Document:

ex4a.htm

Exhibit 4(a)

May 24, 2010

Company Order and Officers’ Certificate

3.40% Senior Notes, Series S, due 2015

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street, Ste 1020

Chicago, IL 60602

Ladies and Gentlemen:

Pursuant to Article Two of the Indenture, dated as of January 1, 1998 (as it may be amended or supplemented, the “Indenture”), from Appalachian Power Company (the “Company”) to The Bank of New York Mellon Trust Company, N.A. (successor to The Bank of New York Mellon formerly known as The Bank of New York), as trustee (the “Trustee”), and the Board Resolutions dated December 14, 2009, a copy of which certified by the Secretary or an Assistant Secretary of the Company is being delivered herewith under Section 2.01 of the Indenture, and unless otherwise provided in a subsequent Company Order pursuant to Section 2.04 of the Indenture,

	
1.

	
the Company’s 3.40% Senior Notes, Series S, due 2015 (the “Notes”) are hereby established.    The Notes shall be in substantially the form attached hereto as Exhibit 1.

	  	  	  
	
2.

	
The terms and characteristics of the Notes shall be as follows (the numbered clauses set forth below corresponding to the numbered subsections of Section 2.01 of the Indenture, with terms used and not defined herein having the meanings specified in the Indenture):

	  	  	  
	  	
(i)

	
the aggregate principal amount of Notes which may be authenticated and delivered under the Indenture initially shall be limited to $300,000,000, except as contemplated in Section 2.01(i) of the Indenture and except that such principal amount may be increased from time to time; all Notes need not be issued at the same time and the series may be reopened at any time, without the consent of any securityholder, for issuance of additional Notes, which Notes will have the same interest rate, maturity and other terms as those initially issued;

	  	  	  
	  	
(ii)

	
the date on which the principal of the Notes shall be payable shall be May 24, 2015.

	  	  	  
	  	
(iii)

	
interest shall accrue from the date of authentication of the Notes; the Interest Payment Dates on which such interest will be payable shall be May 24 and November 24, and the Regular Record Date for the determination of holders to whom interest is payable on any such Interest Payment Date shall be the May 9 or November 9 preceding the relevant Interest Payment Date; provided that the first Interest Payment Date shall be November 24 and interest payable on the Stated Maturity Date or any Redemption Date shall be paid to the Person to whom principal shall be paid;

	  	  	  
	  	
(iv)

	
the interest rate at which the Notes shall bear interest shall be 3.40% per annum.

	  	  	  
	  	
(v)

	
the Notes shall be redeemable at the option of the Company, in whole at any time or in part from time to time, upon not less than thirty but not more than sixty days previous notice given by mail to the registered owners of the Notes at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes being redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes being redeemed (excluding the portion of any such interest accrued to the date of redemption) discounted (for purposes of determining present value) to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 30 basis points, plus, accrued interest thereon to the date of redemption.

 

“Treasury Rate” means, with respect to any redemption, (1) the yield, under the heading which represents the average for the week immediately preceding the date on which the notice of redemption is mailed to the registered holders of the securities (the “calculation date”) appearing in the most recently published statistical release designated “H.15(519)” or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the remaining life (as defined above), yields for the two published maturities most closely corresponding to the Comparable Treasury Issue will be determined and the Treasury Rate will be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

 

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term (“remaining life”) of the Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining life of the Notes.

 

“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (2) if the Company obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

 

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company and reasonably acceptable to the Trustee.

 

“Reference Treasury Dealer” means each of Credit Suisse Securities (USA) LLC, UBS Securities LLC, and a Primary Treasury Dealer (defined herein) selected by Wells Fargo Securities, LLC and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. government securities dealer in the United States (a “Primary Treasury Dealer”) the Company will substitute therefor another Primary Treasury Dealer reasonably acceptable to the Trustee.

 

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at or before 3:30 p.m., New York City time, on the third Business Day preceding such redemption date.

	  	  	  
	  	
(vi)

	
(a) the Notes shall be issued in the form of Global Notes; (b) the Depositary for such Global Notes shall be The Depository Trust Company; and (c) the procedures with respect to transfer and exchange of Global Notes shall be as set forth in the forms of Note attached hereto;

	  	  	  
	  	
(vii)

	
the title of the Notes shall be 3.40% Senior Notes, Series S, due 2015;

	  	  	  
	  	
(viii)

	
the forms of the Notes shall be as set forth in Paragraph 1, above;

	  	  	  
	  	
(ix)

	
not applicable;

	  	  	  
	  	
(x)

	
the Notes shall not be subject to a Periodic Offering;

	  	  	  
	  	
(xi)

	
not applicable;

	  	  	  
	  	
(xii)

	
not applicable;

	  	  	  
	  	
(xiii)

	
not applicable;

	  	  	  
	  	
(xiv)

	
the Notes shall be issuable in denominations of $1,000 and any integral multiple thereof;

	  	  	  
	  	
(xv)

	
not applicable;

