buyer's obligation to maintain the SEC registration statement shall cease. 2.08 Contingent Earn-Out Payment. ----------------------------- Buyer shall pay to the Sellers up to an additional $1,000,000 in accordance with the allocations set forth in Exhibit 2.03, over the next three years ------------- following the Closing in increments of $333,333 per year (the "ANNUAL EARN-OUT PAYMENT") provided ICS attains Net Revenues (defined below) of no less than $7,000,000 in each of the 2008, 2009, and 2010 fiscal years. The Annual Earn-Out Payment for up to the aggregate amount of $1,000,000 shall be evidenced by a non-interest bearing promissory note of Buyer (the "Buyer's Promissory Note") in the form attached hereto as Exhibit 2.08(a). In the event that ICS --------------- does not achieve the minimum of $7,000,000 of Net Revenues in any of the 2008, 2009, or 2010 fiscal years (each individually referred to as an "EARN-OUT YEAR"), the Annual Earn-Out Payment attributable to that fiscal year shall be eliminated in its entirety and forfeited by the Sellers in its entirety. The Annual Earn-Out Payments, if any, shall be paid by Buyer to the Sellers in cash on the date that is ten (10) business days following receipt by Buyer of the final audit report for ICS (as then owned by Buyer) for the fiscal year then ended but in no event later than April 15th (the "EARN-OUT PAYMENT DATE"). "NET REVENUES" shall mean the sum of revenues from all sources related to ICS's operations (priced consistently with past practices to yield similar gross margins) and net non-operating income, after making adequate provisions for uncollectible debt, discounts, chargebacks and rebates. The calculation of Net Revenues shall be derived from audited consolidated financial statements of Buyer applied consistent with past practices of ICS. Within a period of ten (10) days following Buyer's receipt of draft financial statements for ICS, Buyer shall deliver to the Sellers (i) an income statement of ICS for the applicable Earn-Out Year; (ii) a calculation of the Net Revenues for such Earn-Out Year; and (iii) a statement as to whether the Sellers are entitled to an Annual Earn-Out Payment for such Earn-Out Year (collectively, the "EARN-OUT CALCULATION"). Unless any of the Sellers notify Buyer of any disagreement with Buyer's calculation of Net Revenues within ten (10) business days after receipt of the Earn-Out Calculation, the Earn-Out Calculation shall be final and shall be deemed conclusively accepted by and binding upon the Sellers and Buyer. On an after the date Buyer delivers the Earn-Out Calculation to the Sellers, the Sellers and their professional Representatives shall have access to the work papers used to prepare the Earn-Out Calculation and the books and records relating to the Earn-Out Calculation, upon reasonable notice during normal business hours. If any of the Sellers notify Buyer of any such disagreement within such ten (10) business day period and such disagreement cannot be amicably resolved within an additional period of ten (10) business days, then the disagreement shall be submitted for determination to an accounting firm mutually agreeable to the Sellers and Buyer, or failing such mutual agreement, to the American Arbitration Association in Jefferson County, Commonwealth of Kentucky. This Agreement and, in particular, the Annual Earn-Out Payment shall be binding upon and inure to the benefit of the parties hereto, their successors, legal representatives and assigns. During the next three years following the Closing, the Shares shall be pledged by Buyer to the Sellers pursuant to the terms and conditions of a Pledge Agreement in the form attached hereto as Exhibit 2.08(b) as collateral for Buyer's obligation to pay the Annual Earn-Out ---------- Payment to the Sellers including in the event Buyer enters into a transaction or otherwise intentionally engages in a course of conduct that causes a Material Adverse Change to ICS's business operations, other than in the Ordinary Course of Business, and which results in the failure of ICS to achieve the minimum of $7,000,000 of Net Revenues in any Earn-Out Year; in such event, the Annual Earn-Out Payment attributable to that fiscal year shall be paid by Buyer to the Sellers by certified check or bank wire of immediately available funds on the date that is ten (10) business days following receipt by Buyer of the final audit report for ICS for the fiscal year then ended but in no event later than the Earn-Out Payment Date. For purposes of clarification, examples of a Material Adverse Change to ICS's business operations could include (x) the discontinuance of ICS's main product line or (y) a reorganization, merger or consolidation (other than a reincorporation or similar event, which has no effect on ICS's business operations) or a sale of all or substantially all of the assets of ICS to a non-affiliated entity of the Buyer (a "Change of Control") in which the Sellers' obligations with respect to the Annual Earn-Out Payments are not assumed in such a Change of Control. Notwithstanding the foregoing, the Shares shall be deposited with MLBFS, Buyer's principal lender, as collateral to ensure repayment of all loans entered into by Buyer with MLBFS and each of the Sellers hereby agrees and acknowledges that any interest he or she has in the Shares and the Buyer's Contingent Promissory Note under this Section 2.08 shall be subordinated to MLBFS. 2.09 Tax Matters. ----------- (a) Section 338(h)(10) Election. ICS and each of the Sellers shall join with Buyer in making an election under Code 338(h)(10) (and any corresponding election under state, local, and foreign tax law) with respect to the Share Purchase (a "SECTION 338(H)(10) ELECTION"). Sellers shall prepare for Buyer's review and agreement a detailed estimated schedule of Buyer's obligations under Section 5.02(ii) as a result of the Section 338(h)(10) Election. Sellers shall include any income, gain, loss, deduction, or other Tax item resulting from the Section 338(h)(10) election on their Tax Returns to the extent required by applicable Law. Buyer shall timely prepare and timely file tax forms 8023 and 8883. Buyer shall be solely responsible for any and all payments owed by the Sellers on the Federal and State levels and by ICS on the local level as a result of the Section 338(h)(10) Election (the "SECTION 338(H)(10) PAYMENT") and shall pay to the Sellers the Section 338(h)(10) Payment on a net after tax basis at least five (5) Business Days before the date that the Section 338(h)(10) Payment is due. Buyer's obligation hereunder shall survive Closing. (b) S Corporation Status. ICS has elected to be taxed as an S corporation within the meaning of Code 1361 and 1362 since its inception and ICS and the Sellers will not revoke such election, or allow any events to occur which with the passage of time could result in the revocation of such status. (c) Allocation of Purchase Price/Earn-Out Payment. Buyer, ICS and each of the Sellers hereby agree that the Purchase Price and any Annual Earn-Out Payments (if paid) will be allocated to the assets of ICS by the Buyer in a manner consistent with Code 338 and 1060 and the regulations thereunder. Buyer, ICS and each of the Sellers shall file all Tax Returns (including amended Tax Returns and claims for refunds) and information reports (including tax form 8883) in a manner consistent with such values. Buyer agrees to provide Sellers with a copy of the allocation of the Purchase Price to the assets of ICS no later than March 15, 2008, so as to enable ICS and the Sellers to timely file their income tax returns. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLERS Except as disclosed (in accordance with Section 10.11 hereof) in the disclosure schedules of ICS and the Sellers attached hereto (collectively, the "ICS DISCLOSURE SCHEDULE"), each of the Sellers, severally and not jointly, to the best of their Knowledge, represents and warrants to Buyer on the date hereof and on the Effective Date, as follows: 3.01 Ownership of Shares. --------------------- Such Seller is the sole owner, beneficially and of record, of such Shares set forth opposite such Seller's name on Schedule 3.01 of the ICS Disclosure ------------- Schedule, free and clear of any Liens. Sellers' Shares are not pledged, mortgaged or otherwise encumbered in any way and there is no Lien against the Sellers' Shares arising from such Sellers' actions. Except as set forth on Schedule 3.01 of the ICS Disclosure Schedule, neither Sellers, ICS, or any ---------- Affiliate are a party to any outstanding options, warrants, rights of - subscription or conversion, calls, commitments, agreements, arrangements, - understandings, plans, contracts, proxies, voting trusts, voting agreements or - instruments of any kind or character, oral or written, relating to the issuance, voting or sale of Sellers' Shares or of any securities representing the right to purchase or otherwise receive any Shares. Sellers are not party to any stockholders agreements, preemptive rights or other agreements, arrangements, commitments or understandings, oral or written, relating to the voting, issuance, acquisition or disposition of the Shares or the conduct or management of ICS by its Board of Directors, other than as set forth on Schedule 3.01 of ------------- the ICS Disclosure Schedule. At the Closing, the Sellers shall have good and marketable title to the Shares and full right to transfer title to such Shares, subject to any restrictions imposed by state or federal securities laws, free and clear of all liens, mortgages, charges, liabilities, claims, security interests or encumbrances of every type whatsoever. The sale, conveyance, transfer and delivery of the Shares by the Sellers, to the Buyer pursuant to this Agreement, against payment therefor in accordance with the terms hereof, will transfer full legal and equitable right, title and interest in the Shares to the Buyer, free and clear of all liens, mortgages, charges, claims, liabilities, security interests and encumbrances of any nature whatsoever other than as contemplated by this Agreement and the other agreements and instruments to be entered into in connection with the transactions contemplated hereby (the "Other Agreements"). 3.02 Authority; Binding Effect. --------------------------- Such Seller has the full authority and legal capacity to execute and deliver this Agreement, the Ancillary Documents to which he or she is party and all other certificates, agreements or other documents to be executed and delivered by such Seller and to consummate the transactions contemplated hereby and thereby. This Agreement and the Ancillary Documents to which such Seller is a party have been duly executed and delivered by such Seller and this Agreement and each of the Ancillary Documents to which such Seller is party is a legal, valid and binding obligation of such Seller, enforceable against such Seller, his or her heirs and assigns in accordance with its terms, subject to applicable bankruptcy, insolvency and similar Laws affecting creditors' rights generally and to general principles of equity. 3.03 No Violations. -------------- The execution, delivery and performance by such Seller of this Agreement and any Ancillary Documents to which such Seller is party, and the consummation of the transactions contemplated by this Agreement, do not and will not (i) conflict with, or result in the breach of, or constitute a default under, or result in the termination, cancellation or acceleration (whether after the giving of notice or the lapse of time or both) of any right or obligation of such Seller or ICS under, any contract or agreement to which such Seller or ICS is a party or to which any of its assets is subject or (ii) violate or result in a breach of, or constitute a default under, any Law or judgment applicable to such Seller or ICS or by which such Seller, ICS or any of their assets are bound or affected, except, in the cases of clauses (i) and (ii), for any conflict, breach, default, termination, cancellation, acceleration or violation which, individually or in the aggregate, would not reasonably be expected to impair such Seller's ability to effect the Share Purchase. 3.04 No Other Agreements to Purchase. ----------------------------------- No Person (other than Buyer hereunder and the Sellers pursuant to that certain Shareholders' Agreement) has any written or oral agreement or option or any right or privilege, whether by Law, pre-emptive or contractual, capable of becoming an agreement or option for the purchase or acquisition from such Seller of any of the Shares hereunder. 3.05 Consents and Approvals. ---------------------- Except as set forth on Schedule 3.05 of the ICS Disclosure Schedule, no ------------- Consent is required to be obtained by such Seller or ICS and no notice or filing is required to be given by such Seller or ICS or made by such Seller or ICS with, any Governmental Authority or other Person in connection with the execution, delivery and performance by such Seller of this Agreement or any Ancillary Documents to which he or she is party, nor are any Consents required under any Contracts to which such Seller is a party or by which he or she is bound to give any notice to, or obtain the Consent or approval of, any party to such Contract relating to the consummation of the transactions contemplated by this Agreement. 3.06 Brokers and Finders. --------------------- There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of such Seller, or any Affiliate of such Seller, who might be entitled to any fee or commission from such Seller, or any Affiliate of such Seller, in connection with the transactions contemplated by this Agreement, and Sellers jointly and severally agree to indemnify, defend and hold Buyer harmless against claims for same. 3.07 Investment Representations. --------------------------- Such Seller is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act, is acquiring the Orbit Shares for his or her own account with the intention of holding such Orbit Shares for investment and not with the intention of participating, directly or indirectly, in any resale or distribution of the Orbit Shares. Such Seller is not a "dealer" of securities (as that term in defined in the Securities Act). Such Seller has such Knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the transactions contemplated under this Agreement and in connection with the ownership of the Orbit Shares. Such Seller's financial condition is such that he or she is able to bear all economic risks of investment in the Orbit Shares, including a complete loss of his or her investment therein. Buyer has provided such Seller with adequate access to financial and other information concerning Buyer as requested, and such Seller has had the opportunity to ask questions of and receive answers from Buyer concerning the transactions contemplated by this Agreement and to obtain therefrom any additional information necessary to make an informed decision regarding an investment in the Orbit Shares. Such Seller is aware that the Orbit Shares are not registered under the Securities Act, and that neither the Orbit Shares nor any interest therein may be sold, pledged, or otherwise transferred unless such transaction or transactions in the Orbit Shares is or are registered under the Securities Act or qualify for an exemption under the Securities Act. 3.08 ICS Disclosure Schedule. ------------------------- The ICS Disclosure Schedule referred to in this Article III contains certain information regarding ICS and such Seller as indicated at various places in this Agreement and is attached to and forms a part of this Agreement. Each such Seller hereby represents and warrants that all information set forth in the ICS Disclosure Schedule regarding ICS and such Seller is and will be true, correct and complete in all material respects as of the date of this Agreement and as of the Effective Date, does not omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and shall be deemed for all purposes of this Agreement to constitute part of the representations and warranties under this Article III. Each of the documents and other writings furnished to Buyer by ICS and such Seller pursuant to Article III and each of the representations, warranties and statements by such Seller in this Article III is true, correct and complete in all material respects with respect to ICS and such Seller as of the date furnished and does not omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. There is no fact or circumstance relating specifically to the business or condition of ICS or the Shares other than such facts and circumstances as are generally understood to affect the industry of ICS that could reasonably be expected to result in a Material Adverse Effect that is not disclosed in the ICS Disclosure Schedule. 3.09 Organization and Qualification. -------------------------------- ICS is a corporation duly organized, validly existing, and in good standing under the Laws of its state of incorporation. ICS has all requisite power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. The minute books of ICS have been made available to Buyer for inspection and accurately record therein all corporate actions taken by the Boards of Directors of ICS and all actions taken by the shareholders of ICS. Schedule 3.09 of the ICS Disclosure ------------- Schedule sets forth, as to ICS, its respective place of incorporation, principal place of business, jurisdictions in which it is qualified to do business, and the business which it presently conducts and which it contemplates conducting. 3.10 Corporate Power; Binding Effect. ---------------------------------- The Sellers have all requisite power and full legal right to execute and deliver this Agreement, the Ancillary Documents to which they are a party and all other certificates, agreements or other documents to be executed and delivered by ICS, and to perform all of its obligations hereunder in accordance with the terms hereof and thereof. This Agreement and the Ancillary Documents to which ICS is a party and the transactions contemplated hereby and thereby have been duly approved and authorized by all requisite corporate action on the part of ICS, and this Agreement and the Ancillary Documents to which ICS is a party have been duly executed and delivered by ICS and constitutes a legal, valid, and binding obligation of ICS, enforceable against it in accordance with their terms, subject to applicable bankruptcy, insolvency and similar Laws affecting creditors rights generally and to general principles of equity. The execution, delivery, and performance by ICS of this Agreement and the Ancillary Documents to which it is a party, and the consummation by ICS of the transactions contemplated hereby and thereby, will not result (with or without the giving of notice or the lapse of time or both) in any conflict, violation, breach, or default, or the creation of any Lien, or (with or without notice or the lapse of time or both) the termination, acceleration, vesting, or modification of any right or obligation, under or in respect of (x) the charter documents or by-laws of ICS, (y) any judgment, decree, order, statute, rule, or regulation binding on or applicable to ICS, or (z) any agreement, instrument, Contract, lease, license, note, bond, mortgage, indenture, or other obligation to which ICS is a party or by which it is bound. The Share Purchase has been approved by all corporate action required by the Laws of the state of incorporation of ICS and its respective charter documents and by-laws. 3.11 Foreign Qualification. ---------------------- ICS is not qualified to do business as a foreign corporation in any jurisdiction. To the extent that ICS previously was, but no longer is, qualified to do business in the State of Virginia or any other jurisdiction, ICS was authorized to do business as a foreign corporation in such jurisdiction(s) during such period. The failure of ICS to qualify to do business in any other jurisdiction prior to the date hereof shall not have a Material Adverse Effect on ICS. 3.12 Subsidiaries. ------------ ICS does not have any Subsidiaries. 3.13 Capitalization. -------------- (a) The authorized and the outstanding capital stock and securities of ICS is as set forth in Schedule 3.13(a) of the ICS Disclosure Schedule, and all such ---------------- outstanding shares of capital stock and securities are owned (of record and beneficially) by the persons and in the amounts there indicated. All such outstanding shares of capital stock and securities are duly authorized, validly issued, fully paid and nonassessable, and free and clear of Liens. (b) Other than in connection with the Share Purchase, and except as set forth in Schedule 3.13(b) of the ICS Disclosure Schedule, neither ICS or Sellers ---------------- are bound by, or has any obligation to grant or enter into, any (i) outstanding subscriptions, options, warrants, calls, commitments, or agreements of any character calling for them to issue, deliver, or sell, or cause to be issued, delivered, or sold, any shares of its capital stock, any membership interests or any other equity security, or any securities described in the following clause, or (ii) securities convertible into, exchangeable for, or representing the right to subscribe for, purchase, or otherwise acquire any shares of its capital stock, any membership interests or any other equity security. (c) Other than in connection with the Share Purchase, and except as set forth in Schedule 3.13(c) of the ICS Disclosure Schedule, neither Sellers or ICS ---------------- (i) has no outstanding obligations, contractual or otherwise, to repurchase, redeem, or otherwise acquire any shares of capital stock, membership interests or other equity securities of ICS, (ii) is not a party to or bound by any agreement or instrument relating to the voting of any of its securities, or (iii) is not a party to or bound by any agreement or instrument under which any person has the right to require it to effect, or to include any securities held by such person in, any registration under the Securities Act. 3.14 Financial Condition. -------------------- (a) Financial Statements. ICS has delivered to Buyer audited consolidated financial statements of ICS, including balance sheets and the related statements of operations and retained earnings and statements of cash flows for the year ended December 31, 2006 (the "Audited Financial Statements") and the compiled financial statements for the year ended December 31, 2005 and the eight month period ended August 31, 2007 (collectively the "Compiled Financial Statements") together with the related notes and schedules (collectively, the "ICS FINANCIAL STATEMENTS"). The Sellers in their capacity as officers of ICS reviewed the ICS Financial Statements, and based on their Knowledge, believe that the ICS Financial Statements do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by the ICS Financial Statements. The Audited Financial Statements have been audited by a certified public accountant and fairly present in all material respects the financial condition and the results of operations, retained earnings, shareholders' equity and cash flows of ICS as at the respective dates of and for the periods referred to therein, all in accordance with GAAP and including an unqualified report. The ICS Financial Statements reflect the consistent application of GAAP throughout the periods involved, except as disclosed in the notes to such financial statements. The ICS Financial Statements are true, correct and complete statements in all material respects of the financial condition and the results of operations of ICS as at and for the periods therein specified. Since December 31, 2006, there has been no change in ICS's method of accounting for Tax purposes or any other purpose. The ICS Financial Statements as of August 31, 2007 (the "CUT-OFF DATE") disclose all Liabilities (contingent or otherwise) of ICS required to be disclosed therein under GAAP and contain adequate reserves for Taxes and all other material accrued Liabilities and there are no loss contingencies which are not adequately provided for in the ICS Financial Statements. The ICS Financial Statements have been prepared from and are in accordance with the accounting Books and Records of ICS. ICS has delivered to Buyer copies of all letters from ICS's auditors to ICS's board of directors or the audit committee thereof during the thirty-six (36) months preceding the execution of this Agreement, together with copies of all responses thereto. Buyer acknowledges that it has reviewed and approved the reports of the independent auditors with respect to the Financial Statements. (b) Sarbanes-Oxley Act of 2002. The Sellers have no reason to believe that ICS's internal controls and procedures would prevent it from complying with Section 404 of the Sarbanes-Oxley Act of 2002, subject to Section 7.01 below under which Buyer's auditors will have access to ICS's books and records to confirm this representation. (c) Accounts Receivable. Accounts receivable and trade receivables (collectively defined as the "ACCOUNTS RECEIVABLE") of ICS reflected in the ICS Financial Statements are valid, bona fide existing claims for the aggregate amounts thereof reflected in the ICS Financial Statements, net of the reserves or allowances for doubtful receivables reflected in such Financial Statements or thereafter in ICS's books and records uniformly maintained in accordance with the ICS Financial Statements, accounted for in accordance with GAAP, and the Sellers know of no reason as of the Closing Date that would make such Accounts Receivable not collectible. This representation is in no manner a representation as to the amount of Accounts Receivable which will ultimately be collected. (d) Inventory. All Inventory has been acquired and maintained in accordance with the regular business practices of ICS, consists of new and unused items of a quality and quantity usable or saleable in the Ordinary Course of Business, and is valued at reasonable amounts based on the normal valuation policies of ICS at prices equal to the lower of cost or market value on a first-in, first-out basis. All obsolete or slow moving Inventory and/or Inventory on hand that is not needed to fulfill present and/or anticipated orders has been written off. (e) Costs and estimated earnings in excess of billings/ billings in excess of costs and estimated earnings. The accounts reflected in the ICS Financial Statements represent Sellers' best estimate of estimated costs, estimated gross profit, estimated gross profit percentage and estimated percentage complete for each contract in progress. (f) Accounts Payable. Schedule 3.14(f) of the ICS Disclosure Schedule sets ---------------- forth a true, correct and complete list of all accounts payable of ICS at the date indicated thereon and updated as of the date hereof, including amounts payable to trade creditors and other short-term Liabilities commonly identified as accounts payable, which are, to the best of the Sellers' Knowledge, bona fide, valid and binding obligations of ICS incurred in the Ordinary Course of Business on an arms-length basis. Schedule 3.14(f) sets forth the dates upon ---------------- which payment to each of the listed items is due. 3.15 Absence of Certain Changes. ----------------------------- Since the Cut-Off Date, other than in the Ordinary Course of Business and except as disclosed in Schedule 3.15 and as contemplated by this Agreement, -------------- there has not been: (a) any (i) acquisition (by purchase, lease as lessee, license as licensee, or otherwise) or disposition (by sale, lease as lessor, license as licensor, or otherwise) by ICS, of any properties or