Document:

Exhibit
      10.2

     

    German
      American Bancorp, Inc. (the "Company"), compensates its directors for their
      service to the Company and the Company's subsidiaries based on a twelve-month
      period commencing with each year's annual reorganization meeting of the
      Board.  The Governance/Nominating Committee made a recommendation with
      respect to director compensation to the Board and the Board approved such
      recommendation at its annual reorganization meeting on  May 7, 2008.

     

    For
      services of directors during the current annual period that commenced at the
      2008 annual meeting, the Company is compensating its directors, including the
      CEO, through an annual retainer of $16,000 paid in cash during June 2008 in
      a
      lump sum (which is earned regardless of the number of meetings held or attended,
      and regardless of committee membership or attendance) and is paying an
      additional attendance fee of $500 for each meeting of the Board that they attend
      during this period. 

     

    In
      addition, those members of the Board (other than the CEO, who as a salaried
      employee of the Company is ineligible) who serve on the board of directors
      (including any regional advisory board) of at least one of the subsidiaries
      receives additional compensation for his or her service to such subsidiaries
      in
      the form of director/advisory fees for meetings actually attended of (i) $500
      per meeting of the board of directors of German American Bancorp (our bank
      subsidiary) or of any regional advisory board, and (ii) $250 per each meeting
      of
      the board of directors of German American Financial Advisors & Trust Company
      and German American Insurance, Inc.EXHIBIT
      4.1

     

    THIS
      NOTE
      HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS NOTE IS AND WILL BE
      SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
      NOT
      BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
      APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR EXEMPTION
      THEREFROM.

     

    SUBORDINATED
      PROMISSORY NOTE

     

    
      
        	$1,000,000	 	
                August
                  1, 2008

              

      

    

     

    FOR
      VALUE
      RECEIVED, Encompass
      Group Affiliates, Inc.,
      a
      Florida corporation (the “Company”) hereby promises to pay to Tritronics,
      LLC
      or its
      permitted transferees or assigns (“Holder”), the principal sum of $1,000,000, or
      such lesser amount as shall then equal the outstanding principal amount
      hereunder (the “Principal Amount”), together with interest on the unpaid
      Principal Amount on the Maturity Date (as defined below), or as otherwise
      specified herein, and in the amounts specified herein.

     

    Section
      1. Background;
      Capitalized Terms.
      This
      Subordinated Promissory Note (the “Note”) is being issued as part of the
      Purchase Price in connection with the consummation of the transactions
      contemplated by that certain Stock Purchase Agreement, dated as of the date
      hereof (the “Stock Purchase Agreement”), by and between the Company, the Buyer,
      the Holder and the members of the Holder. Capitalized terms used herein and
      not
      otherwise defined herein shall have the meaning set forth in the Stock Purchase
      Agreement.

     

    Section
      2. Required
      Repayment; Prepayment.
      The
      Company will pay the Principal Amount of the Note then outstanding together
      with
      all accrued and unpaid interest thereon upon the Maturity Date (or such earlier
      date as may be required hereunder). The Company may prepay the Principal Amount
      of this Note, in full or in part, at any time without premium, fee or penalty,
      provided that any such prepayment shall include all accrued and unpaid interest
      due on the amount of such prepaid Principal Amount. Company shall prepay the
      Principal Amount of the Note then outstanding together with all accrued and
      unpaid interest on the Note, without premium, fee or penalty, upon the
      occurrence of (i) a liquidation, dissolution or winding up of the Company,
      whether voluntary or involuntary, (ii) a consolidation or merger of the Company
      with or into any other person(s), entity or entities in which, or a
      recapitalization of the equity of the Company immediately following which,
      less
      than a majority of the outstanding voting power of the surviving person(s),
      entity or entities is held by persons or entities who were stockholders of
      the
      Company, respectively, prior to such event, or (iii) a sale or other disposition
      (whether in a single transaction or a series of related transactions) of
      substantially all of the assets of the Company.

     

    All
      repayments, prepayments and payments of principal and interest due with respect
      to this Note shall be made by the Company in United States Dollars in
      immediately available funds to the account of, or otherwise as directed in
      writing by, Holder. If the payment date for any installment of principal or
      interest under this Note occurs on a day that is a Saturday, Sunday or a legal
      holiday at the place of the Company’s offices, then such payment shall be deemed
      timely if made on the next day which is not such a day.