	  	  	  
	  	
(xvi)

	
the Notes shall not be issued as Discount Securities;

	  	  	  
	  	
(xvii)

	
not applicable;

	  	  	  
	  	
(xviii)

	
not applicable; and

	  	  	  
	  	
(xix)

	
So long as any of the Notes are outstanding, the Company will not create or suffer to be created or to exist any additional mortgage, pledge, security interest, or other lien (collectively “Liens”) on any of its utility properties or tangible assets now owned or hereafter acquired to secure any indebtedness for borrowed money (“Secured Debt”), without providing that the Notes will be similarly secured.  This restriction does not apply to the Company’s subsidiaries, nor will it prevent any of them from creating or permitting to exist Liens on their property or assets to secure any Secured Debt.  In addition, this restriction does not prevent the creation or existence of:

	  	  	  
	  	  	
(a)

	
Liens on property existing at the time of acquisition or construction of such property (or created within one year after completion of such acquisition or construction), whether by purchase, merger, construction or otherwise, or to secure the payment of all or any part of the purchase price or construction cost thereof, including the extension of any Liens to repairs, renewals, replacements, substitutions, betterments, additions, extensions and improvements then or thereafter made on the property subject thereto;

	  
	  	  	  	  	  
	  	  	
(b)

	
Financing of the Company’s accounts receivable for electric service;

	  
	  	  	  	  	  
	  	  	
(c)

	
Any extensions, renewals or replacements (or successive extensions, renewals or replacements), in whole or in part, of liens permitted by the foregoing clauses; and

	  
	  	  	  	  	  
	  	  	
(d)

	
The pledge of any bonds or other securities at any time issued under any of the Secured Debt permitted by the above clauses.

	  
	  	  	  	  	  
	  	
In addition to the permitted issuances above, Secured Debt not otherwise so permitted may be issued in an amount that does not exceed 15% of Net Tangible Assets as defined below.

 

“Net Tangible Assets” means the total of all assets (including revaluations thereof as a result of commercial appraisals, price level restatement or otherwise) appearing on the Company’s balance sheet, net of applicable reserves and deductions, but excluding goodwill, trade names, trademarks, patents, unamortized debt discount and all other like intangible assets (which term shall not be construed to include such revaluations), less the aggregate of the Company’s current liabilities appearing on such balance sheet.  For purposes of this definition, the Company’s balance sheet does not include assets and liabilities of its subsidiaries.

 

This restriction also does not apply to or prevent the creation or existence of leases made, or existing on property acquired, in the ordinary course of business.

	  	  
	
3.

	
You are hereby requested to authenticate $300,000,000 aggregate principal amount of 3.40% Senior Notes, Series S, due 2015, executed by the Company and delivered to you concurrently with this Company Order and Officers’ Certificate, in the manner provided by the Indenture.

	  	  
	
4.

	
You are hereby requested to hold the Notes as custodian for DTC in accordance with the Blanket Issuer Letter of Representations dated June 24, 2004, from the Company to DTC.

	  	  
	
5.

	
Concurrently with this Company Order and Officers’ Certificate, an Opinion of Counsel under Sections 2.04 and 13.06 of the Indenture is being delivered to you.

	  	  
	
6.

	
The undersigned Renee V. Hawkins and Thomas G. Berkemeyer, the Assistant Treasurer and Assistant Secretary, respectively, of the Company do hereby certify that:

	  	  
	  	
(i)

	
we have read the relevant portions of the Indenture, including without limitation the conditions precedent provided for therein relating to the action proposed to be taken by the Trustee as requested in this Company Order and Officers’ Certificate, and the definitions in the Indenture relating thereto;

	  	  	  
	  	
(ii)

	
we have read the Board Resolutions of the Company and the Opinion of Counsel referred to above;

	  	  	  
	  	
(iii)

	
we have conferred with other officers of the Company, have examined such records of the Company and have made such other investigation as we deemed relevant for purposes of this certificate;

	  	  	  
	  	
(iv)

	
in our opinion, we have made such examination or investigation as is necessary to enable us to express an informed opinion as to whether or not such conditions have been complied with; and

	  	  	  
	  	
(v)

	
on the basis of the foregoing, we are of the opinion that all conditions precedent provided for in the Indenture relating to the action proposed to be taken by the Trustee as requested herein have been complied with.

Kindly acknowledge receipt of this Company Order and Officers’ Certificate, including the documents listed herein, and confirm the arrangements set forth herein by signing and returning the copy of this document attached hereto.

  

  

  

IN WITNESS WHEREOF, the Company has caused this Instrument to be duly executed and delivered.

	
Very truly yours,

	  
	
APPALACHIAN POWER COMPANY

	  
	  
	
By: /s/ Renee V. Hawkins

	
Assistant Treasurer

	  
	  
	
And: /s/ Thomas G. Berkemeyer

	
Assistant Secretary

	  
	  
	
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

	  
	  
	
By: /s/ Benita A. Vaughn

	
Authorized Signatory

  

  

  

Exhibit 1

Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any certificate to be issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.  Except as otherwise provided in Section 2.11 of the Indenture, this Security may be transferred, in whole but not in part, only to another nominee of the Depository or to a successor Depository or to a nominee of such successor Depository.