assets, or (ii) other transaction by, or any agreement or commitment on the part of ICS, other than in the Ordinary Course of Business that has not caused and is not reasonably likely to cause, either in any case or in the aggregate, a Material Adverse Effect; (b) any material change in the condition (financial or otherwise), of the properties, assets, Liabilities, investments, revenues, expenses, income, operations, business, or prospects of ICS, or in any of its relationships with any suppliers, customers or other third parties with whom it has financial, commercial or other business relationships, other than changes in the Ordinary Course of Business that have not caused and cannot reasonably be expected to cause, either in any case or in the aggregate, a Material Adverse Effect; (c) any transaction or change in compensation by ICS, with any of its stockholders, members, directors, officers or key employees, other than the payment of compensation and reimbursement of reasonable employee travel and other business expenses in accordance with existing employment arrangements and usual past practices; (d) any damage, destruction, or loss, whether or not covered by insurance, that, either in any case or in the aggregate, has caused, or could reasonably be expected to cause, a Material Adverse Effect; (e) any declaration, setting aside, or payment of any dividend or any other distribution (in cash, stock, and/or property or otherwise) in respect of any shares of the capital stock, membership interests, or other securities of ICS, except as disclosed in Schedule 3.15(e) of the ICS Disclosure Schedule; ---------------- (f) any issuance of any shares of the capital stock or other securities or derivative securities of ICS, or any direct or indirect redemption, purchase, or other acquisition by ICS of any shares of its capital stock or other securities; (g) any change in the officers, directors, key employees or material independent contractors or vendors of ICS; (h) any labor trouble or claim of unfair labor practices involving ICS, any increase in the compensation or other benefits payable or to become payable by ICS to any of its Affiliates, or to any of its officers, employees, or independent contractors, or any bonus payments or arrangements made to or with any of such officers, employees, or independent contractors, which have caused or could reasonably be expected to cause, either in any case or in the aggregate, a Material Adverse Effect; (i) any forgiveness or cancellation of any material debt or claim by ICS or any waiver by ICS of any right of material value, other than compromises of Accounts Receivable in the Ordinary Course of Business; (j) any incurrence or any payment, discharge, or satisfaction or default by ICS of any material Indebtedness or any material obligations or material Liabilities, whether absolute, accrued, contingent, or otherwise (including without limitation Liabilities, as guarantor or otherwise, with respect to obligations of others), and whether due or to become due, matured or unmatured, liquidated or unliquidated, other than that which are reflected or reserved against in the ICS Financial Statements or incurred in the Ordinary Course of Business that have not caused and cannot reasonably be expected to cause, either in any case or in the aggregate, a Material Adverse Effect; (k) any incurrence, discharge, or satisfaction of any Lien (i) by ICS, or (ii) on any of the capital stock, other securities, properties, or assets owned or leased by ICS; (l) any change in the financial or Tax accounting principles, practices, or methods of ICS; (m) any agreement, understanding, or commitment by or on behalf of ICS, whether in writing or otherwise, to do or permit any of the things referred to in this Section 3.15; (n) any cancellation or notice of cancellation, or surrender of any policy of insurance (which has not been cured by payment of premium, procurement of an equivalent policy, or otherwise) relating to or affecting the assets or the business of ICS; (o) write-down of the value of any Inventory of ICS, or write-off as uncollectible of any notes or Accounts Receivable, or any portion thereof of ICS in excess of the amount reserved therefor on the ICS Financial Statements; (p) prepayments, advances or other deposits, made by customers of the business with respect to products or services contracted for but not provided as of the Closing Date or any other unearned income; (q) transaction not in the Ordinary Course of Business; (r) cancellation or threatened cancellation of any material orders from, or Contracts with, customers of ICS, that, singly or in the aggregate, has caused, or could reasonably be expected to cause, a Material Adverse Effect; (s) any problems with key suppliers of ICS which would impair its ability to fulfill its customers' orders, that, singly or in the aggregate, has caused, or could reasonably be expected to cause, a Material Adverse Effect; or (t) any agreement or commitment, whether or not in writing, to do any of the aforementioned. 3.16 Properties, Leases, Etc. -------------------------- (a) Title to Properties; Condition of Personal Properties. ICS has (i) good and marketable title to all of the assets and properties owned by it, including without limitation all assets and properties reflected in the ICS Financial Statements free and clear of all Liens, (ii) valid title to the lessee interest in all assets and properties leased by it as lessee, free and clear of all Liens, other than lessors' interests in such assets, and (iii) full right to hold and use all of its assets and properties used in or necessary to its business and operations, in each case all free and clear of all Liens, and in each case subject to applicable Laws and the terms of any lease under which ICS leases such assets or properties as lessee. All such assets and properties are in good condition and repair, reasonable wear and tear excepted, and collectively are adequate and sufficient to carry on the business of ICS as presently conducted and as proposed to be conducted. (b) No Owned Real Properties. ICS does not own any real property or any interest (other than a leasehold interest) in any real property. (c) Leased Properties. Schedule 3.16(c) of the ICS Disclosure Schedule sets ---------------- forth a complete and correct description of all leases of real or personal property under which ICS is lessor or lessee. True, complete and correct copies of all such leases and all amendments, supplements, and modifications thereto (THE "LEASES") (excepting any Lease pertaining to personal property with an annual rent of less than $10,000 and total remaining rental payments of less than $20,000), have been delivered to Buyer. Each Lease is valid and enforceable in accordance with its terms (subject to bankruptcy, insolvency and similar Laws affecting creditor's rights generally and to general equitable principles), is in full force and effect and, to the Knowledge of the Sellers, no event or condition exists that constitutes, or after notice or lapse of time or both would constitute, a default thereunder by ICS, or, to the Knowledge of the Sellers, any other party to any of the Leases. The right, title and interest of ICS in and to the Leases are subject to no Lien, and ICS is in quiet and lawful possession of the demised premises ("Demised Premises")described IN THE LEASES. ICS has established adequate reserves which are reflected in the ICS Financial Statements, for the anticipated costs of any and all renovation, maintenance and/or repair required to be performed at the Demised Premises or required to be paid for by ICS upon termination of any of the Leases. Each Lease represents the entire agreement between the lessor thereunder and ICS, including all representations and warranties, and there exist no agreements between ICS and any party other than as set forth in the Leases. ICS has paid in full all obligations for brokerage commissions and finders' fees incurred in entering into the Leases. Except as set forth on Schedule 3.16(c), the Demised Premises, ---------------- including all fixtures, furnishings, improvements and personalty in the Demised Premises are in good working order, and at Closing shall be in the same condition as on the date hereof; provided, further, that the building and land of which the Demised Premises are a part in good working order, condition and repair, and to the Knowledge of the Sellers, have no structural or mechanical defects. (d) Pending Tax Proceedings. Except as set forth in Schedule 3.16(d) of the ---------------- ICS Disclosure Schedule, ICS has not retained anyone to file notices of protest against, or to commence actions to review, real property Tax assessments against the leased Premises, and is not aware that any such action has been taken by or on behalf of any lessees under the leases. Schedule 3.16(d) of the ICS ---------------- Disclosure Schedule contains (i) a list and description of all actions taken by ICS to file notices of protest against, or to commence actions to review, real property Tax assessments against the leased Premises, and that status of all such Proceedings, and (ii) true and complete copies of all agreements between ICS and its Tax counsel relating to any such Proceedings. (e) Insurance Policies. ICS has furnished to Buyer an accurate schedule of all insurance policies now affecting the leased Premises as set forth in Schedule 3.16(e) of the ICS Disclosure Schedule. These policies are in --------- compliance with, and fulfill all of ICS's insurance obligations under the leases - and each of these policies permits any waiver of subrogation contained in, or required by, the leases, and the only insurance policies carried on the leased Premises are those set forth in Schedule 3.16(e) of the ICS Disclosure Schedule. ---------------- 3.17 Indebtedness. ------------ Except as set forth in Schedule 3.14(f) and Schedule 3.17 of the ICS ----------------- ------------- Disclosure Schedule and disclosed in the ICS Financial Statements, immediately after the Closing, ICS will not have any Indebtedness outstanding. ICS is not in default with respect to any outstanding Indebtedness or any instrument or agreement relating thereto, and no such Indebtedness or any instrument or agreement relating thereto purports to limit the issuance of any securities by ICS or the operation of its business. Complete and correct copies of all instruments and agreements (including all amendments, supplements, waivers, and consents) relating to any Indebtedness of ICS have been furnished to Buyer. 3.18 Absence of Undisclosed Liabilities. ------------------------------------- Except as set forth in Schedule 3.18 of the ICS Disclosure Schedule or ------------- except to the extent reflected or reserved in the ICS Financial Statements, or incurred in the Ordinary Course of Business since the Cut-Off Date, ICS has no material Liabilities or obligations of any nature, whether accrued, absolute, contingent, or otherwise (including, without limitation, Liabilities as guarantor or otherwise with respect to obligations of others) and whether due or to become due. 3.19 Tax Matters. ----------- (a) Filing of Tax Returns and Payment of Taxes. Except as set forth in Schedule 3.19(a) of the ICS Disclosure Schedule, ICS has timely filed all Tax ------------- Returns required to be filed by it under applicable Laws, each such Tax Return has been prepared in compliance with all applicable Laws and regulations, and all such Tax Returns are true, correct, complete and accurate in all respects. All Taxes due and payable by ICS as reflected on such Tax Returns have been paid, and ICS will not be liable for any additional Taxes in respect of any Taxable period ending on or before the Effective Date in an amount that exceeds the corresponding reserve therefor, if any, reflected in the accounting records of ICS as of the Effective Date. ICS is not doing business in or engaged in a trade or business in any jurisdiction in which it has not filed all required Tax Returns and no claim has ever been made by a Taxing authority in a jurisdiction where ICS does not pay Tax or file Tax Returns that ICS is or may be subject to Taxes assessed by such jurisdiction. There are no Liens for Taxes (other than current Taxes not yet due and payable) on the assets of ICS. ICS has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Taxes within the meaning of Section 6662 of the Code. ICS has never participated in any listed transaction, as defined in Treasury Regulation Section 1.6011-4(b)(2), required to be reported in a disclosure statement pursuant to Treasury Regulation Section 1.6011-4. ICS is not subject to tax under Section 1374 of the Code. (b) Audit History, Extensions, Etc. There is no action, suit, Taxing authority Proceeding (foreign, federal, state or local), or audit with respect to any Tax now in progress, pending, or to the best of the Sellers' Knowledge, threatened, against or with respect to ICS. Except as set forth in Schedule -------- 3.19(b) of the ICS Disclosure Schedule, no deficiency or proposed adjustment in ---- respect of Taxes that has not been settled or otherwise resolved has been asserted or assessed by any Taxing authority against ICS. ICS has not consented to extend the time in which any Tax may be assessed or collected by any Taxing authority. ICS has not requested or been granted an extension of the time for filing any Tax Return to a date on or after the Closing Date. (c) Membership in Affiliated Groups, Etc. ICS has never been a member of any Affiliated Group, or filed or been included in a combined, consolidated, or unitary Tax Return other than a consolidated Tax return with respect to ICS. ICS is not a party to or bound by any Tax sharing or allocation agreement or has any current or potential contractual obligation to indemnify any other person with respect to Taxes. (d) Withholding Taxes. ICS has withheld and paid all Taxes required to have been withheld and paid by it in connection with amounts paid or owing to any employee, creditor, independent contractor, or other Person. (e) Amending Tax Returns. Following Closing, no Tax Returns with respect to ICS shall be amended without the prior written consent of the Sellers if such amendments could result in liability to such Sellers. 3.20 Litigation and Claims. ----------------------- No litigation, arbitration, action, suit, claim, demand, Proceeding or investigation (whether conducted by or before any judicial or regulatory body, arbitrator, commission or other person) is pending or, to the Knowledge of the Sellers, threatened against ICS. 3.21 Safety; Zoning; Real Estate; and Environmental Matters. ------------------------------------------------------------ Except as set forth on Schedule 3.21: -------------- (a) To the Knowledge of the Sellers, ICS is not nor has it ever been in violation of any applicable statute, Law, or regulation relating to occupational health or safety, other than those the violation of which would not be reasonably likely to, either in any case or in the aggregate, have a Material Adverse Effect, and no charge, complaint, action, suit, Proceeding, hearing, investigation, claim, demand, or written notice has been filed or commenced against or received by ICS alleging any failure by ICS to comply with any such statute, Law, or regulation, nor is there any basis therefor known to the Sellers. (b) To the Knowledge of the Sellers, the real properties presently owned, leased, or operated by ICS and any leasehold improvements thereto, and any business conducted by ICS thereon, is in compliance with and has been in compliance with all applicable statutes, Laws, and regulations in respect of the use, occupation and construction thereof, including, but not limited to, environmental, zoning, platting and other land use requirements, including but not limited to, the Americans With Disabilities Act, and ICS has not received written notice of, and neither does any of the Sellers have Knowledge of, any violations or investigations relating thereto. Any written notice of violations thereof which shall be received by ICS before Closing, whether now noted or issued, shall be cured by ICS so that the Premises shall be conveyed free of the same at Closing. In the event that the same shall not be capable of cure prior to Closing, it shall not constitute a default hereunder and the parties shall mutually agree to postpone Closing or to escrow funds for such cure. (c) To the Knowledge of the Sellers, ICS is and has been in compliance with all judgments, decrees, orders, statutes, Laws, permits, licenses, rules, or regulations pertaining to environmental matters, including without limitation, those arising under any Environmental Laws and has not received any written notice that it is presently, or ever has been, in violation of any Environmental Law other than those the violation of which would not be reasonably likely to, either in any case or in the aggregate, have a Material Adverse Effect. (d) ICS currently possesses, currently is in compliance with, and, to the Knowledge of each of the Sellers, in the past has complied in all material respects with the terms of all Environmental Permits, if any, and other approvals necessary to operate the business, and any application for renewals of said permits has been filed in a timely fashion. A list of all such Environmental Permits is set forth in Schedule 3.21(d). ---------------- (e) (i) Hazardous Substances. To the Knowledge of the Sellers, ICS neither -------------------- is nor has been affected by the existence of any Environmental Conditions, nor has ICS used any (other than as may be used in the ordinary course of their business), or received any written notice of violation for the use or misuse of any, Hazardous Substances on or about the Premises or in violation of any Environmental Laws, and there are no Environmental Conditions which are reasonably likely to affect the Premises. Without in any way limiting the generality of the foregoing provision, the Sellers specifically represent and warrant that all prior uses of the Premises or any part of the Premises known to the Sellers are listed in Schedule 3.21(e)(i) of the ICS Disclosure Schedule; to ------------------- the Knowledge of the Sellers, no other user or occupant of any part of the Premises known to the Sellers, has ever been cited for violating any Environmental Laws with respect to operations or activities on or about the Premises; and all reports, test results, and other documents in the possession of ICS relating to Environmental Conditions on or about the Premises are being delivered to Buyer concurrently herewith. (ii) Soil Conditions; Flood and Mud Slide Hazard; Wetlands. To the ------------------------------------------------------------ Knowledge of the Sellers, (x) there is no soil condition adversely affecting the Premises (y) the Premises are not in an area identified by any agency or department of the federal, state or local government as having specific flood or mud-slide hazards, or as containing wetlands, endangered species or any other protected Environmental Condition which is reasonably likely to impair the current use of the Premises, and the Sellers do not know of any state of facts which is reasonably likely to cause any portion of the Premises to be identified as containing any such wetlands, endangered species or other Environmental Condition; (z) no portion of the Premises is or is reasonably likely to be designated as a "wetland" as defined by any governmental agency having jurisdiction over the Premises. (iii) Buried Tanks. Except as set forth on Schedule 3.21(e)(iii), there are ------------ --------------------- no underground storage tanks on the Premises, nor have any underground storage tanks been removed from the Premises. (iv) Obligations. There are no obligations, commitments or agreements in ----------- connection with ICS's lease and occupancy of the Premises which will be binding upon Buyer after Closing, except for those set forth in the Leases or which have been approved by Buyer and are listed in Schedule 3.21(e)(iv) of the ICS -------------------- Disclosure Schedule. (v) Absence of Moratorium. To the Knowledge of the Sellers, no moratorium, ---------------------- statute, order, regulation, ordinance, legislation, judgment, ruling or decree of any court or governmental agency has been enacted, adopted, issued, entered or pending, or is in effect, which is reasonably likely to have a Material Adverse Effect to the Premises. (vi) Easements and Declarations. There are no easements, declarations or ---------------------------- other similar agreements affecting the Premises or any portion thereof, other than those of public record or those which have been approved by Buyer and are listed in Schedule 3.21(e)(vi) of the ICS Disclosure Schedule. --------------------- (vii) Condemnation. There is no condemnation Proceeding affecting the ------------ Premises or any portion thereof, currently pending nor, to the Knowledge of the Sellers, is any such Proceeding threatened. (viii) Covenants, Conditions and Restrictions. There is no material default -------------------------------------- or breach by ICS under any covenants, conditions, restrictions, rights-of-way, or easements which may affect the Premises or any portion thereof. Gas, electric power, sanitary and storm sewer and water facilities, and all other utilities necessary for the current use and operation of the Premises are available in quantities satisfactory to service the Premises and for ICS to conduct its business operations. To the Knowledge of the Sellers, no condition exists which is reasonably likely to result in the termination or impairment of access to the Premises or discontinuation of necessary sewer, water, electric, gas, telephone or other utilities. (ix) Work Performed. No work has been performed or is in progress at, and --------------- no materials have been furnished to, the Premises on behalf of ICS that have not been paid for or will not be paid for in full by ICS prior to the Closing Date. No special or general assessments have been levied, or to the Knowledge of the Sellers, threatened, against all or any part of the Premises, except as set forth in Schedule 3.21(e)(ix) of the ICS Disclosure Schedule. --------------------- (x) Access. The streets, roads, highways and avenues in front of or ------ adjoining any part of the Premises have been dedicated to and accepted by the proper Governmental Authority and such Governmental Authority has the responsibility to maintain such streets, road, highways and avenues. (xi) Zoning. The current use on the Premises is presently permitted under ------ applicable zoning laws. 3.22 Material Contracts. ------------------- Except for the Contracts, agreements and other arrangements set forth in Schedule 3.22 of the ICS Disclosure Schedule, and Contracts, agreements, or ------------ other arrangements that have been fully performed and with respect to which ICS -- has no further obligations or Liabilities, ICS is not a party to, or otherwise bound by: (i) any Contract, agreement, instrument, or commitment that is reasonably likely to affect the Sellers or ICS' ability to consummate the transactions contemplated hereby, or (ii) any other material agreement, instrument, or commitment, including without limitation any: (a) agreement for the purchase, sale, lease, or license by or from ICS of services, products, or assets, requiring total payments by or to it in excess of $10,000 in any instance, or entered into other than in the Ordinary Course of Business; (b) agreement requiring ICS to purchase all or substantially all of its requirements for a particular product or service from a particular supplier or suppliers, or requiring it to supply all of a particular customer's or customers' requirements for a certain service or product; (c) agreement or other commitment pursuant to which ICS has agreed to indemnify or hold harmless any other Person, other than agreements with respect to the purchase, sale, lease or license from it of services, products or assets in the Ordinary Course of Business; (d) (i) employment agreement providing for annual payments equal to or in excess of $100,000 per annum and/or with a term greater than one (1) year, (ii) consulting agreement providing for annual payments equal to or in excess of $100,000 per annum and/or with a term greater than one (1) year, or (iii) agreement providing for severance payments or other additional rights or benefits (whether or not optional) in the event of the sale or other change in control of ICS; (e) agreement with any current or former Affiliate, shareholder, member, officer, director, employee, or consultant or with any Person in which any such Affiliate has an interest; (f) joint venture, partnership, teaming or similar agreement; (g) agreement with any domestic or foreign government or agency or executive office thereof or any subcontract between it and any third party relating to a Contract between such third party and any domestic or foreign government or agency or executive office thereof; (h) agreement imposing non-competition or exclusive dealing obligations on ICS; (i) agreement with respect to the confidentiality of ICS's Proprietary Information, and the assignment to ICS of any and all rights employees of ICS might have to acquire with respect to technology, inventions, developments, etc., developed in connection with their employment with ICS; (j) agreement, the performance of which is reasonably likely to result in a loss to ICS; (k) the lease of real or personal property as lessor or lessee or sublessor or sublessee; (l) distribution, dealer, agency, or financing agreements or arrangements (including without limitation, letters of credit) not terminable within thirty (30) days or less without obligation on the part of ICS; and (m) non-competition, confidential information or similar agreements. The Sellers have delivered or caused to be delivered to Buyer correct and complete copies (or written summaries of the material terms of oral agreements or understandings) of each agreement, instrument, and commitment listed in Schedule 3.22 of the ICS Disclosure Schedule, each as amended to date. Each such -------- agreement, instrument, and commitment is a valid, binding and enforceable obligation of ICS which is a party thereto, and, to the Knowledge of the Sellers, of the other party or parties thereto (subject in all events to bankruptcy, insolvency or similar laws affecting creditor's rights generally and to general equitable principles), and is in full force and effect. ICS is not, nor to the Knowledge of the Sellers, is any other party thereto (nor is ICS considered by any other party thereto to be), in breach of or noncompliance with any term of any such agreement, instrument, or commitment (nor to their Knowledge is there any basis for any of the foregoing), except for any breaches or non-compliances that singly or in the aggregate would not be reasonably likely to have a Material Adverse Effect. Other than in the Ordinary Course of Business, no claim, change order, request for equitable adjustment, or request for contract price or schedule adjustment, between ICS and any supplier, customer or any other person, relating to any agreement, instrument, or commitment listed in Schedule 3.22 of the ICS Disclosure Schedule is pending or, ------------- to the Knowledge of the Sellers, threatened, nor to their Knowledge is there any basis for any of the foregoing. No agreement, instrument, or commitment listed in Schedule 3.22 of the ICS Disclosure Schedule, (i) includes or incorporates -------------- any provision, the effect of which is reasonably likely to enlarge or accelerate any of the obligations of ICS or to give additional rights to any other party thereto, (ii) will terminate, lapse, or (iii) in any other way be affected, by reason of the Share Purchase, the effect of which is reasonably likely to have a Material Adverse Effect on ICS, either individually or in the aggregate. 