     

    For
      purposes hereof, the term “Maturity Date” shall mean August 1, 2014, unless the
      Senior Indebtedness shall not have been paid in full as of such date in which
      case the “Maturity Date” shall be the day after the Senior Indebtedness has been
      paid in full.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      3. Interest.
      This
      Note shall bear interest (computed on the basis of the actual number of days
      elapsed and a 360-day year of twelve 30-day months) on the unpaid Principal
      Amount outstanding from time to time at a rate per annum equal to seven percent
      (7%), compounded annually, and payable semi-annually in arrears, with the first
      payment of interest due on January 31, 2009 and further interest payments due
      on
      each July 31 and January 31 thereafter until the Principal Amount and all
      accrued interest thereon have been paid in full. Notwithstanding the first
      sentence of this Section 3, upon the occurrence of a default under Section
      6
      below, the unpaid Principal Amount hereunder shall bear interest at a default
      rate of nine and one-half percent (9.5%) per annum until such time as such
      default is cured.

     

    Section
      4. Subordination.
      This
      Note is subject to the Subordination provisions set forth on Schedule I hereto.
      The Company shall promptly notify Holder of any Event of Default (under the
      Senior Indebtedness, as defined on Schedule I).

     

    Section
      5. Set-off.
      The
      Company’s obligations under this Note, and the Principal Amount and accrued
      interest thereon, shall be subject to set-off as provided in Section 8.7 of
      the
      Stock Purchase Agreement.

     

    Section
      6. Events
      of Default.

     

    (a) The
      occurrence of any of the following events (each, an “Event of Default”) while
      any Principal Amount is outstanding, or any interest thereon is accrued and
      unpaid, will constitute a default under this Note:

     

    (i) Non-Payment.
      The
      Company fails to pay any portion of the Principal Amount or interest accrued
      thereon under this Note within 5 days of the due date, which failure is not
      cured within five (5) days after written notice thereof from Holder to the
      Company;

     

    (ii) Bankruptcy.
      The
      Company makes an assignment for the benefit of creditors, files a petition
      in
      bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies to any
      tribunal for any receiver or trustee, commences any proceeding relating to
      itself under any bankruptcy, reorganization, readjustment of debt, dissolution
      or liquidation law or statute of any jurisdiction, has commenced against it
      any
      such proceeding which remains undismissed for a period of ninety (90) days,
      or
      indicates its consent to, approval of or acquiescence in any such proceeding,
      or
      any receiver of or trustee for the Company or any substantial part of the
      property of the Company is appointed, or if any such receivership or trusteeship
      continues undischarged for a period of ninety (90) days;

     

    (iii) Dividends.
      The
      Company pays a cash dividend on any of its issued and outstanding shares of
      capital stock;

     

    (iv) Covenants.
      The
      Company fails to observe or defaults in the performance of any term, condition
      or covenant contained in this Note (other than payment obligations), which
      failure or default is not cured within thirty (30) days after written notice
      of
      such default from Holder to the Company; or

     

    (v) Prohibited
      Interest Payments.
      The
      Holder is required to repay or turn over any interest that has been paid to
      the
      Holder by the Company but was not permitted to be paid to the Holder pursuant
      to
      Section (d)(i) of Schedule
      1.

     

    Seller
      Promissory Note - Page 2

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) Subject
      to the Subordination provisions set forth on Schedule I hereto, if an Event
      of
      Default shall have occurred and be continuing, at the option of Holder, the
      unpaid Principal Amount of this Note and all accrued and unpaid interest thereon
      may become, or may be declared to be, immediately due and payable to Holder,
      and
      the Company shall pay to Holder on demand all costs of collection of the unpaid
      Principal Amount and accrued and unpaid interest thereon, including, but not
      limited to, reasonable attorney’s fees.