3.23 Tangible Property. ------------------ Schedule 3.23 of the ICS Disclosure Schedule sets forth a true and complete ------------- list of all fixtures, machinery, equipment and any other tangible property of ICS attached or appurtenant to, or used in connection with, its business ("PERSONAL PROPERTY"), including a description of each item, whether it is owned or leased, the location and serial number, if any, the gross and net book value of each item, and to the extent available, accumulated depreciation, if any, with respect thereto (except to the extent such information is provided on other Schedules to this Agreement). Each owned item is owned by ICS free of any Liens or encumbrances, except for Permitted Liens. Except as indicated on Schedule -------- 3.24, each item of Personal Property is in working condition and repair, -- ordinary wear and tear excepted, none of such items has any material defects or -- is in need of immediate maintenance or repairs, except for ordinary routine maintenance and repairs which are not material in nature or cost, and all of the items listed are adequate for the uses to which they are being put. 3.24 Title to Assets; Permitted Liens. ------------------------------------ ICS has good and marketable title to all of its assets (except real and other properties and assets held pursuant to leases or licenses described in Schedules 3.16(c), 3.22, 3.23 and 3.27 of the ICS Disclosure Schedule), free and ----------------------------------- clear of all Liens, except such Permitted Liens as are specified in Schedule -------- 3.24 of the ICS Disclosure Schedule. - 3.25 Employees; Labor Relations; Benefit Plans. --------------------------------------------- Employees; Labor Relations; Benefit Plans. ---------------------------------------------- Employees. Schedule 3.25 of the ICS Disclosure Schedule sets forth the -------------- name, employment relationship, present compensation arrangement and other material terms of employment or engagement of each director, officer, employee and consultant of ICS. Labor Relations. To the best knowledge of the Sellers ICS is in compliance with all applicable federal and state laws respecting employment and employment practices, terms and conditions of employment, wages and hours, and nondiscrimination in employment, other than those the violation of which would not, either alone or in the aggregate, have a Material Adverse Effect, and ICS is not engaged in any unfair labor practice. To the best Knowledge of the Sellers, there is no charge pending or threatened against or with respect to ICS before any court or agency, alleging unlawful discrimination in employment practices, and there is no charge of or Proceeding with regard to any unfair labor practice against ICS pending before the National Labor Relations Board. There is no labor strike, known dispute, slow-down, or work stoppage pending or, to the Knowledge of the Sellers, threatened against or involving ICS. None of the employees of ICS is covered by any collective bargaining agreement, and, to the Knowledge of the Sellers, no such collective bargaining agreement is currently being negotiated. No one has petitioned and, to the Knowledge of the Sellers, no one is now petitioning, for union representation of any employees of ICS. ICS has not experienced any work stoppage during the last three years. Benefit Plans. (i) Identification of Plans. Except for the arrangements set forth in ------------------------- Schedule 3.25(i) of the ICS Disclosure Schedule, ICS does not sponsor, maintain ----------- or contribute to any pension, profit-sharing, deferred compensation, bonus, stock option, share appreciation right, severance, group or individual health, dental, medical, life insurance, survivor benefit, or similar plan, policy or arrangement, whether formal or informal, for the benefit of any director, member, officer, consultant, or employee of any of them, whether active or terminated; nor has ICS ever maintained or contributed to any such plan, policy, or arrangement that was subject to ERISA. Each of the arrangements set forth in Schedule 3.25(i) of the ICS Disclosure Schedule is herein referred to as an - ----------------- "EMPLOYEE BENEFIT PLAN." - ---- (ii) With respect to each Employee Benefit Plan, the Sellers have provided the Buyer with, or made available to Buyer, complete and correct copies of (i) each Employee Benefit Plan, including all amendments thereto, (ii) the most recent summary plan description (if any) and all other documents pursuant to which the Employee Benefit Plans are maintained, (iii) the most recent annual report (Form 5500 series) filed with the IRS (with attachments) and (iv) all IRS determination letters, rulings and opinions received by ICS, in respect of any applicable Employee Benefit Plans. (iii) With respect to each Plan which is intended to be a qualified plan under Section 401(a) of the Code as currently in effect, a favorable determination letter has been received from the IRS as to its qualification under Section 401(a) of the Code (including the amendments to the Code made by GUST), each such Plan has been operated and administered in accordance with its terms and all such Plans have been amended to comply with the Good Faith Interim Amendments. (iv) Compliance with Terms and Law. Each Employee Benefit Plan is and has ----------------------------- been maintained and operated in compliance, in all material respects, with the terms of such plan and with the applicable requirements prescribed (whether as a matter of substantive Law or as necessary to secure favorable Tax treatment) by any and all statutes, governmental, or court orders, or governmental rules or regulations in effect from time to time, including but not limited to, ERISA and the Code. Each Employee Benefit Plan that is intended to qualify under Section 401(a) of the Code is so qualified. (v) Absence of Certain Events and Arrangements: ------------------------------------------ (A) There is no pending or, to the Knowledge of the Sellers, threatened, legal action, Proceeding, or investigation, other than routine claims for benefits, concerning any Employee Benefit Plan, or any fiduciary or service provider thereof and, to the Knowledge of the Sellers, there is no basis for any such legal action or Proceeding. (B) With respect to each Employee Benefit Plan, to the Knowledge of the Sellers, neither ICS nor any other Party in interest in respect thereof have engaged in a prohibited transaction. that could subject ICS, directly or indirectly, to Liability under Sections 409 or 502(i) of ERISA or Section 4975 of the Code. (C) No communication, report or disclosure has been made by ICS or Sellers that, at the time made, did not accurately reflect the terms and operations of any Employee Benefit Plan. (D) No Employee Benefit Plan requires ICS to provide welfare benefits subsequent to termination of employment to employees or their beneficiaries (except to the extent required by applicable state insurance laws, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and Title I, Part 6 of ERISA). (E) ICS has not undertaken to maintain any Employee Benefit Plan for any specific period of time and each such plan is terminable at the sole discretion of ICS, subject only to such constraints as may be imposed by applicable Law. (F) No Employee Benefit Plan is maintained pursuant to a collective bargaining agreement or, is or has been subject to the minimum funding requirements of Section 302 of ERISA or Section 412 of the Code or is a defined benefit pension plan. (G) Except as set forth in Section 3.25(v) of the ICS Disclosure Schedule, the consummation of transactions contemplated by this Agreement will not, either alone or in combination with any other event expressly contemplated hereby in this Agreement; (i) entitle any current or former employee or officer of ICS to severance pay, or any other payment, except as expressly provided in this Agreement; (ii) accelerate the time of payment or increase the amount of or vesting of compensation or benefits due any such employee or officer; (iii) result in termination or forgiveness of indebtedness or (iv) otherwise give rise to a benefit that is reasonably expected to be treated as a parachute payment under Section 280G of the Code. (H) With respect to each Employee Benefit Plan which is intended or deemed to be a "non qualified deferred compensation plan," ICS has operated such Plan during 2006 and 2007 in good faith compliance with Code Section 409A, IRS Notice 2005-1 and any treasury regulations and other applicable guidance issued by the IRS. (vi) Funding of Certain Plans. With respect to each Employee Benefit Plan -------------------------- for which a separate fund of assets is or is required to be maintained, full payment has been made of all amounts that, under the terms of each such plan, ICS is required to have paid as contributions to that plan as of the end of such plan's most recently ended year, and through the Closing hereof consistent with ICS's past practices. 3.26 Potential Conflicts of Interest. ---------------------------------- Except as disclosed in Schedule 3.26 of the ICS Disclosure Schedule, -------------- neither ICS nor any of its respective officers, members, directors, or shareholders or their affiliates (i) owns, directly or indirectly, any interest (with the exception of passive holdings for investment purposes of not more than 2% of the securities of any publicly held and traded company) in, or is an officer, director, member, employee or consultant of, any Person that is a competitor, lessor, lessee, customer or supplier of ICS; (ii) owns, directly or indirectly, any interest in any tangible or intangible property used in or necessary to the business of ICS; (iii) to the Knowledge of the Sellers, has any cause of action or other claim whatsoever against ICS, except for claims in the Ordinary Course of Business, such as for accrued vacation pay, accrued benefits under employee benefit plans, and similar matters and agreements; or (iv) owes any amount to ICS. 3.27 Patents, Trademarks, Business Name. ------------------------------------- (a) Schedule 3.27 of the ICS Disclosure Schedule lists all patents, patent -------------- applications, trademarks, trade names, service marks, logos, copyrights, and licenses used in or necessary to ICS's business (other than for software programs that have not been customized for its use), as now being conducted or as proposed to be conducted (collectively, and together with any technology, know-how, trade secrets, processes, formulas, and techniques used in or necessary to ICS's business, "PROPRIETARY INFORMATION"). Except as disclosed in Schedule 3.27 of the ICS Disclosure Schedule, ICS owns or is licensed or - -------------- otherwise has the full and unrestricted exclusive right to use, without the - ------- payment of royalties or other further consideration, all Proprietary - ---- Information, and no other intellectual property rights, privileges, licenses, - ---- contracts, or other agreements, instruments, or evidences of interests are - -- necessary to or used in the conduct of its business. - -- (b) Each instance where ICS's rights to Proprietary Information arise under a license or similar agreements (other than for software programs that have not been customized for its use) is set forth in Schedule 3.27 of the ICS Disclosure ------------- Schedule and such rights are licensed exclusively to such entity except as set forth in Schedule 3.27 of the ICS Disclosure Schedule. No other person has an ------------- interest in, other than the licensor with respect to licensed Proprietary Information, or right or license to use, other than the licensor after the expiration of the license with respect to licensed Proprietary Information, any of the Proprietary Information. To the best Knowledge of the Sellers, none of the Proprietary Information is being infringed by others, or is subject to any outstanding order, decree, judgment, or stipulation. No litigation (or other Proceedings in or before any court or other governmental, adjudicatory, arbitral, or administrative body) relating to the Proprietary Information is pending (other than litigation against the licensor of any Proprietary Information licensed to ICS with respect to which the Sellers have no Knowledge) or, to the Knowledge of the Sellers, threatened, nor, to the best Knowledge of the Sellers, is there any basis for any such litigation or Proceeding. ICS maintains adequate and sufficient security measures for the preservation of the secrecy and proprietary nature of the Proprietary Information consistent with the practice in its industry. All software used by ICS (the "SOFTWARE") is legal, licensed, and authorized for use by ICS. The use of the Software by ICS or the exercise by ICS of any license granted to it with respect to the Software will not violate or interfere with the intellectual property or contractual rights of any third party, including without limitation, those rights arising under copyright, trademark, trade secret or patent law. (c) To the best Knowledge of the Sellers: (i) neither ICS nor any of its respective employees, has infringed or made unlawful use of, or is, to the Knowledge of the Sellers, infringing or making unlawful use of, any proprietary or confidential information of any Person, related to the business of ICS, including without limitation any former employer of any past or present employee or consultant of ICS; and (ii) the activities of ICS's employees in connection with their employment do not violate any agreements or arrangements that any such employees or consultants have with any former employer or any other Person. No litigation (or other Proceedings in or before any court or other governmental, adjudicatory, arbitral, or administrative body) charging ICS with infringement or unlawful use of any patent, trademark, copyright, or other proprietary right is pending or, to the Knowledge of the Sellers, threatened, nor to their Knowledge is there any basis for any such litigation or Proceeding. (d) To the best Knowledge of the Sellers, no officer, director, member, employee, or consultant of ICS is presently obligated under or bound by any agreement or instrument, or any judgment, decree, or order of any court of administrative agency, that (i) conflicts or is reasonably likely to conflict with his or her agreements and obligations to use his best efforts to promote the interests of ICS (ii) conflicts or is reasonably likely to conflict with the business or operations of ICS as presently conducted or as presently proposed to be conducted, or (iii) restricts or is reasonably likely to restrict the use or disclosure of any information that is necessary to the business of ICS. 3.28 Insurance. --------- Schedule 3.28 of the ICS Disclosure Schedule lists the policies of theft, -------------- fire, liability, worker's compensation, life, property and casualty, directors' and officers', medical malpractice, and other insurance owned or held by ICS, and the basis on which such policies provide coverage (i.e., an occurrence or claims-made basis). All such policies are, and at all times since the respective dates set forth in Schedule 3.28 of the ICS Disclosure Schedule, have been, in ------------- full force and effect, are sufficient for compliance in all respects by ICS with all requirements of Law and of all agreements to which it is a party, and provide that they will remain in full force and effect through the respective dates set forth in Schedule 3.28 of the ICS Disclosure Schedule, and will not ------------- terminate or lapse or otherwise be affected in any way by reason of the transactions contemplated hereby. 3.29 Governmental and Other Third-Party Consents. ----------------------------------------------- Except as otherwise disclosed on Schedule 3.29 of the ICS Disclosure -------------- Schedule, no Consent, approval, or authorization of, or registration, designation, declaration, or filing with, any Governmental Authority, federal or other, or any other Person is required on the part of ICS in connection with the Sellers execution, delivery, or performance of this Agreement and the Ancillary Documents to which they are a party, or the Sellers consummation of the transactions contemplated hereby or thereby, or the continued conduct of the present business of ICS after the Closing Date; nor are any Consents required under any Contracts to which ICS is a party or by which it is bound to give any notice to, or obtain the Consent or approval of, any party to such Contract relating to the consummation of the transactions contemplated by this Agreement. 3.30 Employment of Officers. ------------------------ Schedule 3.30 of the ICS Disclosure Schedule sets forth the person who -------------- served as chief executive officer (or in an equivalent capacity) during ICS's last fiscal year and each of ICS's other executive officers who earned (or accrued) compensation in excess of $100,000 during the last fiscal year. 3.31 Compliance with Other Instruments, Laws, Etc. -------------------------------------------------- Except as otherwise disclosed on Schedule 3.31 of the ICS Disclosure -------------- Schedule, ICS has complied with, and is in compliance with, (i) all Laws, statutes, governmental regulations, judicial or administrative tribunal orders, judgments, writs, injunctions, decrees, and similar commands applicable to it and its business, and all unwaived terms and provisions of all Contracts, agreements, instruments, and commitments to which it is a party or to which it or any of its assets or properties is subject, except for any non-compliances that, both individually and in the aggregate, have not had and could not reasonably be expected to have a Material Adverse Effect, and (ii) its charter documents and by-laws, each as amended to date. To the best Knowledge of the Sellers, ICS has not committed, been charged with, or been under investigation (or threatened with a pending or potential investigation) with respect to, nor does there exist, any violation by ICS of any provision of any federal, state or local Law or administrative regulation, except for any violations that, both singly or in the aggregate, have not had and could not reasonably be expected to have a Material Adverse Effect. ICS has and maintains, and Schedule 3.31 of the ------------- ICS Disclosure Schedule sets forth a complete and correct list of, all such licenses, Permits, and other authorizations from all such Governmental Authorities as are legally required for the conduct of its business or in connection with the ownership or use of its properties, except for any such licenses, permits, and other authorizations, the failure to obtain or maintain which in effect, both singly or in the aggregate, has not had and could not reasonably be expected to have a Material Adverse Effect, and all of which (except as specifically described in Schedule 3.31 of the ICS Disclosure -------------- Schedule) are in full force and effect in all material respects, and true and complete copies of all of which have been delivered to Buyer. 3.32 Compliance with Securities Laws. ---------------------------------- Neither ICS, the Sellers, nor anyone acting on their behalf, will hereafter offer to sell, solicit offers to buy, or sell any securities of ICS so as to preclude the offer, issuance, and sale of the Orbit Shares from being exempt from the registration requirements of the Securities Act. 3.33 Questionable Payments. ---------------------- Neither ICS or Sellers has taken any action which would cause it or them to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any rules or regulations thereunder. To the Knowledge of the Sellers, there is not now, and there has never been, any employment by ICS of, or beneficial ownership in ICS by, any governmental or political official of any country in the world. 3.34 ICS Disclosure Schedule. ----------------------- The ICS Disclosure Schedule referred to in this Article III contains certain information regarding ICS and Sellers as indicated at various places in this Agreement and is attached to and forms a part of this Agreement. ICS and Sellers hereby represent and warrant that all information set forth in the ICS Disclosure Schedule is and will be true, correct and complete in all material respects as of the date of this Agreement and the Effective Date, does not omit to state any material fact necessary in order to make the statements therein not misleading, and shall be deemed for all purposes of this Agreement to constitute part of the representations and warranties under this Article III. Each of the documents and other writings furnished to the Buyer by ICS and Sellers pursuant to Article III and each of the representations, warranties and statements by ICS and Sellers in this Article III is true, correct and complete in all material respects with respect to ICS and Sellers as of the date furnished and does not omit to state any material fact necessary in order to make the statements therein not misleading. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER Except as disclosed (in accordance with Section 10.11) in the disclosure schedules of Buyer, (the "ORBIT DISCLOSURE SCHEDULE"), Buyer represents and warrants to Sellers on the date hereof and on the Effective Date, as follows: 4.01 Organization and Standing. --------------------------- (a) Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) The minute books of Buyer accurately reflect all material corporate action of its shareholders and board of directors (including committees) through the date of this Agreement. (c) Prior to the execution of this Agreement, Buyer has made available to Sellers true and correct copies of the certificate of incorporation and the by-laws of Buyer, as in effect on the date hereof. 4.02 Corporate Power. ---------------- Buyer has all requisite corporate power and full legal right and authority to enter into and deliver this Agreement, the Ancillary Documents to which it is a party and all other certificates, agreements or other documents to be executed and delivered by Buyer, and to consummate the transactions contemplated hereby and thereby, and to perform all of its obligations in accordance with the terms hereof and thereof. 4.03 Authorization; Binding Effect. ------------------------------- The execution and delivery by Buyer of this Agreement and the Ancillary Documents to which it is a party, and the consummation by Buyer of the transactions contemplated hereby and thereby, and the performance by Buyer of its obligations hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of Buyer. This Agreement and the Ancillary Documents to which it is a party have been duly executed and delivered by Buyer and constitutes a legal, valid and binding obligation of Buyer, enforceable against it in accordance with its terms. 4.04 Capitalization. -------------- (a) The authorized capital stock of Buyer consists of 10,000,000 shares of Common Stock, $0.10 par value per share. As of October 24, 2007, the issued and outstanding capital stock of Buyer consists of (i) 4,603,571 shares of Common Stock, (ii) 600,383 Shares of Common Stock reserved for issuance upon exercise of all options granted under Buyer's stock option plans and (iii) no other common stock equivalents. All such shares of Buyer are duly authorized, those shares described in clause (i) above are validly issued, fully paid and non-assessable, and those shares described in clauses (ii) and (iii) above, when so issued, will be validly issued, fully paid and non-assessable. (b) Except as set forth in Schedule 4.04(b) of the Orbit Disclosure ---------------- Schedule, Buyer does not have outstanding any capital stock or securities convertible into or exchangeable for any shares of capital stock, and there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which Buyer is a party or otherwise obligating Buyer to issue or sell, entitling any person to acquire from Buyer, and Buyer is not a party to any agreement, arrangement or commitment obligating it to repurchase, redeem or otherwise acquire, any shares of its capital stock or securities convertible into or exchangeable for any of its capital stock. (c) Except as contemplated by this Agreement or as set forth in Schedule -------- 4.04(c) of the Orbit Disclosure Schedule, Buyer has not granted any registration ---- rights with respect to any shares of its capital stock to any third party. 4.05 Subsidiaries. ------------ Schedule 4.05 of the Orbit Disclosure Schedule sets forth a list of all -------------- Subsidiaries of Buyer, showing, as to each such Subsidiary, the jurisdiction of its organization, the number of shares or other equity or ownership interests of each class of its capital stock authorized and the amount of each class outstanding, and the percentage of the outstanding shares or other equity or ownership interests of each such class owned, directly or indirectly, by Buyer. On the date hereof, except as and to the extent set forth in Schedule 4.05 of ------------- the Orbit Disclosure Schedule, (i) all the outstanding stock or other equity or ownership interest of each Subsidiary of Buyer, owned directly or indirectly by Buyer as shown on Schedule 4.05 of the Orbit Disclosure Schedule, is owned free ------------- and clear of all Liens and encumbrances and is duly authorized, validly issued, fully paid and non-assessable, and (ii) there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which any Subsidiary of Buyer is a party or otherwise obligating any Subsidiary of Buyer to issue or sell, or entitling any person to acquire from any Subsidiary of Buyer, and no Subsidiary of Buyer is a party or otherwise obligating any Subsidiary of Buyer to issue or sell, or entitling any person to acquire from any Subsidiary of Buyer, and no Subsidiary of Buyer is a party to any agreement, arrangement or commitment obligating it to repurchase, redeem or otherwise acquire, any shares of the capital stock or any securities convertible into or exchangeable for the capital stock of any such Subsidiary. 4.06 Authority to Conduct Business. -------------------------------- Buyer and its Subsidiaries have all requisite corporate power and authority necessary or advisable to own or hold their respective properties and conduct their respective businesses and hold all material licenses, permits and other required authorizations and approvals from Governmental Authorities and have made all material registrations and given all notifications required under federal, state or local Law that are necessary or advisable for the conduct of their respective businesses. 4.07 No Violation. ------------- Except as disclosed on Schedule 4.07 of the Orbit Disclosure Schedule, -------------- Buyer and each of its Subsidiaries is in substantial compliance with all statutes, laws, ordinances, rules, regulations, judgments, orders, decrees, directives, permits, concessions, grants, franchises, licenses and other governmental authorizations or approvals applicable to Buyer or any of its properties. The execution, delivery and performance of this Agreement and the Ancillary Documents to which it is a party and the consummation by Buyer of the transactions contemplated hereby and thereby will not (i) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default or give rise to any right of termination, cancellation or acceleration under, or result in the creation of any Lien or encumbrance on or against any of the properties of Buyer or any of its Subsidiaries pursuant to any of the terms or conditions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which Buyer or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, (ii) violate the charter documents or by-laws of Buyer or any of its Subsidiaries, (iii) violate any statute, Law, rule, regulation, writ, injunction, judgment, order or decree of any Governmental Authority, binding on Buyer or any of its Subsidiaries or any of their properties or assets, or (iv) result in or give rise (whether upon demand by the holder of any such securities or by the terms of any such security) to the issuance of any additional capital stock of Buyer or accelerate or alter the conversion rights of any holder of any securities exercisable into or convertible for shares of capital stock of Buyer. 4.08 Litigation. ---------- Except as disclosed on Schedule 4.08 of the Orbit Disclosure Schedule, -------------- there is no pending or threatened legal or governmental claim, action or Proceeding against or relating to Buyer which could, individually or in the aggregate, have a Material Adverse Effect on Buyer or consummation of the transactions contemplated by this Agreement. 4.09 Full Disclosure. ---------------- With respect to Buyer or any of its Subsidiaries, this Agreement (including the Orbit Disclosure Schedule and all materials incorporated by reference herein), are true, correct and complete and do not contain an untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading. 4.10 SEC Filings. ------------ (a) Buyer has made available to each Seller for inspection a true and complete copy of each report, schedule, registration statement and definitive proxy statement filed by Buyer with the SEC since January 1, 2005 and prior to the date of this Agreement (the "SEC DOCUMENTS"), which are all the documents (other than preliminary material) that Buyer was required to file with the SEC since such date. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act or the Securities Exchange Act of 1934, as amended, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Documents, and none of the SEC Documents contained as of the date of its filing any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statement therein, in light of the circumstances under which they were made, not misleading. (b) The financial statements of Buyer included in the SEC Documents (including the information contained in the notes to the financial statements) comply as to form in all material respects with the published rules and regulations of the SEC with respect thereto and were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated on the notes thereto or, in the case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC). The consolidated financial statements fairly present, in accordance with applicable requirements of GAAP (subject, in the case of the unaudited statements, to normal, recurring adjustments, none of which will be material), the consolidated financial position of Buyer and its consolidated Subsidiaries as of their respective dates and the consolidated results of operations and the consolidated cash flows of Buyer and its consolidated Subsidiaries for the periods presented therein. 4.11 Conduct of Business. --------------------- Since January 1, 2007, except as set forth on Schedule 4.11 of the Orbit ------------- Disclosure Schedule and in SEC Documents, Buyer and its Subsidiaries have conducted their respective businesses, operations and affairs in the Ordinary Course of Business consistent with past practice; and (ii) there have not been changes, conditions or events that, in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect. 4.12 Brokers. ------- Except as set forth on Schedule 4.12 of the Orbit Disclosure Schedule -------------- disclosing Cove Partners LLC, no finder, broker, agent or other intermediary has acted for or on behalf of Buyer or any of its Subsidiaries in connection with the negotiation or consummation of the transactions contemplated hereby. 4.13 Consents. -------- Except as set forth on Schedule 4.13 of the Orbit Disclosure Schedule, no ------------- consents or approvals or waivers of, or filings or registrations with, any public body or authority are necessary, and no consents or approvals of any third party is necessary in connection with the execution and delivery of this Agreement by Buyer and the completion by Buyer of the transactions contemplated hereby. 4.14 Common Stock. ------------- The Common Stock is registered under Section 12(g) of the Exchange Act and Buyer is subject to the periodic reporting requirements imposed by Section 13 or 15(d) of the Exchange Act. 4.15 Orbit Shares. ------------- The Orbit Shares of Common Stock to be issued and delivered to Sellers in accordance with this Agreement, when so issued and delivered, will be validly authorized and issued and fully paid and non-assessable, and no shareholder of Buyer shall have any preemptive right with respect thereto. 4.16 Absence of Undisclosed Liabilities. ------------------------------------- Except as set forth on Schedule 4.16 of the Orbit Disclosure Schedule or ------------- except to the extent reflected or reserved in Buyer's financial statements included in the SEC Documents, or incurred in the ordinary course of business, since September 30, 2007, Buyer has not incurred any material liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise (including, without limitation, liabilities as guarantor or otherwise with respect to obligations to others) and whether due or to become due. 4.17 Sarbanes-Oxley Act. ------------------- Buyer is in compliance with the provisions of the Sarbanes-Oxley Act of 2002, which apply to Buyer, as of the date of this Agreement, and the certificates prepared and filed, to date, by Buyer pursuant to Sections 302 and 906 thereof are accurate. 4.18 Orbit Disclosure Schedule. --------------------------- The Orbit Disclosure Schedule referred to in this Article IV contains certain information regarding Buyer as indicated at various places in this Agreement and is attached to and forms a part of this Agreement. Buyer hereby represents and warrants that all information set forth in the Orbit Disclosure Schedule is and will be true, correct and complete in all material respects as of the date of this Agreement and the Effective Date, does not omit to state any material fact necessary in order to make the statements therein not misleading, and shall be deemed for all purposes of this Agreement to constitute part of the representations and warranties under this Article IV. Each of the documents and other writings furnished to the Sellers by Buyer pursuant to Article IV and each of the representations, warranties and statements by Buyer in this Article IV is true, correct and complete in all material respects with respect to Buyer as of the date furnished and does not omit to state any material fact necessary in order to make the statements therein not misleading. ARTICLE V. INDEMNIFICATION 5.01 Indemnity in Favor of Buyer. --------------------------- Subject to the limitations set forth below in this Article V, each of the Sellers, agree to severally, but not jointly, indemnify and hold harmless Buyer, its Subsidiaries and their respective officers, directors, employees and stockholders against and in respect of any and all of the following, but only with respect to each Seller's respective representations and warranties set forth in Article III of this Agreement: (i) Claims, suits, actions, Proceedings (formal or informal), investigations, judgments, deficiencies, damages, settlements, Liabilities, and legal and other expenses (including reasonable legal fees and expenses of counsel chosen by any Indemnified Party, as defined below in Section 5.03 and subject to the limitations set forth therein) as and when incurred arising out of or based upon (A) any breach of any representation, warranty, covenant, or agreement of any Seller contained in this Agreement, (B) any obligation or Liability of any nature, accrued or contingent, of ICS prior to the Closing and not specifically disclosed to Buyer in accordance with this Agreement; (ii) Claims, suits, actions, Proceedings (formal or informal), investigations, judgments, deficiencies, damages, settlements, Liabilities, and legal and other expenses (including reasonable legal fees and expenses of counsel chosen by any Indemnified Party, subject to the limitations set forth in Section 5.03 below) as and when incurred arising out of or based upon the failure of ICS to obtain the consent of any Person whose consent is required to effectuate the Buyer's right to any of ICS's assets under the terms existing prior to the Share Purchase; (iii) Claims, suits, actions, Proceedings (formal or informal), investigations, judgments, deficiencies, damages, settlements, Liabilities, and legal and other expenses (including reasonable legal fees and expenses of counsel chosen by any Indemnified Party) as and when incurred arising out of or based upon the relationship between ICS and any of its shareholders, members, investors, agents, employees, officers, directors, Representatives or associates or arising out of or based upon any agreements or negotiations between any such parties; (iv) Claims, suits, actions, Proceedings (formal or informal), investigations, judgments, deficiencies, damages, settlements, Liabilities, and reasonable legal and other expenses (including reasonable legal fees and expenses of counsel chosen by any Indemnified Party) as and when incurred arising out of or resulting from the acts or omissions of ICS that result in Environmental Conditions, Environmental Liabilities, or failure to comply with any Environmental Law; (v) Claims, suits, actions, Proceedings (formal or informal), investigations, judgments, deficiencies, damages, settlements, Liabilities, and legal and other expenses (including reasonable legal fees and expenses of counsel chosen by any Indemnified Party, subject to the limitations set forth in Section 5.03 below) as and when incurred arising out of or based upon Contract GS-23F-0181; and (vi) Claims, suits, actions, Proceedings (formal or informal), investigations, judgments, deficiencies, damages, settlements, Liabilities, and legal and other expenses (including reasonable legal fees and expenses of counsel chosen by any Indemnified Party, subject to the limitations set forth in Section 5.03 below) as and when incurred arising out of or based upon Sellers' obligations under Section 8.23 for all payments owed by ICS. 5.02 Indemnity in Favor of Sellers. --------------------------------- Buyer agrees to indemnify, defend and hold the Sellers free and harmless from and against all claims, actions, Liabilities and damages (including reasonable attorneys' fees and expenses) as and when incurred arising out of or based upon (i) the breach by Buyer or the inaccuracy of any of its representations, warranties, covenants or agreements contained in this Agreement, (ii) any and all incremental costs incurred as a result of making the Section 338(h)(10) Election with regard to the Share Purchase, (iii) any breach or failure to perform by Buyer of any material term of this Agreement, (iv) any and all liabilities assumed by Buyer hereunder and the operations of ICS following the Closing, (v) any liability of any of the Sellers under any guaranty or surety agreement executed on behalf of ICS that has been previously disclosed to Buyer, and (vi) any uninsured liability for personal injury and/or property damage arising out of or based on Buyer's activities on the Premises, including actions of Buyer's agents, employees, and/or contractors including without limitation any environmental testing, but not the results of such testing. 5.03 Indemnification Procedure. -------------------------- All claims by a party seeking indemnification (the "INDEMNIFIED PARTY") under this Article V shall be asserted and resolved as follows: (a) Notice of Claims. In the event that (i) any claim, suit, action, Proceeding (formal or informal) or investigation is asserted or instituted by any Person other than the parties to this Agreement which could give rise to any judgment, deficiency, damages, settlement or Liability for which the party from whom the indemnification is being sought (the "INDEMNIFYING PARTY") could be liable to the Indemnified Party under this Agreement (such claim, suit, action, Proceeding (formal or informal) or investigation, a "THIRD PARTY CLAIM") or (ii) any Indemnified Party under this Agreement shall have a claim to be indemnified by the Indemnifying Party which does not involve a Third Party Claim (such claim, a "DIRECT CLAIM" and, together with Third Party Claims, "CLAIMS"), the Indemnified Party shall with reasonable promptness send to the Indemnifying Party a written notice specifying the nature of such Claim and the amount or estimated amount thereof (which amount or estimated amount shall not be conclusive of the final amount, if any, of such Claim) (a "CLAIM NOTICE"), provided that a delay in notifying the Indemnifying Party shall not relieve such Indemnifying Party of its obligations under this Agreement except to the extent that (and only to the extent that) such failure shall have caused the losses for which the Indemnifying Party is obligated to be greater than such losses would have been had the Indemnified Party given proper notice. (b) Third Party Claims. In the event of a Third Party Claim, the Indemnifying Party shall be entitled to appoint counsel of its choice at its expense to represent the Indemnified Party and any others. The Indemnifying Party may reasonably designate in connection with such Third Party Claim (in which case the Indemnifying Party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Party except as set forth below), provided that such counsel is reasonably acceptable to the Indemnified Party. Notwithstanding the Indemnifying Party's election to appoint counsel to represent an Indemnified Party in connection with a Third Party Claim, an Indemnified Party shall have the right to employ separate counsel, and the Indemnifying Party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel selected by the Indemnifying Party to represent the Indemnified Party would present such counsel with a conflict of interest or (ii) the Indemnifying Party shall not have employed counsel to represent the Indemnified Party within a reasonable time after notice of the institution of such Third Party Claim. If requested by the Indemnifying Party, the Indemnified Party agrees to cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim which the Indemnifying Party is defending, or, if appropriate and related to the Third Party Claim in question, in making any counterclaim against the Person asserting the Third Party Claim, or any cross-complaint against any Person. (c) Settlement of Claims. The Indemnifying Party shall not, without the written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed), (i) settle or compromise any Claims or consent to the entry of any judgment which does not include as an unconditional term thereof the delivery by the claimant or plaintiff to the Indemnified Party of a written release from all Liability in respect of such Claim of all Indemnified Parties affected by such Claim or (ii) settle or compromise any Claim if the settlement imposes equitable remedies or material obligations on the Indemnified Party other than financial obligations for which such Indemnified Party will be indemnified hereunder. No Claim which is being defended in good faith by the Indemnifying Party in accordance with the terms of this Agreement shall be settled or compromised by the Indemnified Party without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed). (d) Direct Claims. In the event of a Direct Claim, the Indemnifying Party shall notify the Indemnified Party in writing within thirty (30) Business Days of receipt of a Claim Notice whether or not the Indemnifying Party will dispute such claim. (e) Access. From and after the delivery of a Claim Notice under this Agreement, at the reasonable request of the Indemnifying Party, each Indemnified Party shall grant the Indemnifying Party and its Representatives all reasonable access to the books, records and properties of such Indemnified Party to the extent reasonably related to the matters to which the Claim Notice relates. All such access shall be granted during normal business hours and shall be granted under conditions which will not unreasonably interfere with the business and operations of such Indemnified Party. The Indemnifying Party will not, and shall require that its Representatives do not, use (except in connection with such Claim Notice) or disclose to any third Person other than the Indemnified Party's Representatives (except as may be required by applicable Law) any information obtained pursuant to this Section 5.03(e) which is designated as confidential by an Indemnified Party. (f) Cooperation; Mitigation of Damages. Each Indemnified Party agrees to take all reasonable steps to mitigate damages in respect of any Claim for which indemnification is sought, including without limitation using commercially reasonable efforts to effect recovery from third parties. Each Indemnified Party shall use good faith efforts to avoid or minimize costs or expenses associated with any such Claim, and shall cooperate with the Indemnifying Party in its efforts to defend or contest any such Claim. (g) Threshold Amount and Limitation. Notwithstanding anything to the contrary contained herein, the Sellers shall have no indemnification obligation whatsoever with respect to the following: (i) Any Claims, suits, actions, Proceedings (formal or informal), investigations, judgments, deficiencies, damages, settlements, Liabilities, and legal and other expenses unless and until the aggregate amount of such matters exceeds the sum of Fifty Thousand and no/100ths Dollars ($50,000.00) (the "Basket") provided, however, that the Sellers shall not be liable for any claim -------- ------- which individually does not exceed $5,000 and such claims not meeting this threshold shall not be applied in calculating the Basket; and provided, further -------- ------- that, in no event, shall the foregoing $5,000 "de minimus exception" apply with respect to willful breaches of any representations and warranties; (ii) The liability of any Seller for indemnification hereunder shall in no circumstance exceed an amount equal to such Seller's allocated share of the Purchase Price as set forth in Exhibit 2.03 of this Agreement which such Seller ------------ actually receives; and (iii) Any liability of any Seller for indemnification with respect to a Direct Claim which has been adjudicated pursuant to a final unappealable order of the court of competent jurisdiction, shall be satisfied up to the thresholds set forth in Subparagraph (ii) above, and unless otherwise directed by each such Seller, first from the Escrow Collateral held pursuant to Section 2.06(c); and, if not satisfied, the pro-rata portion of cash received by such Seller from any Annual Earn-Out Payments; and, if not satisfied, next from the pro-rata portion of Orbit Shares (valued at the average Closing Price of such stock for the ten (10) trading days immediately prior to the payment date by such Seller); and finally, if not satisfied, the cash received by such Seller at Closing pursuant to Section 2.02(ii) of this Agreement. 5.04 Survival. -------- Except as otherwise provided in this Agreement, all representations, warranties, covenants and obligations in this Agreement, the ICS Disclosure Schedule, the Orbit Disclosure Schedule and any other certificate or document delivered pursuant to this Agreement shall survive the Closing and the consummation of the Share Purchase for a period of two (2) years after the Closing Date as to the representations, warranties, covenants and obligations of Sellers ("Applicable Survival Period"). Any claim first asserted in writing and in reasonable detail to the Indemnifying Party within the Applicable Survival Period shall survive the Closing until finally resolved notwithstanding expiration of the Applicable Survival Period, but in no other event shall any claim for indemnification be asserted after the expiration date of the Applicable Survival Period. The right to indemnification, reimbursement or other remedy based upon such representations, warranties, covenants and obligations shall not be affected by any investigation (including any environmental investigation or assessment) conducted with respect to to the accuracy or inaccuracy of or compliance with any such representation, warranty, covenant or obligation, except that any Knowledge acquired (or capable of being acquired) at any time, whether before or after the Closing Date with respect to any representation, warranty, covenant or obligation shall void any claim for indemnification with respect thereto. In no event shall any information or condition of which Buyer had Knowledge (or reasonably should have had Knowledge) on or before the Closing Date, constitute the basis of a claim for indemnification under this Agreement against any of the Sellers. ARTICLE VI. COVENANTS OF THE SELLERS 6.01 Access. ------ ICS will afford, and the Sellers will cause ICS to afford, the officers, employees, counsel, agents, accountants, and other Representatives of Buyer reasonable access, at reasonable times and upon reasonable notice though the Effective Date, to the plants, properties, books, and records of ICS, will permit any of them to conduct at Buyer's expense, any environmental investigation of the properties deemed necessary by the Buyer or Buyer's environmental consultant, and agreed to by Sellers will permit any of them to make extracts from and copies of such books and records, and will from time to time furnish any of them with such additional financial and operating data and other information as to the financial condition, results of operations, business, properties, assets, Liabilities, or future prospects of ICS as they from time to time may request, provided however that Buyer and its Representatives shall not unreasonably interfere with the conduct of ICS's business. In connection with the foregoing, ICS will allow Buyer's independent accountants to (i) audit the ICS Financial Statements at Buyer's expense in order to prepare such audited financial statements as are required to be included in Buyer's Current Report on Form 8-K for the Share Purchase and subsequently to be included in a registration statement pursuant to the Registration Rights Agreement for the Orbit Shares, in accordance with the applicable rules and regulations of the SEC and (ii) perform all necessary work required to determine that ICS will have in place the necessary internal controls and procedures to be in compliance with Section 404 of the Sarbanes-Oxley Act of 2002 following the Closing Date. In addition, ICS and the Sellers shall continue to provide Buyer and its independent accountants with current unaudited financial statements for any completed calendar quarter prior to the Effective Date. 6.02 Conduct of Business. ------------------- ICS will use reasonable best efforts to conduct its affairs, and the Sellers will cause ICS to use reasonable best efforts to conduct its affairs, so that at the Effective Date, no representation or warranty of the Sellers and ICS will be inaccurate, no covenant or agreement of the Sellers and Sellers will be breached, and no condition in this Agreement will remain unfulfilled by reason of the actions or omissions not in the Ordinary Course of Business of ICS or any Seller. Buyer acknowledges and agrees that in the ordinary course of ICS's Business, all of the representations and warranties made by Sellers were believed to be accurate when made and all changes outside of the Ordinary Course of Business will be brought to the attention of Buyer at or before the Effective Date. Until the Effective Date, ICS will use, and the Sellers will cause ICS to use, its best efforts to preserve the business of ICS intact, to keep available the services of its present personnel, to preserve in full force and effect the Contracts, agreements, instruments, leases, licenses, arrangements, and understandings of ICS, and to preserve the goodwill of its suppliers, customers, and others having business relations with any of them. Until the Effective Date, ICS will conduct, and the Sellers will cause ICS to conduct, its business and operations in all respects only in the Ordinary Course of Business and in accordance with past practice. 6.03 Advice of Changes. ----------------- Until the Effective Date, the Sellers will promptly advise Buyer in a detailed written notice of any fact or occurrence or any pending or threatened occurrence of which any of them obtains Knowledge and which (if existing and known at the date of the execution of this Agreement) would have been required to be set forth or disclosed in or pursuant to this Agreement, the ICS Disclosure Schedule or an exhibit hereto, which (if existing and known at any time prior to or at the Effective Date) would make the performance by any party of a covenant contained in this Agreement impossible or make such performance materially more difficult than in the absence of such fact or occurrence, or which (if existing and known at the time of the Effective Date) would cause a condition to any party's obligations under this Agreement not to be fully satisfied. 6.04 Voting by Sellers. ----------------- It is agreed and understood that until the Effective Date, the Sellers shall not vote their shares in ICS for: (a) Any merger, consolidation, reorganization, or other business combination involving ICS, except as contemplated by this Agreement; (b) Any sale, lease, exchange or disposition of assets of ICS, except as contemplated by this Agreement or in the Ordinary Course of Business; (c) Any issuance of any corporate interests of ICS or, any option, warrant, or other right calling for the issuance of any such interest, or any security convertible into or exchangeable for any such interest; (d) Any authorization of any class of capital stock of ICS; (e) The amendment of the certificate of incorporation (or other organizational document) of ICS; or (f) Any proposition the effect of which is reasonably likely to inhibit, restrict, or delay the consummation of the Share Purchase or any of the transactions contemplated by this Agreement or impair the contemplated benefits to Buyer or the Sellers of the transactions contemplated by this Agreement. 