     

    Section
      7. Notices.
      Unless
      otherwise provided, any notice required or permitted under this Note shall
      be
      given in writing and shall be deemed effectively given (i) at the time of
      personal delivery, if delivery is in person; (ii) one (1) business day
      after deposit with an express overnight courier for United States deliveries,
      or
      two (2) business days after such deposit for deliveries outside of the United
      States, with proof of delivery from the courier requested; or (iii) three
      (3) business days after deposit in the United States mail by certified mail
      (return receipt requested) for United States deliveries when addressed to the
      party to be notified at the address indicated for such party on Exhibit A
      hereto, or at such other address as any party or the Company may designate
      by
      giving ten (10) days’ advance written notice to all other parties.

     

    Section
      8. Construction.
      The
      headings and captions used in this Note are used only for convenience and are
      not to be considered in construing or interpreting this Note. All references
      in
      this Note to sections and exhibits shall, unless otherwise provided, refer
      to
      sections hereof and exhibits attached hereto, all of which exhibits are
      incorporated herein by this reference.

     

    Section
      9. Governing
      Law and Venue; Waiver of Jury Trial.
      THIS
      NOTE SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED,
      CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
      YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties
      hereby irrevocably submit to the jurisdiction of the Federal courts of the
      United States of America located in the State of New York, solely in respect
      of
      the interpretation and enforcement of the provisions of this Note and of the
      documents referred to in this Note, and in respect of the transactions
      contemplated hereby, and hereby waive, and agree not to assert, as a defense
      in
      any action, suit or proceeding for the interpretation or enforcement hereof
      or
      of any such document, that it is not subject thereto or that such action, suit
      or proceeding may not be brought or is not maintainable in said courts or that
      the venue thereof may not be appropriate or that this Note or any such document
      may not be enforced in or by such courts, and the parties hereto irrevocably
      agree that all claims with respect to such action or proceeding shall be heard
      and determined in such a Federal or state court. The parties hereby consent
      to
      and grant any such court jurisdiction over the Person of such parties and over
      the subject matter of such dispute and agree that mailing of process or other
      papers in connection with any such action or proceeding in the manner provided
      in Section 7 or in such other manner as may be permitted by law, shall be valid
      and sufficient service thereof.

     

    EACH
      PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
      NOTE IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH
      SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY
      MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
      ARISING OUT OF OR RELATING TO THIS NOTE, OR THE TRANSACTIONS CONTEMPLATED BY
      THIS NOTE. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE,
      AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
      THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
      THE
      FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
      IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER
      VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS NOTE
      BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
      9.

     

    Seller
      Promissory Note - Page 3

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      10. Amendments,
      Waivers and Consents.
      The
      Company and Holder agree that this Note may be amended only in writing signed
      by
      both parties. Compliance by the Company with any term, covenant or condition
      of
      this Note may be omitted or waived (either generally or in a particular instance
      and either retroactively or prospectively) only by a consent or consents in
      writing signed by Holder. No failure to exercise, and no delay in exercising,
      on
      the part of Holder, 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 not exclusive of any rights or remedies provided
      by
      law. The Company and all endorsers of this Note hereby waive notice,
      presentment, protest and notice of dishonor.

     

    Section
      11. Transfers.
      This
      Note is not a negotiable instrument. Except involuntary transfers by operation
      of law, Holder may not assign or otherwise transfer this Note without the
      express written consent of the Company which may be withheld or granted by
      the
      Company in its absolute discretion. It shall be a condition to any permitted
      assignment, transfer or distribution that the transferee agrees in writing
      that
      the Note shall continue to be subject to the set-off provisions applicable
      to
      such Holder set forth in the Stock Purchase Agreement. In addition, any transfer
      of this Note or any interest herein shall be subject, at the Company’s
      discretion, to the Company’s receipt of an opinion of counsel, reasonably
      acceptable to the Company in form and substance and as to the identity of such
      counsel, that such transfer may occur without registration under the Securities
      Act of 1933.

     

    Section
      12. Severability.
      If one
      or more provisions of this Note are held to be unenforceable under applicable
      law, such provision(s) shall be excluded from this Note and the balance of
      the
      Note shall be interpreted as if such provision(s) were so excluded and shall
      be
      enforceable in accordance with its terms.