6.05 Conduct of Business Until the Effective Date. -------------------------------------------------- The Sellers agree that until the Effective Date, unless they have received the prior written consent of Buyer, with the exception of shareholder distributions consistent with Section 8.03 and 9.17, they will: (a) Operate ICS's business only in the usual, regular and ordinary course consistent with past practice; (b) Use all reasonable efforts as to events within ICS's or the Sellers' control to prevent the occurrence of any change or event which would prevent any of the representations and warranties of the Sellers contained herein from being true at and as of the Effective Date with the same effect as though such representations and warranties had been made at and as of the Effective Date; (c) Use their best efforts to preserve ICS's present relationship with suppliers, customers and others having business dealings with it; (d) Pay and discharge all costs and expenses of carrying on ICS's business consistent with past business practices; (e) Neither enter into any customer order or purchase order in excess of $50,000 nor enter or make any Contract or commitment and render no bid or quotation, written or oral, except in the Ordinary Course of Business consistent with past practice; (f) Create or suffer any Liens upon any of its assets (other than Permitted Liens set forth in Schedule 3.24 of the ICS Disclosure Schedule); ------------- (g) Not acquire or dispose of any assets or enter into any transaction, except in the Ordinary Course of Business as currently conducted and consistent with past practice; (h) Maintain books, accounts and records in the usual, regular, true and ordinary manner consistent with past practice; (i) Incur any obligation or Liability (fixed or contingent), except in the Ordinary Course of Business consistent with past practice; (j) Not cancel or compromise any material debt or claim, other than in the Ordinary Course of Business consistent with past practice; (k) Not waive or release any rights of material value with respect to its assets, except in the Ordinary Course of Business consistent with past practice; (l) Not modify or change in any material respect or terminate any existing license, lease, contract or other document required to be listed on the ICS Disclosure Schedule other than in the Ordinary Course of Business consistent with past practice, except that ICS shall be permitted to modify or change existing licenses, leases, Contracts and other documents to obtain the Consents referred in Schedule 3.29 of the ICS Disclosure Schedule hereto if Buyer ------------- consents to such modification or change; (m) Make any loans or extensions of credit, except to trade purchasers in the Ordinary Course of Business consistent with past practice; (n) Maintain its properties, machinery and equipment in their present condition and repair, normal wear and tear excepted; (o) Continue all policies of insurance in full force and effect up to and including the Effective Date; (p) Make no material change in compensation policies; (q) Make all payments of principal and interest due in connection with outstanding Indebtedness and not incur any additional material Indebtedness, unless required by cash flow necessity, with Buyer's approval; and (r) Not engage in any other transactions not in the Ordinary Course of Business. 6.06 Cooperation on Tax Matters. ----------------------------- (a) The Sellers shall cooperate fully, as and to the extent reasonably requested by Buyer in connection with the filing of Tax Returns and any audit, litigation or other Proceeding with respect to Taxes. Such cooperation shall include without limitation, the retention and (upon Buyer's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other Proceeding, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Sellers agree to (A) retain all books and records, not already in ICS's or Buyer's possession, with respect to Tax matters pertinent to ICS relating to any taxable period beginning before the Effective Date until the expiration of the statute of limitations (and, to the extent notified by Buyer or the Sellers, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (B) give Buyer reasonable written notice prior to transferring, destroying or discarding any such books and records and, if Buyer so requests, ICS or the Sellers, as the case may be, shall allow Buyer to take possession of such books and records. (b) ICS, and the Sellers shall prior to the Effective Date, upon Buyer's request, use reasonable commercial efforts to obtain any certificates or other documents from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed, including, but not limited to, with respect to the transactions contemplated by this Agreement. 6.07 Assignment and Assumption of Facility Leases. ------------------------------------------------- On or prior to the Closing Date, ICS shall enter into an Assignment and Assumption of Lease, substantially in the form annexed hereto as Exhibit 6.07 ------------ ("ASSIGNMENT AND ASSUMPTION OF LEASE"), with each of the landlords under the Facility Leases and the Buyer, pursuant to which all of ICS's right, title and interest in and to each of the Facility Leases shall be assigned to and assumed by Buyer. ARTICLE VII. COVENANTS OF BUYER 7.01 Employment Agreement. --------------------- Buyer will retain the services of the individuals set forth in Schedule -------- 7.01 of the ICS Disclosure Schedule as employees pursuant to the terms of an - employment agreement, substantially in the form annexed hereto as Exhibit 7.01 ------------ ("EMPLOYMENT AGREEMENT"), to be executed and delivered upon the execution of this Agreement, which shall contain terms and conditions customary and similar to Buyer's existing employment agreements of this nature. 7.02 Transfer of Orbit Shares to Sellers. ---------------------------------------- Buyer shall transfer to the Sellers' Escrow Agent the number of Orbit Shares referred to in Section 2.02(i) hereof on the Closing Date. The Sellers' Escrow Agent shall transfer the Shares to the Sellers on the Effective Date in accordance with the Sellers' Closing Escrow Agreement. 7.03 Registration Rights Agreement. ------------------------------- Buyer will execute and deliver to Sellers upon the execution of this Agreement, a Registration Rights Agreement pursuant to Section 2.07(b) pursuant to which Buyer will file with the SEC a registration statement for the Orbit Shares within a reasonable time following the Closing, to be mutually agreed upon by the parties hereto, but in no event later than nine (9) months from the Closing. 7.04 Assignment and Assumption of Lease. -------------------------------------- Buyer shall execute and deliver to ICS an Assignment and Assumption of Leases pursuant to Section 6.07 hereof upon the execution of this Agreement. 7.05 Cooperation of Buyer. ---------------------- Buyer shall cooperate with all reasonable requests of the Sellers and their respective Representatives in connection with the consummation of the transactions contemplated hereby, including without limitation using its best efforts to obtain all authorizations, consents and permits of others which may be required to permit the consummation of the transactions contemplated by this Agreement. 7.06 SEC Filings. ------------ Within four (4) business days after the Closing Date, Buyer shall prepare and timely file with the SEC a Current Report on Form 8-K describing the transactions contemplated hereby and any and all other required filing(s) to effectuate the Share Purchase. 7.07 Certain Tax Matters. --------------------- With regard to any decisions by the Buyer and/or its Representatives subsequent to the Closing regarding ICS, to effect their current or future status via changes such as tax elections, liquidation or any other form of change or disposition, the Buyer shall bear the full and complete responsibility and resulting costs and all federal and/or state tax implications associated with such, and the Sellers shall have no obligation or liability therefore. ARTICLE VIII. CONDITIONS TO OBLIGATIONS OF BUYER The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction or waiver at or prior to the Closing Date (unless otherwise provided herein) of each of the following conditions: 8.01 Accuracy of Representations and Warranties and Compliance With -------------------------------------------------------------------- Covenants. ---- (a) All representations and warranties of the Sellers set forth in this Agreement, the Ancillary Documents to which they are a party, the ICS Disclosure Schedule and any other document delivered pursuant to this Agreement, shall be accurate when made and, in addition, except as may be otherwise disclosed to Buyer, shall be accurate as of the Effective Date; and (b) As of the Closing, the Sellers shall have performed and complied with all covenants and agreements and satisfied all conditions required to be performed and complied with by them at or before such time by this Agreement. 8.02 Good Standing; Qualification to do Business. ------------------------------------------------ ICS shall have delivered to Buyer a certificate of good standing from the State of Kentucky and any other jurisdiction in which it has qualified to do business dated as of a date no earlier than five (5) days prior to the Closing Date. 8.03 Minimum Net Working Capital. ------------------------------ (a) The Purchase Price is based upon ICS having a minimum of Net Working Capital of $750,000 ("MINIMUM NET WORKING CAPITAL") computed as of December 31, 2007 by Buyer's auditors. The cash portion of the Purchase Price shall be adjusted, if necessary, on the date that is ten (10) business days following receipt by Buyer of the final audit report for ICS (as then owned by Buyer) for the 2007 fiscal year then ended, but in no event later than April 15, 2008. The audit report shall include an audited consolidated balance sheet for ICS ("CLOSING BALANCE SHEET") computed in accordance with GAAP, applied consistent with past practices of ICS. If the Closing Balance Sheet reflects Net Working Capital that is less than the Minimum Net Working Capital (the difference to be referred to as the "SHORTFALL"), each of the Sellers shall pay to Buyer their respective pro rata share of the Shortfall, dollar for dollar within fifteen (15) Business Days of their receipt of the Closing Balance Sheet. In the event the Closing Balance Sheet reflects Net Working Capital in excess of the Minimum Net Working Capital, then Buyer will pay to the Sellers their respective pro rata share of the excess, dollar for dollar, within fifteen (15) Business Days of its receipt of the Closing Balance Sheet. "NET WORKING CAPITAL" shall mean current assets minus current liabilities in accordance with GAAP. Further, consistent with the provisions of Section 2.09(a), above, any local level taxes (i.e, City of Louisville/Jefferson County, Kentucky) accrued by ICS on its Closing Balance Sheet as a result of the Section 338(h)(10) Election, shall not be taken into account as a liability for purposes of the Net Working Capital calculation as provided for in this Section 8.03. (b) If the Sellers do not agree with the Net Working Capital calculation computed by the Buyer's auditors, the Sellers shall so inform the Buyer in writing within fifteen (15) Business Days after the Sellers' receipt thereof, such writing to set forth the objections of the Sellers in reasonable detail. If the Sellers and the Buyer cannot reach agreement as to any disputed matter relating to the Net Working Capital calculation within thirty (30) Business Days after notification by the Sellers to the Buyer of a dispute, they shall forthwith refer the disputed items to an accounting firm of recognized standing in the United States and mutually agreeable to the Sellers and the Buyer for resolution, with the understanding that such firm shall resolve all disputed items within twenty (20) Business Days after such disputed items are referred to it. If the Buyer and the Sellers are unable to agree on the choice of an accounting firm, then PriceWaterhouse Coopers LLP, of Louisville, Kentucky, shall serve as the accounting firm. If PriceWaterhouse Coopers LLP is unwilling to so serve, the Buyer and the Sellers shall within ten (10) Business Days each select two (2) accounting firms of recognized standing within 150 miles of Louisville, Kentucky, and the accounting firm shall be selected by lot (after excluding their respective regular outside accounting firms). The decision of any such accounting firm under this subparagraph (b) with respect to all disputed matters relating to the Net Working Capital computation shall be deemed final and conclusive and shall be binding upon the Sellers and the Buyer. Any payments due pursuant to the decision of the accounting firm shall be made within fifteen (15) Business Days of the parties' receipt of such firm's decision. In addition, if the Sellers do not object to the Net Working Capital calculation within the fifteen (15) Business Day period referred to above, the Net Working Capital calculation as so prepared by Buyer's auditors shall be deemed final and conclusive and binding upon the Sellers and the Buyer. (c) The Sellers shall be entitled to have reasonable access to the books and records of ICS and the work papers of the Buyer prepared specifically in connection with the Net Working Capital calculation, and, upon reasonable prior notice, shall be entitled to discuss such books and records and work papers with the Buyer and those persons responsible for the preparation thereof. (d) The Sellers and the Buyer shall pay their own respective costs and expenses incurred in connection with the matters described in this Section 8.03, ------------ provided, however, that the fees and expenses of the accounting firm selected to - -------- ------- calculate the Net Working Capital pursuant to Section 8.03(b) shall be borne --------------- entirely by the party whose calculation of the final Net Working Capital differs by the greatest amount from the Net Working Capital determined by such accounting firm. 8.04 Inventory. --------- An itemized Inventory shall have been prepared on the Closing Balance Sheet pursuant to Section 8.03 hereof, based upon physical observation by a Representative of Buyer and a Representative of ICS. 8.05 Review of Proceedings. ----------------------- All actions, Proceedings, instruments, and documents required to carry out this Agreement, the Ancillary Documents to which ICS and the Sellers are a party, the ICS Disclosure Schedule and any other certificate or document delivered pursuant to this Agreement or incidental to any of them and all other related legal matters shall be subject to the reasonable approval of Phillips Nizer LLP, counsel to Buyer, and ICS, and the Sellers shall have furnished such counsel such documents as such counsel may have reasonably requested for the purpose of enabling them to pass upon such matters. 8.06 No Legal Action. ----------------- There shall not have been instituted or threatened any legal Proceeding relating to, or seeking to prohibit or otherwise challenge the consummation of, the transactions contemplated by this Agreement, or to obtain substantial damages with respect thereto. 8.07 No Governmental Action. ------------------------ There shall not have been any action taken, or any Law, rule, regulation, order, or decree proposed, promulgated, enacted, entered, enforced, or deemed applicable to the transactions contemplated by this Agreement by any federal, state, local, or other Governmental Authority or any court or other tribunal, including the entry of a preliminary or permanent injunction, which, in the sole but reasonable judgment of Buyer, is reasonably likely to: (a) make any of the transactions contemplated by this Agreement illegal; (b) result in a delay in the consummation of any of the transactions contemplated by this Agreement; (c) require the divestiture by Buyer or ICS of a material portion of the business of either of them; (d) impose material limitations on the ability of Buyer effectively to exercise full rights of ownership with respect to the properties and assets of ICS; or (e) otherwise prohibit, restrict or delay consummation of any of the transactions contemplated by this Agreement or impair the contemplated benefits to Buyer, ICS and the Sellers of the transactions contemplated by this Agreement. 8.08 Consents. -------- The Sellers shall have obtained at or prior to the execution of this Agreement, all Consents required for consummation of the transactions contemplated by this Agreement. 8.09 Personnel. --------- The individuals set forth on Schedule 8.09 of the ICS Disclosure Schedule ------------- are employees (except those who resigned or were terminated in the Ordinary Course of Business) of ICS as provided thereon, and shall, at the Closing Date be actively engaged in the performance of their existing duties for ICS and shall not have evidenced any intention not to continue employment subsequent to the Closing Date. 8.10 Employment Agreements. ---------------------- The persons listed in Schedule 7.01 of the ICS Disclosure Schedule, -------------- including, but not limited to, Mr. Ice, Mr. Rhudy and Ms. McDearman, shall have entered into the Employment Agreements with Buyer pursuant to Section 7.01 hereof, subject to mutual agreement with Buyer as to all material terms and conditions. Mr. Ice will be elected at the Closing effective on the Effective Date to the position of President and Chief Operating Officer of ICS. Mr. Ice shall receive notice of and have the opportunity to participate in all meetings of the Board of Directors of Buyer. Any breach or default by Buyer of the conditions herein would render any Employment Agreement void at the option of each of these persons. 8.11 Restrictive Covenants Agreement. ------------------------------- All key operating personnel of ICS identified and agreed upon before the execution of this Agreement and who do not enter into employment agreements with Buyer, shall have executed and delivered to Buyer a Restrictive Covenants Agreement, substantially in the form annexed hereto as Exhibit 8.11 ------------- ("RESTRICTIVE COVENANTS AGREEMENT"). 8.12 General Release. --------------- Buyer shall have received from each person who is before the execution of this Agreement, becomes, or who at any time between that date which is one year prior to the date this Agreement is executed was, an officer, director or shareholder of ICS, a General Release of all claims, demands and causes of action against ICS, dated the date of the Closing Date, substantially in the form annexed hereto as Exhibit 8.12 ("GENERAL RELEASE"). ------------- 8.13 Other Closing Documents. ------------------------- ICS and the Sellers shall have delivered to Buyer at or prior to the Closing such other documents as Buyer may reasonably request in order to enable it to determine whether the conditions to their obligations under this Agreement have been met and otherwise to carry out the provisions of this Agreement. 8.14 Other Agreements. ----------------- Any and all agreements to be executed in connection with this Agreement and the transactions contemplated herein shall have been duly authorized, executed, and delivered by the parties thereto at or prior to the Closing, shall be in full force, valid and binding upon the parties thereto, and enforceable by them in accordance with their terms at the Closing Date, and no party thereto at any time from the execution thereof until immediately after the Effective Date shall have been in violation of or in default in complying with any material provision thereof. 8.15 Corporate Records. ------------------ Buyer shall have received at or prior to the Closing Date the original corporate minute book, stock ledger, stock certificate book, corporate seal and other related corporate records and documents of ICS, along with the signed resignation, effective as of the Effective Date, of the officers and directors of each of them. Notwithstanding that fact, Mr. Ice shall be reelected by the new Board of Directors of ICS to the position of President and Chief Operating Officer of ICS and by Buyer, as a Director of ICS, upon the Closing Date. In addition, Buyer shall have received at the Closing signed bank and financial institution signature cards substituting the existing signatories with the newly appointed signatories mutually authorized by Buyer and Mr. Ice on all bank and financial institution accounts of ICS effective as of the Effective Date. Buyer shall also have received at the Closing a copy of all keys to the leased Premises of ICS and physical control and custody of all of the business assets and property of ICS effective as of the Effective Date. 8.16 Opinion of Counsel. -------------------- On the Closing Date, Buyer shall have received an opinion of counsel for ICS and the Sellers, addressed to Buyer, in the form of Exhibit 8.16 annexed ------------ hereto. 8.17 Board Approval. --------------- The Boards of Directors of ICS shall have approved this Agreement and the Share Purchase and such approval shall not have been recorded, modified or superseded in any way and shall remain in full force and effect on the Effective Date. 8.18 No Material Adverse Change. ----------------------------- From the date of this Agreement until the Effective Date, there shall not have occurred any Material Adverse Change with respect to ICS. 8.19 Tax Withholding Forms and Certificates. ------------------------------------------ The Sellers shall have provided Buyer with properly executed Internal Revenue Service Forms W-9, a statement that satisfies Buyer's obligations under Treasury Regulation Section 1.1445-2(b)(2), state Tax clearance certificates or any other document(s) which may be required by any Taxing or Governmental Authority in order to relieve Buyer of any obligation to withhold any portion of the payments to the Sellers pursuant to this Agreement. 8.20 Section 338(h)(10) Election. ----------------------------- Within a reasonable time following the Closing, each of ICS and the Sellers will join with Buyer in making the Section 338(h)(10) Election with respect to the Share Purchase and shall timely file all tax forms (including forms 8023 and 8883) in connection therewith, pursuant to Section 2.09 hereof. 8.21 Assignment and Assumption of Lease. -------------------------------------- ICS shall have executed and delivered to Buyer an Assignment and Assumption of Lease pursuant to Section 6.08 hereof. 8.22 Delivery of Cash into the Indemnity Escrow Account. --------------------------------------------------------- Buyer shall, at the direction of Mr. Ice, have deposited $150,000 cash into the Indemnity Escrow Account pursuant to the terms and conditions of this Agreement and the Indemnity Escrow Agreement in the Form of Exhibit 2.06(d) --------------- annexed hereto. 8.23 Responsibility for Filing Tax Returns. ----------------------------------------- The Sellers shall prepare or cause to be prepared and file or cause to be filed all Tax Returns for ICS through the Effective Date. Sellers shall provide Buyer with copies of all of such Tax Returns prior to filing and provide Buyer with reasonable time to review and comment on each such Tax Return. The Sellers shall be solely responsible for any and all payments owed by the Sellers for all Tax Periods through the Effective Date. ICS shall have accrued any and all payments owed by ICS for all Tax Periods through the Effective Date. ICS and the Sellers' obligations hereunder shall survive the Closing. 8.24 Termination of Shareholders' Agreement. ----------------------------------------- At the Closing, the Sellers shall have each provided Buyer with written confirmation that the Shareholders' Agreement made and entered into on May 24, 2001, as amended, by and among Kenneth J. Ice, Julie A. McDearman, Michael R. Rhudy and ICS has been terminated and that ICS and the Sellers have no further liabilities under such Agreement. ARTICLE IX. CONDITIONS TO OBLIGATIONS OF THE SELLERS The respective obligations of the Sellers to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction or waiver at or prior to the Closing Date (unless otherwise provided herein) of each of the following conditions: 9.01 Accuracy of Representations and Compliance with Covenants. -------------------------------------------------------------- (a) All representations and warranties of Buyer contained in this Agreement, the Ancillary Documents to which it is a party, the Orbit Disclosure Schedule and all other certificates, agreements or other documents executed and delivered by Buyer pursuant to this Agreement, shall be accurate when made and shall be accurate as of the Effective Date; and (b) As of the Closing, Buyer shall have performed and complied with all covenants and agreements and satisfied all conditions required to be performed and complied with by any of them at or before such time by this Agreement. 9.02 Stock Certificates. ------------------ Buyer shall have delivered to the Sellers' Closing Escrow Agent on the Closing Date, stock certificates representing the Orbit Shares that are being issued pursuant to Section 2.02(i) and Section 2.05(b) hereof and the Sellers' Closing Escrow Agreement. The Sellers' Closing Escrow Agent shall deliver the Orbit Shares to the Sellers on the Effective Date in accordance with the Closing Escrow Agreement. 9.03 Cash Purchase Price. --------------------- Buyer shall deliver the cash portion of the Purchase Price on the Closing Date as follows: (i) $900,000 to the Sellers' Closing Escrow Agent and (ii) $4,500,000 to Buyer's Closing Escrow Agent pursuant to Section 2.06 of this Agreement, the Closing Escrow Agreements and the Indemnity Escrow Agreement. Subject to Section 2.06(d) and Section 8.03 hereof, the Sellers' Closing Escrow Agent and Buyer's Closing Escrow Agent shall deliver the cash portion of the Purchase Price to the Sellers on the Effective Date in accordance with the Closing Escrow Agreements. 9.04 Employment Agreements. ---------------------- Buyer shall enter into and deliver the Employment Agreement with each person listed in Schedule 7.01 of the ICS Disclosure Schedule pursuant to -------------- Section 7.01 hereof. 9.05 Registration Rights Agreement. ------------------------------- Sellers shall have received from Buyer the fully executed Registration Rights Agreement pursuant to Section 2.07(b) hereof. 9.06 Opinion of Counsel. -------------------- On the Closing Date, the Sellers shall have received an opinion of counsel for Buyer, addressed to the Sellers, in the form of Exhibit 9.06 annexed hereto. ------------ 9.07 Assignment and Assumption of Lease. -------------------------------------- Buyer shall have executed and delivered to ICS an Assignment and Assumption of Lease pursuant to Section 6.07 hereof. 9.08 Board Approval. --------------- The Board of Directors of Buyer shall have approved this Agreement and the Share Purchase and such approval shall not have been recorded, modified or superseded in any way and shall remain in full force and effect on the Closing Date. 9.09 Other Closing Documents. ------------------------- Buyer shall have delivered to the Sellers at or prior to the Closing Date such other documents as the Sellers may reasonably request in order to enable the Sellers to determine whether the conditions to their obligations under this Agreement have been met and otherwise to carry out the provisions of this Agreement. 9.10 No Legal Action. ----------------- There shall not have been instituted or threatened any legal Proceeding relating to, or seeking to prohibit or otherwise challenge the consummation of, the transactions contemplated by this Agreement, or to obtain substantial damages with respect thereto. 9.11 Other Agreements. ---------------- Any and all agreements to be executed in connection with this Agreement and the transactions contemplated herein shall have been duly authorized, executed, and delivered by the parties thereto at or prior to the Closing, shall be in full force, valid and binding upon the parties thereto, and enforceable by them in accordance with their terms at the Closing Date, and no party thereto at any time from the execution thereof until immediately after the Effective Date shall have been in violation of or in default in complying with any material provision thereof. 9.12 Consents. -------- All Consents shall have been obtained at or prior to the date of this Agreement. 9.13 Review of Proceedings. ----------------------- All Actions, Proceedings, instruments and documents required to carry out this Agreement, the Ancillary Documents to which they are parties, the Orbit Disclosure Schedule and any other certificate or document delivered pursuant to this Agreement or incidental to any of them and all other related legal matters shall be subject to the reasonable approval of Seiller Waterman LLC, counsel to the Sellers, and Buyer shall have furnished such counsel with such documents as such counsel may have reasonably requested for the purpose of enabling them to pass upon such matters. 9.14 No Governmental Action. ------------------------ There shall not have been any action taken, or any Law, rule, regulation, order, or decree proposed, promulgated, enacted, entered, enforced, or deemed applicable to the transactions contemplated by this Agreement by any federal, state, local, or other Governmental Authority or any court or other tribunal, including the entry of a preliminary or permanent injunction, which, in the sole but reasonable judgment of the Sellers, is reasonably likely to: (a) make any of the transactions contemplated by this Agreement illegal; (b) result in a delay in the consummation of any of the transactions contemplated by this Agreement; or (c) otherwise prohibit, restrict or delay consummation of any of the transactions contemplated by this Agreement or impair the contemplated benefits to Buyer and the Sellers of the transactions contemplated by this Agreement. 9.15 Release of Guaranties, Mortgages. ----------------------------------- If not completed contemporaneously with the Closing, Buyer will, no later than the Effective Date, take all necessary steps to release Sellers from any personal guaranties of Sellers with any financial institution in favor of ICS, and release any and all liens or mortgages on the Sellers' assets pledged to any financial institution (including as set forth in Section 9.16 below) as collateral in favor of ICS and Buyer agrees to fully indemnify and hold Sellers harmless from any claims, demands and damages arising out of such obligations. 9.16 Pre-Closing Assignment of the Certificates of Deposits. ------------------------------------------------------------ Immediately prior to the Closing, ICS shall, upon Sellers' request, have assigned the Certificate of Deposit (account #00000783806) ("Certificate of Deposit") and funds associated with it currently in the name of ICS and held by The First Capital Bank of Kentucky ("Bank"), as follows: $200,000 to ICS, with the balance of the Certificate of Deposit, including any interest earned thereon, to be allocated amongst the Sellers as follows: Mr. Ice - 80%; Mr. Rhudy - 10%; and Ms. McDearman - 10% (collectively, the "Sellers CD Funds"). Sellers CD Funds may remain pledged as collateral to the Bank for ICS' benefit, until released to the Sellers as provided in Section 9.15 hereof. ARTICLE X. MISCELLANEOUS 10.01 Termination. ----------- This Agreement may not be terminated and the Share Purchase and the other transactions contemplated herein may not be abandoned at any time prior to the Effective Date except by written mutual consent of Buyer and each Seller. 10.02 [Intentionally left blank] ---------------------------- 10.03 Confidentiality. --------------- (a) The terms and conditions of an executed Confidentiality Agreement dated November 18, 2005 by and between Buyer and ICS are incorporated herein by reference. (b) Neither Buyer nor the Sellers shall issue any press release or other public statement or make any comment (other than in the course of performing their respective obligations hereunder) with respect to the Share Purchase without the prior written consent of the other party. Notwithstanding the foregoing, each party shall have the right, after consulting with the other party, to issue any press release or other public statement, if required by applicable Law. 10.04 Expenses. -------- Buyer and the Sellers will each be responsible for their own respective expenses in connection with the proposed Share Purchase, and the performance of the provisions of this Agreement, except the Parties agree that ICS shall reimburse, at Closing or shall pay prior to Closing, Sellers' reasonable expenses (including in such amount any legal and accounting fees) incurred in connection with the matters related to this Agreement. 10.05 Brokers and Finders. --------------------- It is understood that there are no brokers, or finders acting on behalf of Buyer and the Sellers in connection with the Share Purchase, and no fees to any broker or finder shall be paid by Buyer or the Sellers in connection with the Share Purchase other than Cove Partners LLC that will be paid by Buyer. The Buyer will indemnify and hold each of the Sellers harmless from any and all claims of Cove Partners LLC (and any other Person acting on behalf of the Buyer) for brokerage or finder fees associated with the transaction contemplated by this Agreement. 10.06 Further Actions. ---------------- At any time and from time to time, each party agrees, at its expense, to take such actions and to execute and deliver such documents as may be reasonably necessary to effectuate the purposes of this Agreement. 10.07 Availability of Equitable Remedies. ------------------------------------- Since a breach of the provisions of this Agreement could not adequately be compensated by money damages, any party shall be entitled, either before or after the Closing, in addition to any other right or remedy available to it, to an injunction restraining such breach or a threatened breach and to specific performance of any such provision of this Agreement, and in either case no bond or other security shall be required in connection therewith, and the parties hereby consent to the issuance of such an injunction and to the ordering of specific performance. 10.08 Modification. ------------ This Agreement, the Ancillary Documents, the ICS Disclosure Schedule, the Orbit Disclosure Schedule and the Exhibits hereto set forth the entire understanding of the parties with respect to the subject matter hereof, supersede all existing agreements among them concerning such subject matter, and may be modified only by a written instrument duly executed by each party. Any prior written agreements or forms executed by the parties are hereby repudiated and declared void ab initio, except for the Confidentiality Agreement referred to in Section 10.03(a) hereof which remains in full force and effect. 10.09 Notices. ------- All notices, requests and other communications hereunder shall be in writing and shall be deemed to have been given only if mailed, certified return receipt requested, or if sent by Federal Express or other well recognized private courier ("COURIER") or if personally delivered to, or if sent by fax with the original thereof sent by Courier to: If to Buyer: Orbit International Corp. 80 Cabot Court Hauppauge, New York 11788 Attention: Dennis Sunshine, President Facsimile: (631) 952-1396 With a copy to: Phillips Nizer LLP 666 Fifth Avenue New York, New York 10103-0084 Attention: Elliot H. Lutzker, Esq. Facsimile: (212) 262-5152 If to ICS: Integrated Consulting Services, Inc. 163 Rochester Drive Louisville, KY 40214 Attention: Kenneth Ice Facsimile: (502) 364-5108 If to Kenneth Ice: Kenneth J. Ice Integrated Consulting Services, Inc. 163 Rochester Drive Louisville, KY 40214 Facsimile: (502) 364-5108 If to Michael R. Rhudy: Michael R. Rhudy Integrated Consulting Services, Inc. 163 Rochester Drive Louisville, KY 40214 Facsimile: (502) 364-5108 If to Julie A. McDearman: Julie A. McDearman Integrated Consulting Services, Inc. 163 Rochester Drive Louisville, KY 40214 Facsimile: (502) 364-5108 And for each, ICS, Mr. Ice, Mr. Rhudy and Ms. McDearman, with a copy to: Seiller Waterman LLC Meidinger Tower, 22nd Floor 462 South Fourth Street Louisville, KY 40202 Attention: Anuj G. Rastogi Facsimile: (502) 371-9287 All notices, requests and other communications shall be deemed received on the date of acknowledgment or other evidence of actual receipt in the case of certified mail, Courier delivery or personal delivery or, in the case of fax delivery, upon the date of fax receipt provided that the original is delivered within two (2) Business Days. Any party hereto may designate different or additional parties for the receipt of notice, pursuant to notice given in accordance with the foregoing. 10.10 Waiver. ------ Any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions will not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing and signed by or on behalf of the waiving party. 10.11 Disclosure Schedules; Effect of Investigation. --------------------------------------------- Nothing in the ICS Disclosure Schedule and Orbit Disclosure Schedule (collectively, the "DISCLOSURE SCHEDULE") shall be deemed adequate to disclose an exception to a representation or warranty made herein, unless, subject to the following two sentences, such exception is identified in the applicable Section of the Disclosure Schedule and the nature of such exception is reasonably apparent from such disclosure. The Disclosure Schedule shall be arranged in numbered schedules corresponding to the Section and subsections contained in this Agreement and shall be complete with cross-references where and as appropriate. Any information, item or other disclosure set forth in any section, schedule or other portion of the Disclosure Schedule shall be deemed to have been set forth in all other applicable portions hereof, if the relevance of such disclosure to such other portion is reasonably apparent from the facts specified in such disclosure. Except as otherwise provided in this Agreement, the right to indemnification, payment of losses or other remedy based on any of the representations, warranties, covenants and agreements herein will not be affected by any investigation conducted with respect to, or any Knowledge acquired (or capable of being acquired) at any time, whether before or after the execution or delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation, and the waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or agreement, will not affect the right to indemnification, payment of losses, or other remedy based on such representations, warranties, covenants and agreements. 10.12 Binding Effect. --------------- The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs, and personal Representatives. 10.13 No Third-Party Beneficiaries. ------------------------------ This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement. 10.14 Severability. ------------ If any provision of this Agreement is invalid, illegal, or unenforceable, the balance of this Agreement shall remain in effect, and any such invalid, illegal or unenforceable provision shall be enforceable to the fullest extent permitted by law, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances 10.15 Headings. -------- The headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 10.16 Governing Law; Jurisdiction; Venue. ------------------------------------- This Agreement shall be governed by and construed in accordance with the Law of the State of New York, without reference to its principles of conflicts of Laws. Notwithstanding the foregoing, any claim or action arising out of or based upon the Employment Agreement set forth in Section 7.01 herein shall be governed by and construed in accordance with the laws of Kentucky. Each party to this Agreement hereby irrevocably submits to the exclusive jurisdiction of the state or federal courts located in Jefferson County (as to state court), or the Western District of Kentucky (as to federal court), for the purpose of any claim or action arising out of or based upon this Agreement or relating to the subject matter hereof, irrevocably waives the defense of an inconvenient forum with respect thereto, and agrees not to commence any such claim or action other than in the above-named courts. 10.17 Counterparts. ------------ This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.18 Construction. ------------ The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise this Agreement and the Ancillary Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement and the Ancillary Documents or any amendments hereto. SIGNATURE PAGE FOLLOWS IN WITNESS WHEREOF, the parties have duly executed this Agreement effective as of the date first written above. ICS: Integrated Consulting Services, Inc. BUYER: By: _______________________________ Orbit International Corp. Kenneth J. Ice President By: Dennis Sunshine President SELLERS: Kenneth J. Ice Michael R. Rhudy Julie A. McDearman EXHIBIT 2.03 ------------ ALLOCATION OF PURCHASE PRICE ---------------------------- Kenneth J. Ice 80% Michael R. Rhudy 10% Julie A. McDearman 10% The aforesaid allocation shall be made with regards to the following consideration received by the Sellers: - - ORBIT shares received pursuant to Section 2.02(i) - - Cash received pursuant to Section 2.02(ii) - - Annual Earn Out Payments made pursuant to Section 2.07 - - Section 338(h)(10) payment made pursuant to Sections 2.02 and 2.09(a) - - The Net Working Capital payment made pursuant to Section 2.03 and 8.03 EX-10.1 3 iceemploymentagreement.txt KEN ICE EMPLOYMENT AGREEMENT Exhibit 10.1 EMPLOYMENT AGREEMENT -------------------- AGREEMENT made and entered into as of December __, 2007, by and between Integrated Consulting Services, Inc. (the "Company"), a Kentucky corporation (the "Company), and Kenneth J. Ice ("Employee"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Employee has entered into on December __, 2007, a Stock Purchase Agreement (the "SPA") by and among the Company, Orbit International Corp., a Delaware corporation ("Parent"), and the respective shareholders of the Company, including Employee, which SPA provides in Section 7.01 therein, for the Company and Employee to enter into an employment agreement; and WHEREAS, the Company desires to enter into this Agreement with Employee and Employee desires to be employed by the Company on the terms and conditions set forth in this 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. 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"); provided, however, -------- ------- that this Agreement may be extended for an additional three years (the "Extension") if (i) Employee gives the Company written notice requesting the Extension at least 30 days prior to the end of the Initial Term (the "Extended Term") and (ii) the Company agrees, in its sole discretion, to accept Employee's request for the Extension. The Initial Term and the Extended Term shall be referred to herein as the "Term." At the expiration of the Term, the Company shall have no further obligation to Employee, and 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 with full control over the day to day operations of the Company. Employee 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 not engage in any other business, profession or occupation which would conflict or interfere with the rendition of such services either directly or indirectly, or which is, or reasonably may be, contrary to the welfare, interest or benefit of the business now or hereafter conducted by the Company, without the prior written consent 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. 3. Location of Employment. Employee shall render services primarily at ----------------------- the Company's offices that are located in Louisville, Kentucky. During the Term, the Company shall continue to provide Employee with an office and staff at the Company's Louisville 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 Louisville, Kentucky 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 $180,000, 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 Louisville, Kentucky 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, 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 provided a monthly car allowance of Four Hundred Dollars ($400.00) for costs related to the use by Employee of Employee's Company Car, including, but not limited to, repairs, maintenance, and fuel costs. The Company shall be responsible for the payment of insurance consistent with prior coverage, registration, and taxes for such automobile. At any time after December 31, 2008, Employee shall have the right and option to purchase Employee's Company Car at its then prevailing book value as same is set forth on the Company's books and records. Notwithstanding the previous sentence, in the event the Employee exercises the option to purchase the Employee's Company Car, the monthly car allowance shall continue to be provided to the Employee for the Term of this Agreement (c) In addition to the compensation set forth in subparagraphs (a) and (b) of this Paragraph 4, Employee shall be entitled to 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. "Pre-Tax Income" shall mean the net income generated by the Company (exclusive of any extraordinary gains, extraordinary losses or any interest expense), as set forth in the financial statements of the Company, determined in accordance with generally accepted accounting principles (GAAP) consistently applied, and which shall 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 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. 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 Company's existing medical plan (including prescription drug coverage) pursuant to which he currently has coverage. The Company shall pay the premiums for the foregoing coverage consistent with its policies then in effect, as amended from time to time. 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, the Parent at its sole expense shall maintain key man life insurance on the Employee in the amount of one million dollars with the Company as the beneficiary ("Policy"). Following the Term, if Employee is no longer employed by the Company as a full-time employee, the Employee, at his sole discretion, will assume ownership, responsibility, and liability for all premiums due under the Policy and will be entitled to designate the beneficiaries under the Policy. (c) From and after the date of this Agreement, the term "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 Parent, 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 week period 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 Agreement for Cause (as hereinafter defined) by sending written notice to 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 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 Parent, or the Chief Executive Officer and/or failure to comply with or perform any of the material terms and/or obligations of this 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 that the Company deems to be Cause for termination of this 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 indictment for, or plea of nolo contendere or conviction of a felony under the laws of the United States or - ---- ---------- any state thereof or a misdemeanor involving moral turpitude; or, (v) Employee materially breaching any provision of this 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 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 Louisville, Kentucky offices; (iv) a material and adverse change in the compensation and benefits provided to Employee under this Agreement; (v) the Company or the Parent materially breaches the SPA; and/or (vi) the failure of any successor company that acquires the assets or stock of the Company to assume this Agreement and the contractual obligations hereunder. 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, 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 Employee is terminated for Cause or Employee terminates not for Good Reason, 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 Agreement, engage in any business which uses as its name, in whole or in part, Integrated Consulting Services, Inc. and/or Orbit International Corp., or any other name used by the Company or Parent 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 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 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 ------------ 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 Louisville, Kentucky. The parties consent to the application of the Kentucky or Federal Arbitration Statutes and to the jurisdiction of the Jefferson County Court of the State of Kentucky, and of the United States District Court of the Western District of Kentucky, 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 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 Agreement or performing the services called for by this 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 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 Agreement ------------------------------ are held invalid or unenforceable, such invalidity or unenforceability shall not affect the other provisions of this Agreement, and, to that extent, the provisions of this 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 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 Agreement, and any such provision of this 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 -------- Agreement shall be sufficient if in writing and if sent by registered or certified mail, telegram, or overnight courier as follows: As to Employee: Kenneth J. Ice ----------------- Integrated Consulting Services, Inc. 163 Rochester Drive Louisville, KY 40214 with a copy to: Seiller Waterman LLC Meidinger Tower, 22nd Floor 462 South Fourth Street Louisville, KY 40202 Attn: Anuj G. Rastogi As to the Company: Orbit International Corp. --------------------- 80 Cabot Court Hauppauge, New York 11788 Attn: Chief Executive Officer with a copy to: Phillips Nizer LLP 666 Fifth Avenue New York, New York 10103 Attn: Elliot H. Lutzker, Esq. or to such other address as either party hereto may designate by notice given in accordance with this Agreement. 18. Assignment. A party hereto may not assign this 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 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 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 Agreement by the other shall not operate or be construed as a waiver of any subsequent breach by such other party. 20. Entire Agreement. This document, together with the SPA, 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 Agreement shall be construed, enforced and ---------------- governed by and under the laws of the State of Kentucky, without regard to conflict of laws principles, in accordance with the laws of the State of Kentucky. SIGNATURE PAGE FOLLOWS IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. EMPLOYEE: ____________________________ Kenneth J. Ice THE COMPANY: Integrated Consulting Services, Inc. By: ____________________________ Dennis Sunshine Chief Executive Officer EX-10.2 4 rhudyemploymentagreement.txt MICHAEL RHUDY EMPLOYMENT AGREEMENT Exhibit 10.2 EMPLOYMENT AGREEMENT -------------------- AGREEMENT made and entered into as of December __, 2007, by and between Integrated Consulting Services, Inc. (the "Company"), a Kentucky corporation (the "Company), and Michael R. Rhudy ("Employee"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Employee has entered into on December __, 2007, a Stock Purchase Agreement (the "SPA") by and among the Company, Orbit International Corp., a Delaware corporation ("Parent"), and the respective shareholders of the Company, including Employee, which SPA provides in Section 7.01 therein, for the Company and Employee to enter into an employment agreement; and WHEREAS, the Company desires to enter into this Agreement with Employee and Employee desires to be employed by the Company on the terms and conditions set forth in this 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. 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"); provided, however, -------- ------- that this Agreement may be extended for an additional three years (the "Extension") if (i) Employee gives the Company written notice requesting the Extension at least 30 days prior to the end of the Initial Term (the "Extended Term") and (ii) the Company agrees, in its sole discretion, to accept Employee's request for the Extension. The Initial Term and the Extended Term shall be referred to herein as the "Term." At the expiration of the Term, the Company shall have no further obligation to Employee, and 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 -------------------- Director of Production of the Company. Employee 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 President 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 President of the Company. Employee shall not engage in any other business, profession or occupation which would conflict or interfere with the rendition of such services either directly or indirectly, or which is, or reasonably may be, contrary to the welfare, interest or benefit of the business now or hereafter conducted by the Company, without the prior written consent of the Board of Directors of the Company or of the Parent, or of the President 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. 3. Location of Employment. Employee shall render services primarily at ----------------------- the Company's offices that are located in Louisville, Kentucky. During the Term, the Company shall continue to provide Employee with an office and staff at the Company's Louisville 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 Louisville, Kentucky 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 $133,500, 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 Louisville, Kentucky 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, Employee shall be provided a monthly car allowance of Four Hundred Dollars ($400.00) for costs related to the use by Employee of his own car for the Company's business, including, but not limited to, repairs, maintenance, and fuel costs. (c) In addition to the compensation set forth in subparagraphs (a) and (b) of this Paragraph 4, Employee shall be entitled to 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. "Pre-Tax Income" shall mean the net income generated by the Company (exclusive of any extraordinary gains, extraordinary losses or any interest expense), as set forth in the financial statements of the Company, determined in accordance with generally accepted accounting principles (GAAP) consistently applied, and which shall 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 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. 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 Company's existing medical plan (including prescription drug coverage) pursuant to which he currently has coverage. The Company shall pay the premiums for the foregoing coverage consistent with its policies then in effect, as amended from time to time. 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) From and after the date of this Agreement, the term "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 Parent, 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 week period 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 Agreement for Cause (as hereinafter defined) by sending written notice to 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 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 Parent, or the President and/or failure to comply with or perform any of the material terms and/or obligations of this 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 that the Company deems to be Cause for termination of this 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 indictment for, or plea of nolo contendere or ---- ---------- conviction of a felony under the laws of the United States or any state thereof or a misdemeanor involving moral turpitude; or, (v) Employee materially breaching any provision of this 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 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 Louisville, Kentucky offices; (iv) a material and adverse change in the compensation and benefits provided to Employee under this Agreement; (v) the Company or the Parent materially breaches the SPA; and/or (vi) the failure of any successor company that acquires the assets or stock of the Company to assume this Agreement and the contractual obligations hereunder. 