     

    Section
      13. Usury.
      It is
      the intention of the parties hereto to comply strictly with all applicable
      usury
      laws. Accordingly, in no event and upon no contingency shall the Holder be
      entitled to receive, collect or apply as interest any interest, fees, charges
      or
      other payments equivalent to interest in excess of the amount which may be
      charged from time to time under applicable law. In the event that the Holder
      of
      this Note ever receives, collects or applies as interest any such excess, then
      immediately upon becoming aware of such receipt, collection or application,
      the
      Holder shall notify the Company of the usurious overcharge and refund to the
      Company the amount of any overcharge received, plus interest on the overcharge
      received at the maximum lawful rate in effect at the time the usurious interest
      rate was received and the Holder shall make whatever adjustments in this Note
      are necessary to insure that the Company will not be required to pay any further
      interest in excess of the amount permitted under applicable law. The Company
      shall not institute any action or file any defense based upon the charging
      or
      collecting of usurious interest hereunder unless (i) the Company shall give
      the
      Holder written notice of an intent to do so and (ii) the Holder shall fail
      to
      comply with the terms hereof, by notification and refund to the Company and
      making necessary adjustments as aforesaid, within fifteen (15) days after
      receipt by the Holder of such written notice from the Company. The provisions
      of
      this paragraph shall be given precedence over any other provision contained
      herein or in any other agreement between the parties hereto that is in conflict
      with the provisions of this paragraph.

     

    [Signature
      Page Immediately Follows]

     

    Seller
      Promissory Note - Page 4

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Note to be signed in its name as of the date first
      above
      written.

     

    
      	 	
              ENCOMPASS
                GROUP AFFILIATES, INC.

               

            
	 	
              By:

            	  

	 	 	
              Name:
                Wayne Danson

            
	 	 	
              Title:
                President and CEO

            
	 	 	 
	
              ACKNOWLEDGED
                AND AGREED:

            	 	 
	  
	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Schedule
      I

     

    Subordination
      Provisions

     

    (a) Definitions.
      For the
      purposes of this Schedule I, the following terms shall have the following
      meanings:

     

    (i) “Post-Petition
      Interest” shall mean interest at the contract rate accruing subsequent to the
      filing of a petition initiating any proceeding in bankruptcy, insolvency or
      like
      proceeding whether or not such interest is an allowed claim enforceable against
      the debtor in a bankruptcy case under the Bankruptcy Code.

     

    (ii) “Senior
      Indebtedness” shall mean the obligations now or hereafter incurred pursuant to
      or in connection with the Amended and Restated Note Purchase Agreement (as
      may
      be amended, modified, refinanced by the Company or its subsidiaries or
      supplemented from time to time, the “Note Purchase Agreement”) dated August 1,
      2008, among Encompass Group Affiliates, Inc. a Delaware corporation
      (“Encompass”), the Company, Tritronics, Inc., a Maryland corporation
      (“Tritronics”), SpectruCell, Inc., a Delaware corporation (“Spectrucell”),
      Hudson Street Investments, Inc., a Delaware corporation (“Hudson Street”),
      Cyber-Test, Inc., a Delaware corporation (“Cyber-Test”), Vance Baldwin, Inc.
      (“Vance Baldwin”), as guarantors (Encompass,
      the Company, Tritronics, SpectruCell, Hudson Street, Cyber-Test, Vance Baldwin
      and any subsidiary of Company that executes a counterpart or joinder together
      being referred to as the “Note Parties”, and each such Person a “Note Party”,
      Sankaty Advisors, LLC as First Lien Collateral Agent for the Senior Note
      Purchasers and Second Lien Collateral Agent for the Subordinated Note Purchasers
      (collectively, the “Agent”),
      and
      each Senior Note Purchaser and Subordinated Note Purchaser listed on
Schedule
      I
      attached
      thereto)
      including, without limitation, principal, premium, interest (including
      Post-Petition Interest), expenses, fees and indemnifications
      thereunder.

     

    (iii) “Subordinated
      Obligations” shall mean all obligations of the Company now or hereafter incurred
pursuant
      to or in
      connection with this Note, including, without limitation, any principal or
      interest on this Note.