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, 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 Employee is terminated for Cause or Employee terminates not for Good Reason, 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 Agreement, engage in any business which uses as its name, in whole or in part, Integrated Consulting Services, Inc. and/or Orbit International Corp., or any other name used by the Company or Parent 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 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 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 ------------ 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 Louisville, Kentucky. The parties consent to the application of the Kentucky or Federal Arbitration Statutes and to the jurisdiction of the Jefferson County Court of the State of Kentucky, and of the United States District Court of the Western District of Kentucky, 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 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 Agreement or performing the services called for by this 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 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 Agreement ------------------------------ are held invalid or unenforceable, such invalidity or unenforceability shall not affect the other provisions of this Agreement, and, to that extent, the provisions of this 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 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 Agreement, and any such provision of this 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 -------- Agreement shall be sufficient if in writing and if sent by registered or certified mail, telegram, or overnight courier as follows: As to Employee: Michael R. Rhudy ----------------- Integrated Consulting Services, Inc. 163 Rochester Drive Louisville, KY 40214 with a copy to: Seiller Waterman LLC Meidinger Tower, 22nd Floor 462 South Fourth Street Louisville, KY 40202 Attn: Anuj G. Rastogi As to the Company: Orbit International Corp. --------------------- 80 Cabot Court Hauppauge, New York 11788 Attn: Chief Executive Officer with a copy to: Phillips Nizer LLP 666 Fifth Avenue New York, New York 10103 Attn: Elliot H. Lutzker, Esq. or to such other address as either party hereto may designate by notice given in accordance with this Agreement. 18. Assignment. A party hereto may not assign this 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 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 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 Agreement by the other shall not operate or be construed as a waiver of any subsequent breach by such other party. 20. Entire Agreement. This document, together with the SPA, 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 Agreement shall be construed, enforced and ---------------- governed by and under the laws of the State of Kentucky, without regard to conflict of laws principles, in accordance with the laws of the State of Kentucky. SIGNATURE PAGE FOLLOWS IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. EMPLOYEE: ____________________________ Michael R. Rhudy THE COMPANY: Integrated Consulting Services, Inc. By: ____________________________ Dennis Sunshine Chief Executive Officer EX-10.3 5 mcdearmaemploymentagreement.txt JULIEMCDEARMANEMPLOYMENTAGREEMENT Exhibit 10.3 EMPLOYMENT AGREEMENT -------------------- AGREEMENT made and entered into as of December __, 2007, by and between Integrated Consulting Services, Inc. (the "Company"), a Kentucky corporation (the "Company), and Julie A. McDearman ("Employee"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Employee has entered into on December __, 2007, a Stock Purchase Agreement (the "SPA") by and among the Company, Orbit International Corp., a Delaware corporation ("Parent"), and the respective shareholders of the Company, including Employee, which SPA provides in Section 7.01 therein, for the Company and Employee to enter into an employment agreement; and WHEREAS, the Company desires to enter into this Agreement with Employee and Employee desires to be employed by the Company on the terms and conditions set forth in this 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. 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"); provided, however, -------- ------- that this Agreement may be extended for an additional three years (the "Extension") if (i) Employee gives the Company written notice requesting the Extension at least 30 days prior to the end of the Initial Term (the "Extended Term") and (ii) the Company agrees, in its sole discretion, to accept Employee's request for the Extension. The Initial Term and the Extended Term shall be referred to herein as the "Term." At the expiration of the Term, the Company shall have no further obligation to Employee, and 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 -------------------- Director of Engineering and Logistics of the Company. Employee 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 her, from time to time, by or under the authority of the Board of Directors of the Company or of the Parent, or by the President of the Company. Employee will devote her 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 President of the Company. Employee shall not engage in any other business, profession or occupation which would conflict or interfere with the rendition of such services either directly or indirectly, or which is, or reasonably may be, contrary to the welfare, interest or benefit of the business now or hereafter conducted by the Company, without the prior written consent of the Board of Directors of the Company or of the Parent, or of the President of the Company. Employee shall render such services to the best of her ability and shall use her best efforts to promote the interests of the Company. 3. Location of Employment. Employee shall render services primarily at ----------------------- the Company's offices that are located in Louisville, Kentucky. During the Term, the Company shall continue to provide Employee with an office and staff at the Company's Louisville 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 Louisville, Kentucky 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 $111,500, 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 Louisville, Kentucky 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, 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 provided a monthly car allowance of Four Hundred Dollars ($400.00) for costs related to the use by Employee of Employee's Company Car, including, but not limited to, repairs, maintenance, and fuel costs. The Company shall be responsible for the payment of insurance consistent with prior coverage, registration, and taxes for such automobile. At any time after December 31, 2008, Employee shall have the right and option to purchase Employee's Company Car at its then prevailing book value as same is set forth on the Company's books and records. Notwithstanding the previous sentence, in the event the Employee exercises the option to purchase the Employee's Company Car, the monthly car allowance shall continue to be provided to the Employee for the Term of this Agreement. (c) In addition to the compensation set forth in subparagraphs (a) and (b) of this Paragraph 4, Employee shall be entitled to 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. "Pre-Tax Income" shall mean the net income generated by the Company (exclusive of any extraordinary gains, extraordinary losses or any interest expense), as set forth in the financial statements of the Company, determined in accordance with generally accepted accounting principles (GAAP) consistently applied, and which shall 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 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. 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 herself, her spouse, and dependents under the Company's existing medical plan (including prescription drug coverage) pursuant to which she currently has coverage. The Company shall pay the premiums for the foregoing coverage consistent with its policies then in effect, as amended from time to time. In the event the Company fails to provide such coverage, or such coverage is otherwise unavailable, then the Company shall provide Employee, her spouse, and dependents with at least equivalent coverage (including healthcare provider choices, deductibles, co-pays, etc.). (b) From and after the date of this Agreement, the term "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 her on its behalf or on behalf of Parent, in the course of her 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 week period 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 she is unable, with or without reasonable accommodation, to attend to the essential duties required of her. (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 her 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 Agreement for Cause (as hereinafter defined) by sending written notice to 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 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 Parent, or the President and/or failure to comply with or perform any of the material terms and/or obligations of this 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 that the Company deems to be Cause for termination of this 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 indictment for, or plea of nolo contendere or ---- ---------- conviction of a felony under the laws of the United States or any state thereof or a misdemeanor involving moral turpitude; or, (v) Employee materially breaching any provision of this 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 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 Louisville, Kentucky offices; (iv) a material and adverse change in the compensation and benefits provided to Employee under this Agreement; (v) the Company or the Parent materially breaches the SPA; and/or (vi) the failure of any successor company that acquires the assets or stock of the Company to assume this Agreement and the contractual obligations hereunder. 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, her spouse, and her eligible dependents. In the event Employee elects COBRA coverage, 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 her 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 her 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 Employee is terminated for Cause or Employee terminates not for Good Reason, until the scheduled expiration of the Term, Employee agrees not to directly or indirectly, on behalf of herself or any business in which she 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 Agreement, engage in any business which uses as its name, in whole or in part, Integrated Consulting Services, Inc. and/or Orbit International Corp., or any other name used by the Company or Parent 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 she participates in such business as proprietor, partner, joint venturer, stockholder, director, officer, lender, manager, employee, consultant, advisor or agent, or if she controls such business. Employee shall not for purposes of this paragraph be deemed a stockholder or lender if she 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 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 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 ------------ 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 Louisville, Kentucky. The parties consent to the application of the Kentucky or Federal Arbitration Statutes and to the jurisdiction of the Jefferson County Court of the State of Kentucky, and of the United States District Court of the Western District of Kentucky, 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 her obligations under this 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 she ------------------------ is not a party to any agreement or contract pursuant to which there is any restriction or limitation upon her entering into this Agreement or performing the services called for by this 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 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 Agreement ------------------------------ are held invalid or unenforceable, such invalidity or unenforceability shall not affect the other provisions of this Agreement, and, to that extent, the provisions of this 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 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 Agreement, and any such provision of this 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 -------- Agreement shall be sufficient if in writing and if sent by registered or certified mail, telegram, or overnight courier as follows: As to Employee: Julie A. McDearman ----------------- Integrated Consulting Services, Inc. 163 Rochester Drive Louisville, KY 40214 with a copy to: Seiller Waterman LLC Meidinger Tower, 22nd Floor 462 South Fourth Street Louisville, KY 40202 Attn: Anuj G. Rastogi As to the Company: Orbit International Corp. --------------------- 80 Cabot Court Hauppauge, New York 11788 Attn: Chief Executive Officer with a copy to: Phillips Nizer LLP 666 Fifth Avenue New York, New York 10103 Attn: Elliot H. Lutzker, Esq. or to such other address as either party hereto may designate by notice given in accordance with this Agreement. 18. Assignment. A party hereto may not assign this 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 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 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 Agreement by the other shall not operate or be construed as a waiver of any subsequent breach by such other party. 20. Entire Agreement. This document, together with the SPA, 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 Agreement shall be construed, enforced and ---------------- governed by and under the laws of the State of Kentucky, without regard to conflict of laws principles, in accordance with the laws of the State of Kentucky. SIGNATURE PAGE FOLLOWS IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. EMPLOYEE: ____________________________ Julie A. McDearman THE COMPANY: Integrated Consulting Services, Inc. By: ____________________________ Dennis Sunshine Chief Executive Officer EX-10.4 6 custodyagreement.txt CUSTODY, PLEDGE AND SECURITY AGREEMENT Exhibit 10.4 CUSTODY, PLEDGE AND SECURITY AGREEMENT -------------------------------------- CUSTODY, PLEDGE AND SECURITY AGREEMENT, dated as of December 19, 2007 ("Agreement"), by and among ORBIT INTERNATIONAL CORP., a Delaware corporation ------ ("Pledgor"), KENNETH J. ICE, MICHAEL R. RHUDY and JULIE A. MCDEARMAN (each, a "Pledgee" and collectively, the "Pledgees") and Phillips Nizer LLP a New York limited liability partnership, as custodian (the "Custodian"). This Agreement is made pursuant to the Stock Purchase Agreement (the "SPA") dated as of December 19, 2007, by and among Pledgor, Integrated Consulting Services, Inc. ("ICS"), a Kentucky corporation, and the Pledgees. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN THAT ARE DEFINED IN THE SPA SHALL HAVE THE MEANINGS GIVEN SUCH TERMS IN THE SPA. W I T N E S S E T H: ------------------- WHEREAS, Pledgees have sold all of the issued and outstanding capital stock of ICS (hereinafter collectively referred to as the "Pledged Shares") under the SPA; WHEREAS, Pledgor shall pay to the Pledgees up to an additional $1,000,000 over the next three years following the Closing of the Share Purchase in increments of $333,333 per year (the "Annual Earn-Out Payment") provided ICS attains Net Revenues of no less than $7,000,000 in each of the 2008, 2009, and 2010 fiscal years; WHEREAS, each Annual Earn-Out Payment is evidenced by a non-interest bearing promissory note of Pledgor, dated the date hereof (as amended, modified, restated or otherwise supplemented from time to time, a "Note," and ---- collectively, the "Notes"), which Notes are secured by this Agreement; ----- WHEREAS, in the event an Event of Default (as defined in the Notes) has occurred, the Annual Earn-Out Payment attributable to the applicable fiscal year shall be paid by Pledgor to the Pledgees as required by the Notes and Section 2.08 of the SPA; WHEREAS, the Pledged Shares are being pledged as collateral to ensure that Pledgor honors its commitment to pay the Annual Earn-Out Payments to the Pledgees under the Notes, including in the event Pledgor enters into a transaction or otherwise intentionally engages in a course of conduct that causes a Material Adverse Change to ICS's business operations, other than in the Ordinary Course of Business, and which results in the failure of ICS to achieve the minimum of $7,000,000 of Net Revenues in any Earn-Out Year; WHEREAS, Pledgor has agreed to execute and deliver to Pledgees this Agreement pledging the Pledged Shares as collateral for its obligations under the Notes and the SPA with respect to the Annual Earn-Out Payments discussed above (the "Obligations"); and ---------- WHEREAS, the Pledgees have entered into an intercreditor agreement with Merrill Lynch Business Financial Services, Inc. ("Pledgor's Lender"), pursuant to which they agreed not to take any action to foreclose or otherwise enforce their liens under this Agreement without the prior written consent of Pledgor's Lender, which consent shall not be unreasonably withheld. 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 obligations owing by Pledgor to Pledgees with respect to the payment of the Annual Earn-Out Payments under the Notes, 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 with respect to the Annual Earn-Out Payments discussed above 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 indebtedness of Pledgor under the Notes (collectively, the "Secured Obligations"). ----------------- 2. Custody of the Pledged Shares. The Pledgees hereby appoint the Custodian ----------------------------- as their agent to receive and hold certificates representing the 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) 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 ICS 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, subject only to any subordination agreement to be entered into with Pledgor's Lender as described above; (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, subject only to any subordination agreement to be entered into with Pledgor's Lender as described above; (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 ICS 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 the 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 ICS subject to the limitations set forth in this Agreement. 8. Release of PledgedShares. -------------------------- If with respect to each of the Notes, either (i) full payment has been made by or on behalf of the Pledgor in accordance with the terms of the Note, together with the payment of accrued interest as set forth therein or (ii) no payment was made by Pledgor in accordance with the terms of the Note due to the failure of ICS to achieve the minimum of $7,000,000 of Net Revenues in the applicable Earn-Out Year; provided, however, that such failure was not due to an Event of Default, then the Pledgees agree 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. In the Event of Default, Custodian shall transfer the certificates representing the Pledged Shares to the Pledgees, upon receiving a written notice from the Pledgees to do so. 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, 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 Kentucky 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. Notwithstanding the foregoing, Pledgees shall enter into a subordination agreement with Pledgor's Lender, if requested to do so by Pledgor's Lender, pursuant to which they shall agree not to take any action to foreclose or otherwise enforce their liens under this Agreement without the prior written consent of Pledgor's Lender, which consent shall not be unreasonably withheld. 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 when one of the following ---- occurs with respect to all Notes made by Pledgor to the Pledgees: (i) full payment has been made by or on behalf of the Pledgor in accordance with the terms of the Note, together with the payment of accrued interest as set forth therein or (ii) no payment was made by Pledgor in accordance with the terms of the Note due to the failure of ICS to achieve the minimum of $7,000,000 of Net Revenues in the applicable Earn-Out Year; provided, however, that such failure was not due to an Event of Default, or (iii) in the Event of Default, immediately after Custodian releases the Pledged Shares to the Pledgees pursuant to the Pledgees written instructions. Upon termination of this Agreement, except in the Event of Default, 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 Kentucky (but not its conflicts of law provisions). Pledgor hereby consents to service of process, and to be sued, in the Commonwealth of Kentucky and consents to the jurisdiction of the courts of Jefferson County, Kentucky, and the United States District Court for the Western District of Kentucky, 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 Kentucky 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 his or her 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: Phillips Nizer LLP 666 Fifth Avenue New York, New York 10103 Attention: Elliot H. Lutzker, Esq. Facsimile: (212) 262-5152 If to Pledgees: Kenneth J. Ice Integrated Consulting Services, Inc. 163 Rochester Drive Louisville, KY 402124 Facsimile: (502) 364-5108 Michael R. Rhudy Integrated Consulting Services, Inc. 163 Rochester Drive Louisville, KY 402124 Facsimile: (502) 364-5108 Julie A. McDearman Integrated Consulting Services, Inc. 163 Rochester Drive Louisville, KY 402124 Facsimile: (502) 364-5108 With a copy to: Seiller Waterman LLC Meidinger Tower, 22nd Floor 462 South Fourth Street Louisville, KY 40202 Attention: Anuj G. Rastogi, Esq. Facsimile: (502) 371-9287 To Custodian: Phillips Nizer LLP 666 Fifth Avenue New York, NY 10103 Attn: Elliot H. Lutzker Fax: (212) 262-5152 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 the 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. THIS AGREEMENT IS SUBJECT TO THAT CERTAIN INTERCREDITOR AGREEMENT DATED DECEMBER 19, 2007 AMONG MERRILL LYNCH BUSINESS FINANCIAL SERVICES, INC., KENNETH J. ICE, MICHAEL R. RHUDY, AND JULIE A. MCDEARMAN. IN THE EVENT OF INCONSISTANCES BETWEEN THIS AGREEMENT AND THE SAID INTERCREDITOR AGREEMENT, THE TERMS OF THE INTERCREDITOR AGREEMENT SHALL GOVERN AND PREVAIL. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. PLEDGEES: PLEDGOR: ________________________________ Kenneth J. Ice ORBIT INTERNATIONAL CORP By: ______________________________ ________________________________ Name: Dennis Sunshine Michael R. Rhudy Title: President ________________________________ CUSTODIAN: Julie A. McDearman PHILLIPS NIZER LLP By: ______________________________ Name: Elliot H. Lutzker ------ 1026228.2 EXHIBIT A --------- PLEDGEE NAME PLEDGED SHARES ------------ -------------- Kenneth Ice 80 shares of ICS Mike Rhudy 10 shares of ICS Julie McDearman 10 shares of ICS EX-10.5 7 contingentprommnote.txt FORM OF CONTINGENT PROMISSORY NOTE Exhibit 10.5 CONTINGENT PROMISSORY NOTE For value received, ORBIT INTERNATIONAL CORP., a Delaware corporation (the "Company"), having an address at 80 Cabot Court, Hauppauge, NY 11788, hereby ------- promises to pay to KENNETH J. ICE and his permitted successors or assigns (the -- "Holder"), having an address at 163 Rochester Drive, Louisville, KY 40214, the ------ principal sum of EIGHT HUNDRED THOUSAND DOLLARS ($800,000), in lawful money of the United States of America and in immediately available funds, if and only if the following contingency occurs: Company shall pay Holder up to $800,000 over the next three years following the Closing in increments of $266,667 per year (the "ANNUAL EARN-OUT PAYMENT") provided Company's fully owned subsidiary, INTEGRATED CONSULTING SERVICES, INC. ("ICS"), a Kentucky corporation, attains Net Revenues (defined below) of no less than $7,000,000 in each of the 2008, 2009, and 2010 fiscal years. In the event that ICS does not achieve the minimum of $7,000,000 of Net Revenues in any of the 2008, 2009, or 2010 fiscal years (each individually referred to as an "EARN-OUT YEAR"), the Annual Earn-Out Payment attributable to that fiscal year shall be eliminated in its entirety and forfeited by the Holder. The Annual Earn-Out Payments, if any, shall be paid by Company to the Holder by check or wire transfer on the date that is ten (10) business days following receipt by Company of the final audit report for ICS (as then owned by Company) for the fiscal year then ended, but in no event later than April 15th (the "EARN-OUT PAYMENT DATE"). "NET REVENUES" shall mean the sum of revenues from all sources related to operations (priced consistently with past practices to yield similar gross margins) and net non-operating income, after making adequate provisions for uncollectible debt, discounts, chargebacks and rebates. The calculation of Net Revenues shall be derived from audited financial statements of ICS, applied consistent with past practices of ICS. Within a period of ten (10) days following Company's receipt of draft financial statements for ICS, Company shall deliver to the Holder (i) an income statement of ICS for the applicable Earn-Out Year; (ii) a calculation of the Net Revenues for such Earn-Out Year; and (iii) a statement as to whether the Holder is entitled to an Annual Earn-Out Payment for such Earn-Out Year (collectively, the "EARN-OUT CALCULATION"). Unless the Holder notifies the Company of any disagreement with Company's calculation of Net Revenues within ten (10) business days after receipt of the Earn-Out Calculation, the Earn-Out Calculation shall be final and shall be accepted by and binding upon the Holder and Company. On and after the date Company delivers the Earn-Out Calculation to the Holder, the Holder and his professional Representatives shall have access to the work papers used to prepare the Earn-Out Calculation and the books and records relating to the Earn-Out Calculation, upon reasonable notice during normal business hours. If any Holder notifies the Company of any such disagreement within such ten (10) business day period and such disagreement cannot be amicably resolved within an additional period of ten (10) business days, then the disagreement shall be submitted for determination to an accounting firm mutually agreeable to the Holder and Company, or failing such mutual agreement, to the American Arbitration Association in Jefferson County, Commonwealth of Kentucky. If arbitrated, the Arbitrator shall be given the authority to award fees and costs to the prevailing party. If the Company does not make any required Annual Earn-Out Payment by the Earn-Out Payment Date to the Holder, then the principal due under this Note shall bear interest at the prime rate charged by Citibank, N.A., as is in effect, as of the Earn-Out Payment Date, plus one percent (1%) ("Default Interest Rate") until all of the amounts due under the Note have been paid in full. All interest on this Note shall be computed on an annual basis of a 360 day year. In no event will the interest rate hereunder exceed that permitted by applicable law. If any interest or other charge is finally determined by a court of competent jurisdiction to exceed the maximum amount permitted by law, the interest or charge shall be reduced to the maximum permitted by law, and Holder may credit any excess amount previously collected against the balance due or refund the amount to maker. All payments on