     

    (b) Obligations
      Subordinate to Senior Indebtedness.
      Company
      and each Guarantor (as defined in the Note Purchase Agreement) covenants and
      agrees, and the Holder by its acceptance hereof, likewise covenants and agrees,
      that this Note shall be issued and all Subordinated Obligations shall be
      incurred hereunder subject to the provisions of this Schedule I; and each Person
      holding this Note, whether upon original issue or upon transfer, assignment
      or
      exchange thereof, accepts and agrees that the payment of all Subordinated
      Obligations, to the extent and in the manner hereinafter set forth, be
      subordinated and junior in right of payment to the prior indefeasible payment
      in
      cash in full of all Senior Indebtedness as from time to time outstanding; that
      the subordination is for the benefit of, and shall be enforceable directly
      by,
      each holder of Senior Indebtedness, and that each holder of Senior Indebtedness
      shall be deemed to have acquired its Senior Indebtedness in reliance upon the
      covenants and provisions contained in this Note. The Senior Indebtedness shall
      not be deemed to have been paid in full for all purposes of the Note Documents
      (as defined in the Note Purchase Agreement) and the Subordinated Obligations
      until all Senior Indebtedness has been indefeasibly paid in full in cash
      (including, without limitation, Post-Petition Interest) and termination of
      all
      commitments or other Note Obligations (as defined in the Note Purchase
      Agreement) under the Note Documents.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) Payment
      Over to Holders of Senior Indebtedness.
      In the
      event of any payment or distribution of assets of any Note Party of any kind
      or
      character, in part or in whole, whether in cash, property or securities, to
      creditors including in connection with (i) any insolvency or bankruptcy case
      or
      proceeding in connection therewith, relative to any Note Party or to any of
      their creditors or to their assets, or (ii) any liquidation, dissolution or
      other winding up of any Note Party whether voluntary or involuntary and whether
      or not involving insolvency or bankruptcy, or (iii) any assignment for the
      benefit of creditors or any other marshaling of assets and liabilities of any
      Note Party, then and in any and all such events:

     

    
      	 	
              (A)

            	
              all
                Senior Indebtedness in such proceeding shall be paid in full in cash
                before the Holder is entitled to receive any payment or distribution
                of
                the assets of such Note Party, whether in cash, securities or other
                property, on account of the Subordinated
                Obligations;

            

    

     

    
      	 	
              (B)

            	
              any
                payment or distribution of assets of any Note Party of any kind or
                character, whether in cash, property or securities, by set-off or
                otherwise, to which the Holder would be entitled to apply to the
                payment
                of the Subordinated Obligations but for the provisions of this Schedule
                I,
                including any such payment or distribution which may be payable or
                deliverable by reason of the payment of any other Indebtedness of
                any Note
                Party being subordinated to the payment of the Subordinated Obligations
                shall be paid by the liquidating trustee or agent or other Person
                making
                such payment or distribution, whether a trustee in bankruptcy, a
                receiver
                or liquidating trustee or otherwise, directly to the Agent in accordance
                with the Note Purchase Agreement until all Senior Indebtedness shall
                have
                been paid in cash, and

            

    

     

    
      	 	
              (C)

            	
              in
                the event that, notwithstanding the foregoing provisions of this
                Schedule
                I, the Holders of this Note shall have received any such payment
                or
                distribution of assets of any Note Party of any kind or character,
                on
                account of the Subordinated Obligations, whether in cash, property
                or
                securities, before all such Senior Indebtedness is paid in full in
                cash,
                then and in such event such payment or distribution shall be received
                in
                trust and paid over or delivered forthwith to the Agent in accordance
                with
                the Note Purchase Agreement until all Senior Indebtedness shall have
                been
                paid in full in cash.

            

    

     

    
      	 	
              (D)

            	
              The
                Agent shall have the right to request any Holder to file and, in
                the event
                that the Holder fails to do so within thirty (30) days prior to the
                date
                such claims or proofs of claim would be barred for failure to make
                a
                timely filing, is hereby authorized to file a proof of claim for
                and on
                behalf of that Holder or any other holder of this Note in such form
                as the
                Agent may reasonably determine to be necessary or appropriate for
                the
                enforcement of the provisions of this subclause (c), to accept and
                receive
                a payment or distribution which may be payable or deliverable at
                any time
                upon or in respect of the Subordinated Obligations in an amount not
                in
                excess of the Senior Indebtedness then outstanding and to take such
                other
                action as may be reasonably necessary to effectuate the foregoing.
                Each
                Holder of this Note shall provide to the Agent any such other instruments,
                documents and information, reasonably necessary to present any such
                claims
                or seek enforcement as aforesaid.

            

    

     

    Schedule
      I - Page 2

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 	
              (E)

            	
              If,
                notwithstanding the provisions of this Note, there shall occur any
                consolidation of any Note Party with, or any merger of any Note Party
                into, another corporation or the liquidation or dissolution of any
                Note
                Party following any conveyance, transfer or lease of its properties
                and
                assets substantially as an entirety to another corporation, such
                consolidation, merger or liquidation shall not be deemed a dissolution,
                winding up, liquidation, reorganization, assignment for the benefit
                of
                creditors or marshaling of assets and liabilities of Note Party for
                the
                purposes of this Schedule I.

            

    

     

    (d) No
      Payment in Certain Circumstances.

     

    (i) Except
      as
      set forth in the immediately following sentence, whether or not the Maturity
      Date hereunder has occurred, no payments shall be made by any Note Party on
      account of the Subordinated Obligations unless and until all Senior Indebtedness
      shall have been indefeasibly paid in cash in full or provision shall have been
      made for such payment or until such default shall have been cured or waived.
      Anything to the contrary herein notwithstanding, the Company may make, and
      the
      Holder may accept, regularly scheduled interest payments pursuant to Section
      3
      of the Note as long as no Event of Default (as defined in the Note Purchase
      Agreement) has occurred and is continuing (“Senior Default”), and as long as no
      Senior Default would result therefrom.

     

    (ii) In
      the
      event that, notwithstanding the foregoing, the Company or any other Note Party
      shall make any payment to any Holder prohibited by the foregoing provisions
      of
      this subclause (d), then and in such event such payment shall be paid over by
      Holder in the form received, to the Agent in accordance with the Note Purchase
      Agreement until all Senior Indebtedness shall have been indefeasibly paid in
      full in cash.

     

    (e) Forbearance
      upon Default under Senior Indebtedness.
      Until
      all Senior Indebtedness has been indefeasibly paid in full in cash, for a period
      beginning on the date of the occurrence of any default under any Note Document
      and ending on the date on which such default shall cease to exist, no Holder
      of
      this Note shall, without the prior written consent of the Agent (which consent
      may be granted or withheld in the Agent’s sole and absolute discretion), demand
      payment of this Note or commence any action, suit or proceeding to enforce
      any
      claims, rights, demands, causes of action, liabilities, or suits, of any kind
      whatsoever, whether known or unknown, that have been, could have been, or in
      the
      future might be asserted by the holders of this Note based upon, arising out
      of,
      or in any way relating to this Note.

     

    (f) Provisions
      Solely to Define Relative Rights.
      The
      provisions of this Schedule I are and are intended solely for the purpose of
      defining the relative rights of the Holders of this Note on the one hand and
      the
      holders of Senior Indebtedness on the other hand. Nothing contained in this
      Schedule I or elsewhere in this Note is intended to or shall (i) impair, as
      among the Company and any Guarantor, their creditors (other than holders of
      Senior Indebtedness) and the Holder, the obligation of the Company or any
      Guarantor, which is absolute and unconditional, to pay to the Holder the
      principal of, and premium and interest on, and any other amount payable by
      the
      Company or any Guarantor under this Note, as and when the same shall become
      due
      and payable in accordance with its terms; or (ii) affect the relative rights
      against the Issuers of the Holder and their creditors (other than the holders
      of
      Senior Indebtedness ).

     