this note shall be payable to Holder's address in Louisville, Kentucky, or at such other place as Holder may designate in writing, in lawful money of the United States of America. In the event Company enters into a transaction or otherwise intentionally engages in a course of conduct that causes a Material Adverse Change to ICS's business operations, other than in the Ordinary Course of Business, and which results in the failure of ICS to achieve the minimum of $7,000,000 of Net Revenues in any Earn-Out Year, then the Annual Earn-Out Payment attributable to that fiscal year shall be paid by Company to the Holder in cash on the date that is ten (10) business days following receipt by Company of the final audit report for ICS for the fiscal year then ended, but in no event later than the Earn-Out Payment Date. For purposes of clarification, examples of a Material Adverse Change to ICS's business operations could include (x) the discontinuance of ICS's main product line, or (y) a reorganization, merger or consolidation (other than a reincorporation or similar event, which has no effect on ICS's business operations) in which ICS is not the surviving corporation or is no longer a stand alone subsidiary of the Company, or a sale of all or substantially all of the assets of ICS to a non-affiliated entity of the Company (a "Change of Control") in which the Holder's obligations with respect to the Annual Earn-Out Payments are not assumed in such a Change of Control. This Note is subordinated in right of payment to Merrill Lynch Business Financial Services, Inc., including any principal of or interest on the indebtedness of the Company to the Holder. The Holder by accepting this Note agrees to the subordination and authorizes the Company to give it effect. It is further agreed and specifically understood between the parties to this Note that there is presently no outstanding, loan or debt represented by this Promissory Note, and that this Note is given to secure ad-vances up to and including principal of $800,000, if and when the above contingency is met, plus any other amounts expressly provided for under this Note. This Note is the Contingent Promissory Note referred to in that certain Stock Purchase Agreement, dated as of December 19, 2007 (as amended, supplemented or otherwise modified from time to time, the "Purchase Agreement"), ------------------ among the Company, the Holder and certain other parties named therein and has been duly authorized and issued pursuant thereto. Capitalized terms used in this Note which are not defined in this Note shall have the meaning ascribed to such terms in the Purchase Agreement. Any amounts that may be due and owing (the "Funds Due") under this Note consist of the principal and interest, which interest is computed at a minimum imputed rate as permitted under the income tax laws of the United States and Commonwealth of Kentucky, from the date of this Note until all of the amounts due under the Note have been paid in full. If any payment under this Note shall be specified to be made on a day which is not a business day, it shall be made on the next succeeding day which is a business day. For purposes of this Note, a "business day" shall mean any day other than Saturday, Sunday or other day in which banks are authorized to close in the Commonwealth of Kentucky. The amounts due and owing under this Note may be repaid in whole or in part without penalty or premium at any time; provided, however, that in such event (or in any event) Holder shall have no obligation to advance, and Company shall have no right to re-borrow, any amounts so repaid. No partial prepayment of principal shall postpone the due date of any subsequent payment due hereunder. All payments shall be made in immediately available funds to Holder at such address as may be designated in writing by the holder of this Note. The occurrence of any of the following events will be deemed to be an "event of default" under this Note: (i) the nonpayment of any of the Funds Due under this Note when due; (ii) the filing by or against the Company or ICS of any proceeding in bankruptcy, receivership, insolvency, reorganization, liquidation, conservatorship or similar proceeding (and, in the case of any such proceeding instituted against Company or ICS such proceeding is not dismissed or stayed within 30 days of the commencement thereof); and (iii) any assignment by Company or ICS for the benefit of creditors, or any levy, garnishment, attachment or similar proceeding is instituted against any property of the Company or ICS. This provision shall control every other provision in any and all other agreements and instruments now existing or hereafter arising between Company and Holder with respect to the indebtedness evidenced hereby. This Note has been delivered in, and shall be governed by and construed in accordance with the laws of, the Commonwealth of Kentucky. With the exception of any disputes related to the calculation of the Annual Earn-Out Payment, as set forth above, the parties hereto consent to the jurisdiction of the courts of Jefferson County, Kentucky, and of the United States District Court of the Western District of Kentucky. Except as otherwise provided herein, Company and any other party who may become primarily or secondarily liable for any of the obligations of the Company hereunder hereby waive presentment, demand, notice of dishonor, protest, notice of protest, and nonpayment, and further agree that the holder of this Note shall have the right, without notice, to deal in any way, at any time, with the Company, or with any other party who may become primarily or secondarily liable for any of the obligations of the Company under this Note without waiving any rights the holder of this Note may have hereunder or by virtue of the laws of this state or any other state of the United States. The failure of any party hereto to insist upon strict performance of any of the terms of this Note, or to exercise any rights herein confirmed, shall not be construed as a waiver or relinquishment to any extent of such party's right to assert or rely upon such terms or rights in any other instance. A waiver on any one occasion shall not be construed as a bar to or waiver of any right and/or remedy on any future occurrence. The Company agrees that if, in the event of a default, this Note is referred to an attorney who is not a salaried employee of Holder, Company will pay such costs and reasonable attorney's fees as are incurred by the holder and actually paid or agreed to be paid by Holder. THE COMPANY IRREVOCABLY WAIVES ANY AND ALL RIGHTS THE COMPANY MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE COMPANY ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY. The invalidity or unenforceability of any provision of this Note in general or in any particular circumstance shall not affect the validity or enforceability of any one or more of the other provisions of this Note or the validity of such provisions as applied to any other circumstance. Company agrees that this Note and all provision hereof shall be interpreted so as to give effect and validity to all the provisions hereof to the fullest extent permitted by law. This Note shall bind the Company and its successors and assigns and the benefits hereof shall inure to the benefit of the Holder and his heirs, personal representatives, successors, and assigns; provided, however, that the Holder may not assign this Note in whole or in part without the Company's prior written consent. The terms and conditions of this Note may not be changed or altered without the prior written consent of the Company. MAKER: ORBIT INTERNATIONAL CORP. By: Mitchell Binder, Executive Vice President and Chief Financial Officer EX-10.6 8 termloanandsecurityagreement.txt TERM LOAN AND SECURITY AGREEMENT Exhibit 10.6 [GRAPHIC OMITED] [GRAPHIC OMITED] TERM LOAN AND SECURITY AGREEMENT TERM LOAN AND SECURITY AGREEMENT dated as of December 19, 2007, 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 Closing Conditions" shall mean the delivery of a certificate of the Customer, dated the Closing Date and signed by a Financial Officer of the Customer (i) certifying that (a) the ICS Acquisition has been consummated in escrow, pursuant to the Escrow Agreement, (b) the total consideration paid in connection with the acquisition of the shares was not more than $7,300,000, (c) no party to any of the ICS Acquisition Agreements has waived the fulfillment of any material condition precedent set forth therein to the consummation of the acquisition, no party has failed to perform any of its material obligations thereunder or under any instrument or document executed and delivered in connection therewith, and nothing has come to the attention of the Customer that would cause it to believe that any of the representations or warranties of ICS contained in the signed ICS Acquisition Agreements was false or misleading in any material respect when made, (d) neither the execution and delivery of the ICS Acquisition Agreements, nor the performance of the Customer's obligations thereunder, will violate any provision of law or will conflict with or result in a breach of, or create (with or without the giving of notice or lapse of time, or both) a default under, any material agreement to which the Customer is a party or by which it is bound or any of its assets is affected and (e) upon the satisfaction of the Escrow Conditions, the Customer will have acquired by virtue of the consummation of the acquisition and will have good and marketable title to all of the capital stock of ICS pursuant to the ICS Acquisition Documents, free and clear of any Lien, except (1) for Permitted Liens and (2) for the liens created and granted by the Loan Documents, and (f) after giving effect to the acquisition, there is no litigation or administrative proceeding, or regulatory development, that could reasonably be expected to have a material adverse effect on (1) the business, assets, operations, condition (financial or otherwise) or material agreements of the Consolidated Entities, (2) the ability of any Consolidated Entity to perform any of its obligations under any Loan Document, (3) the rights of or benefits available to MLBFS under any Loan Document or (4) the ability of any party to the ICS Acquisition Agreement to perform any of its obligations under the signed ICS Acquisition Agreement, and (ii) attaching a true, complete and correct copy of the ICS Acquisition Agreement. "Anti-Terrorism and Anti-Money Laundering Laws" shall mean (a) all applicable laws, regulations, executive orders and government guidance on the prevention and detection of money laundering (including 18 U.S.C. 1956 and 1957), drug trafficking, terrorist-related activities, or financial or other fraud; (b) the Bank Secrecy Act (31 U.S.C. 5311 et seq. and 12 U.S.C. 1818(s), 1829(b) and 1951-1959) and its implementing regulations, and (c) all regulations and any other requirements of any governmental authority (including, without limitation, the United States Department of the Treasury Office of Foreign Assets Control) addressing, relating to, or attempting to eliminate drug trafficking, terrorist acts and acts of war. "Applicable Margin" shall mean, at all times during the applicable periods set forth below the percentage set forth below under the heading "Applicable Margin" and adjacent to such period: PERIOD APPLICABLE MARGIN ------ ----------------- WHEN THE TOTAL FUNDED DEBT TO EBITDA RATIO IS GREATER THAN OR EQUAL TO AND ---------------------------------------------------------------------- --- LESS THAN --------- 2.50:1.00 1.75% --------- ----- 1.75:1.00 2.50:1.00 1.50% --------- --------- ----- 1.25:1.00 1.75:1.00 1.25% --------- --------- ----- 1.25:1.00 1.00% --------- ----- Changes in the Applicable Margin resulting from a change in the Total Funded Debt to EBITDA Ratio shall be based upon the certificate most recently delivered under Section 3.2(a) and shall become effective five (5) Business Days after the date such certificate is delivered to MLBFS. Notwithstanding anything to the contrary in this definition, (i) if Customer shall fail to deliver to MLBFS such a certificate on or prior to any date required hereby, the Total Funded Debt to EBITDA Ratio shall be deemed to be greater than 2.50:1.00 from and including such date to the date that is five (5) Business Days after the date of delivery to MLBFS of such certificate and (ii) during the period commencing on the Closing Date and ending on the date that the certificate to be delivered under Section 3.2(a) for the fiscal year ending December 31, 2007 is delivered to MLBFS, the Applicable Margin shall be 1.50%. "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 January 31, 2008. "Commitment Fee" shall mean a fee of $31,500.00 due to MLBFS in connection with this Loan Agreement. "Consolidated Entities" shall mean Customer, Behlman Electronics, Inc., Orbit Instrument of California, Inc., TDL Manufacturing, Inc., Tulip Development Laboratory, Inc. and ICS. "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. "Escrow Agent" shall mean Phillips Nizer LLP. "Escrow Agreement" shall mean the Escrow Agreement dated the Closing Date among ICS, Customer, Kenneth J. Ice, Michael R. Rhody and Julie A. McDearman and Phillps Nizer LLP, as Escrow Agent. "Escrow Conditions" shall mean the "Condition" in the Escrow Agreement. "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 since December 31, 2006; (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 and other amounts due and payable to MLBFS under the Loan Documents on or prior to the date hereof, including reimbursement or payment of the reasonable fees and disbursements of counsel to MLBFS; (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; (ix) Customer shall have entered into an amendment to the WCMA Loan and Security Agreement dated January 28, 2003 (Loan No. 885-07587) (the "Orbit WCMA"), and an amendment to the Term Loan and Security Agreement dated June 5, 2007 (Loan No. 912914027) and an amendment to the Term Loan and Security Agreement dated April 4, 2005 (Loan No. 912870864) with MLBFS and the conditions to the effectiveness thereof shall have been fulfilled to the satisfaction of MLBFS, (x) ICS shall have entered into a WCMA Loan and Security Agreement with MLBFS, dated as of December 31, 2007 and shall be in a form and substance satisfactory to MLBFS (the "ICS WCMA"), (xi) the Guarantors shall have confirmed their respective obligations under their Guaranties and Security Agreements in form and substance satisfactory to MLBFS (xii) shall have satisfied the Acquisition Closing Conditions, and (xiv) 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. "ICS" shall mean Integrated Consulting Services, Inc., a Kentucky corporation and wholly-owned subsidiary of Customer. "ICS Acquisition" shall mean the purchase by Customer of all of the issued and outstanding capital stock of ICS pursuant to the ICS Acquisition Agreement. "ICS Acquisition Agreement" shall mean the Stock Purchase Agreement dated as of December 19, 2007 by and among Customer, as Buyer, ICS and the respective shareholders of ICS, as the Sellers, together with all schedules and exhibits thereto and all instruments, documents and agreements delivered in connection therewith. "Loan" shall mean a sixty-month term installment loan in an amount equal to $4,500,000. "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 ICS Acquisition. "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. "Term Loan Agreements" shall mean, collectively, the Term Loan and Security Agreement dated as of April 4, 2005 between Customer and MLBFS (Loan No. 912870864), the Term Loan and Security Agreement dated as of June 5, 2007 between Customer and MLBFS (No. 912914027) and the Loan Agreement, as each may be amended, restated, supplemented or modified from time to time. "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 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) the Commitment Expiration Date shall not then have occurred; and (c) 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. 2.6 PREPAYMENTS. In the event and on each occasion that any net proceeds are received by or on behalf of Customer or any Consolidated Entity in respect of any of the following: (i) the disposition of any or all of the fixed assets of any Consolidated Entity, whether by sale, lease, transfer or otherwise (but excluding damage, destruction, loss or condemnation), other than in the ordinary course of business; (ii) any equity issuance by Customer or any Consolidated Entity, or (iii) the incurrence by Customer or any of the Consolidated Entities of any indebtedness not permitted to be incurred by any Loan Document, then, immediately after such net proceeds are received, Customer shall prepay pro rata the Loan and the term loans outstanding under the other Term Loan Agreements in an amount equal to such net proceeds. ARTICLE III. GENERAL PROVISIONS 3.1 REPRESENTATIONS AND WARRANTIES Customer represents and warrants to MLBFS that: (A) COMPLIANCE WITH ANTI-TERRORISM, EMBARGO, SANCTIONS AND ANTI-MONEY LAUNDERING LAWS. Without limiting the generality of any other provision in this Loan Agreement: (i) each Credit Party has taken all reasonable measures, in accordance with all applicable Anti-Terrorism and Anti-Money Laundering Laws with respect to each holder of a direct or indirect interest in such Credit Party, to assure that funds invested by such holders in the Credit Parties are derived from legal sources; (ii) to Customer's knowledge after making due inquiry, neither any of the Credit Parties nor any holder of a direct or indirect interest in the Credit Parties: (a) is under investigation by any governmental authority for, or has ever been charged with, or convicted of, any violation of any Anti-Terrorism and Anti-Money Laundering Laws or any other criminal activity, (b) has been assessed civil penalties under any Anti-Terrorism and Anti-Money Laundering Laws, (c) has had any of its funds seized or forfeited in an action under any Anti-Terrorism and Anti-Money Laundering Laws or (d) is a Person with whom a citizen of the United States is prohibited to engage in transactions pursuant to any Anti-Terrorism and Anti-Money Laundering Laws; (iii) each Credit Party has taken reasonable steps, consistent with industry practice for comparable organizations and in any event as required by law, to ensure that such Credit Parties are and shall be in compliance with all Anti-Terrorism and Anti-Money Laundering Laws; provided -------- however, Sections (i) and (ii) of this provision shall not apply to the extent ---- that such Person's interest is in or through an entity whose securities are traded on a national securities exchange. (B) 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. (C) 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. 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. (D) 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. (E) 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. (F) 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. (G) 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. (H) 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. (I) 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) unless such taxes are being actively contested in good faith, and there are adequate reserves to timely pay any such taxes determined to be owed. (J) COLLATERAL LOCATION. All of the tangible Collateral is located at a Location of Tangible Collateral. (K) 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. (L) 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. 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) 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; (iii) 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; (iv) 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; (v) PROJECTIONS. Not earlier than thirty (30) days prior to the beginning of each fiscal year of Customer, financial projections of Customer and the Consolidated Entities on a consolidated basis, including cash flow, balance sheet and income statements, on a quarterly basis for such fiscal year and on an annual basis for the immediately succeeding two (2) fiscal years, all in reasonable detail, in form satisfactory to MLBFS, and certified by the chief financial officer of Customer as Customer's good faith projections of the matters contained therein; 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 covenant s and agrees during the term of this Loan Agreement that: (a) COMPLIANCE WITH ANTI-TERRORISM, EMBARGO, SANCTIONS AND ANTI-MONEY LAUNDERING LAWS. Each Credit Party (i) shall take all reasonable measures in accordance with all applicable Anti-Terrorism and Anti-Money Laundering Laws with respect to each holder of a direct or indirect interest in such Credit Party, to assure that funds invested by such holders in the Credit Parties are derived from legal sources; (ii) shall not violate any Anti-Terrorism and Anti-Money Laundering Laws, and (iii) shall take reasonable steps, consistent with industry practice for comparable organizations and in any event as required by law, to ensure that such Credit Parties are and shall be in compliance with all Anti-Terrorism and Anti-Money Laundering Laws; provided however, Sections ---------------- (i) and (ii) of this provision shall not apply to the extent that such Person's interest is in or through an entity whose securities are traded on a national securities exchange. (b) 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. (c) 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. (d) 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. (e) 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. (f) 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. (g) 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. (h) 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. (i) NO CHANGE IN MANAGEMENT. Customer will maintain experienced and competent professional senior management, including Dennis Sunshine, Bruce Reissman and Mitchell Binder. (j) 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, services, business ventures, companies or divisions. (k) 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. (l) MINIMUM LIQUIDITY The Consolidated Entities "Minimum Liquidity" shall at all times be not less than $3,000,000. For purposes hereof, "Minimum Liquidity" shall mean, as of any date of determination, the sum of (i) cash and cash equivalents of the Consolidated Entities as of such date determined in accordance with GAAP plus (ii) unused availability under any revolving credit facility made available to any Consolidated Entity by MLBFS. (m) TOTAL FUNDED DEBT TO EBITDA. For purposes hereof, "Total Funded Debt to EBITDA Ratio" shall mean the ratio of (a) all debt for borrowed money including all outstandings (excluding 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; provided that, for each fiscal quarter during the fiscal year of the Consolidated Entities ending on December 31, 2008, income before interest (including payments in the nature of interest under capital leases), taxes, depreciation, amortization, and other non-cash charges shall be determined on a pro forma basis as if ICS were acquired on January 1, 2007. The Consolidated Entities Total Funded Debt to EBITDA Ratio shall not exceed the ratios set forth below opposite such period: Period Ratio ------ ----- December 31, 2007 to and including December 31, 2009 2.50:1.00 ---------------------------------------------------- --------- January 1, 2010 and thereafter 2.00:1.00 ------------------------------ --------- (n) FIXED CHARGE COVERAGE. Consolidated Entities "Fixed Charge Coverage Ratio" shall at all times exceed 1.25 to 1.00. 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 schedule to be paid or accrued over the next 12 month period; all as set forth in Consolidated Entities regular quarterly financial statements prepared in accordance with GAAP. 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 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 $100,000.00 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 active gross negligence 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) ANTI-TERRORISM, EMBARGO, SANCTIONS AND ANTI-MONEY LAUNDERING LAWS. (i) Any Credit Party (a) becomes under investigation by any governmental authority for any violation of any Anti-Terrorism and Anti-Money Laundering Laws, (b) is assessed civil penalties under any Anti-Terrorism and Anti-Money Laundering Laws, (c) has any of its funds seized or forfeited in an action under any Anti-Terrorism and Anti-Money Laundering Laws, or (d) is identified as a Person with whom a citizen of the United States is prohibited to engage in transactions by any Anti-Terrorism and Anti-Money Laundering Laws; (ii) any representation or warranty made by any Credit Party in this Loan Agreement or any of the other Loan Documents with respect to any Anti-Terrorism and Anti-Money Laundering Laws shall at any time prove to have been incorrect when made or (ii) any Credit Party shall default in the performance or observance of any covenant or agreement related to any Anti-Terrorism and Anti-Money Laundering Laws contained in any of the Loan Documents. (b) 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. (c) 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. (d) 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. (e) 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. (f) BANKRUPTCY EVENT. Any Bankruptcy Event shall occur. (g) 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. (h) 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. (i) 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. (j) 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. (k) JUDGMENTS. A judgment shall be entered against any Credit Party in excess of $25,000 and the judgment is not paid in full and discharged, or stayed and bonded to the satisfaction of MLBFS. (l) 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 satisfactory to MLBFS in its sole discretion) 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 Customer. (m) 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 integ-ral 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: Signature (1) Signature (2) Printed Name Printed Name 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 DECEMBER 19, 2007 BETWEEN MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. AND ORBIT INTERNATIONAL CORP. ADDITIONAL LOCATIONS OF TANGIBLE COLLATERAL: [GRAPHIC OMITED] [GRAPHIC OMITED] $4,500,000.00 December 19, 2007 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 Four Million Five Hundred Thousand And 00/100 Dollars ($4,500,000.00), 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 of interest equal to the sum of the Applicable Margin, plus the One-Month LIBOR. "One-Month LIBOR" shall mean, as of the date of any determination, the interest rate then most recently published in the "Money Rates" section of The Wall Street Journal as the one-month London Interbank Offered Rate (or if more than one such rate is published, the highest of such 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 on December 31, 2007 provided that if the Escrow Conditions have been met prior to or on December 31, 2007 then Customer shall pay the indebtedness 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 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) any Excess Interest that MLBFS may have received under any of the Loan Documents shall, at the option of MLBFS, either 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 Customer. 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: Signature (1) Signature (2) Printed Name Printed Name Title Title -----END PRIVACY-ENHANCED MESSAGE-----