    Schedule
      I - Page 3

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (g) No
      Waiver of Subordination Provisions.
      No
      right of any present or future holder of any Senior Indebtedness to enforce
      subordination as herein provided shall at any time in any way be prejudiced
      or
      impaired by any act or failure to act on the part of the Company, any Guarantor,
      any Note Party or any holder of Senior Indebtedness or by any act or failure
      to
      act, in good faith, by any such holder, or by any noncompliance by the Issuers
      or any holder of Senior Indebtedness with the terms, provisions, or covenants
      of
      this Agreement, regardless of any knowledge thereof any such holder may have
      or
      be otherwise charged with. Without in any way limiting the generality of the
      foregoing, the holders of Senior Indebtedness may at any time and from time
      to
      time, without the consent of or notice to the Holder, without incurring
      responsibility to the Holder and without impairing or releasing the
      subordination provided in this Schedule I or obligations hereunder of the Holder
      to the holders of Senior Indebtedness, do anyone or more of the following:
      (i)
      subject to the provisions of this Agreement, change the manner, place or terms
      of payment or extend the time of payment of, or renew or alter, or otherwise
      amend, supplement, modify, refinance or restructure in any manner any Senior
      Indebtedness or any instrument evidencing the same or any agreement under which
      the Senior Indebtedness is outstanding or is related thereto; (ii) sell,
      exchange, release or otherwise deal with any property pledged, mortgaged or
      otherwise securing Senior Indebtedness; (iii) release any Person liable in
      any
      manner for the collection of Senior Indebtedness; and (iv) exercise or refrain
      from exercising or waiving any rights, powers or remedies against the Company,
      any Guarantor and any other Person.

     

    (h) Reinstatement.
      The
      holders of Senior Indebtedness shall continue to benefit from the subordination
      created hereunder and the provisions of this Note shall continue to govern
      the
      relative rights and priorities of such holders, on the one hand, and the Holder,
      on the other hand, notwithstanding the fact that part or all of the Senior
      Indebtedness, or any payment received in respect of Senior Indebtedness, is
      subordinated, set aside, avoided or disallowed under Sections 547 or 548 of
      the
      Bankruptcy Code or any successor statute or other applicable insolvency law
      or
      equitable principles and the subordination provisions hereunder shall be
      reinstated in the event that any payment in respect of Senior Indebtedness
      is
      set aside, avoided or disallowed.

     

    (i) Guarantees.
      Holder
      agrees that no entity that controls, is controlled by, or is under common
      control with the Company shall guarantee or otherwise become obligated under
      this Note.

     

    (j) Amendment.
      Any
      amendment to the provisions of this Note shall not be effective against any
      holder of Senior Indebtedness without the consent of the Required Noteholders
      until all Senior Indebtedness shall have been paid in full in cash; provided
      that,
      notwithstanding the foregoing, no amendment to the provisions of this Note
      which
      would permit any payment on the Note to be made or retained by the Holder (and
      which is not currently permitted) prior to the payment in full, in cash, of
      Senior Indebtedness under the Note Documents shall be effective without consent
      of all holders of such Senior Indebtedness.

     

    (k) Remedies.
      The
      holders of Senior Indebtedness shall be entitled to enforce their rights under
      this Schedule I specifically, to recover damages by reason of any breach of
      any
      provision of this Schedule I and to exercise all other rights existing in their
      favor. The Holder acknowledges and agrees that money damages may not be adequate
      remedy for any breach of the provisions of this Schedule I and that the Agent,
      on behalf of the holders of Senior Indebtedness, may apply to any court of
      law
      or equity of competent jurisdiction for specific performance and/or injunctive
      relief (without posting bond or other security) in order to enforce or prevent
      any violation of the provisions of this Schedule I. 

     

    Schedule
      I - Page 4

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit
      A

     

    Notices:

     

    If
      to the
      Company, to:

     

    Encompass
      Group Affiliates, Inc.

    420
      Lexington Avenue, Suite 2739

    New
      York,
      NY 10170

    Attention:
      Wayne Danson, Chief Executive Officer

    Facsimile:
      646.227.1666

     

    With
      a
      copy to:

     

    Eckert
      Seamans Cherin & Mellott, LLC

    Two
      Liberty Place

    50
      South
      16th Street

    22nd
      Floor

    Philadelphia,
      PA 19102

    Attention:
      Gary A. Miller, Esquire

    Facsimile:
      215.851.8383

     

    If
      to
      Holder, to:

     

    Tritronics,
      Inc.

    1306
      Continental Drive

    Abingdon,
      MD 21009

     

    With
      a
      copy to:

     

    Gordon,
      Feinblatt, Rothman, Hoffberger & Hollander LLC

    233
      East
      Redwood Street

    Baltimore,
      MD 21202

    Attention:
      Abba David Poliakoff

    Facsimile:
      410.576.4032

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