No.   R1

APPALACHIAN POWER COMPANY

  3.40% Senior Notes, Series S, due 2015

	
CUSIP:  037735 CQ8                                                 

	
                 Original Issue Date:  May 24, 2010

	  	  
	
Stated Maturity:  May 24, 2015

	
              Interest Rate:                       3.40%

	  	  
	
Principal Amount:  $300,000,000

	  
	  	  
	
Redeemable:

	
Yes

	
X

	
No

	  	  	  
	
In Whole:

	
Yes

	
X

	
No

	  	  	  
	
In Part:

	
Yes

	
X

	
No

	  	  	  

APPALACHIAN POWER COMPANY, a corporation duly organized and existing under the laws of the Commonwealth of Virginia (herein referred to as the “Company”, which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO. or registered assigns, the Principal Amount specified above on the Stated Maturity specified above, and to pay interest on said Principal Amount from the Original Issue Date specified above or from the most recent interest payment date (each such date, an “Interest Payment Date”) to which interest has been paid or duly provided for, semi-annually in arrears on  May 24 and November 24 in each year, commencing on November 24, 2010, at the Interest Rate per annum specified above, until the Principal Amount shall have been paid or duly provided for.  Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date, as provided in the Indenture, as hereinafter defined, shall be paid to the Person in whose name this Note (or one or more Predecessor Securities) shall have been registered at the close of business on the Regular Record Date with respect to such Interest Payment Date, which shall be the May 9 or November 9 (whether or not a Business Day) prior to such Interest Payment Date, provided that interest payable on the Stated Maturity or any redemption date shall be paid to the Person to whom principal is paid.  Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and shall be paid as provided in said Indenture.

If any Interest Payment Date, any redemption date or Stated Maturity is not a Business Day, then payment of the amounts due on this Note on such date will be made on the next succeeding Business Day, and no interest shall accrue on such amounts for the period from and after such Interest Payment Date, redemption date or Stated Maturity, as the case may be, with the same force and effect as if made on such date.  The principal of (and premium, if any) and the interest on this Note shall be payable at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, the City of New York, New York, in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest (other than interest payable on the Stated Maturity or any redemption date) may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Security Register.

This Note is one of a duly authorized series of Notes of the Company (herein sometimes referred to as the “Notes”), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of January 1, 1998 duly executed and delivered between the Company and The Bank of New York Mellon, a corporation organized and existing under the laws of the State of New York, as Trustee (herein referred to as the “Trustee”) (such Indenture, as originally executed and delivered and as thereafter supplemented and amended being hereinafter referred to as the “Indenture”), to which Indenture and all indentures supplemental thereto or Company Orders reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Notes.  By the terms of the Indenture, the Notes are issuable in series which may vary as to amount, date of maturity, rate of interest and in other respects as in the Indenture provided.  This Note is one of the series of Notes designated on the face hereof.

This Note may be redeemed by the Company at its option, in whole at any time or in part from time to time, upon not less than thirty but not more than sixty days’ prior notice given by mail to the registered owners of the Notes at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes being redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Note being redeemed (excluding the portion of any such interest accrued to the date of redemption) discounted (for purposes of determining present value) to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 30 basis points, plus, in each case, accrued interest thereon to the date of redemption.

“Treasury Rate” means, with respect to any redemption:

 

	
     ·  

	
the yield, under the heading which represents the average for the week immediately preceding the date on which the notice of redemption is mailed to the registered holders of the securities (the “calculation date”) appearing in the most recently published statistical release designated “H.15(519)” or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the remaining life (as defined above), yields for the two published maturities most closely corresponding to the Comparable Treasury Issue will be determined and the Treasury Rate will be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or

	
     ·  

	
if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

 “Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term (“remaining life”) of the Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining life of the Notes.

“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (2) if the Company obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company and reasonably acceptable to the Trustee.

“Reference Treasury Dealer” means each of Credit Suisse Securities (USA) LLC, UBS Securities LLC, and a Primary Treasury Dealer (defined herein) selected by Wells Fargo Securities, LLC and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. government securities dealer in the United States (a “Primary Treasury Dealer”) the Company will substitute therefor another Primary Treasury Dealer reasonably acceptable to the Trustee.

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at or before 3:30 p.m., New York City time, on the third Business Day preceding such redemption date.

The Company shall not be required to (i) issue, exchange or register the transfer of any Notes during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of less than all the outstanding Notes of the same series and ending at the close of business on the day of such mailing, nor (ii) register the transfer of or exchange of any Notes of any series or portions thereof called for redemption.  This Global Note is exchangeable for Notes in definitive registered form only under certain limited circumstances set forth in the Indenture.

In the event of redemption of this Note in part only, a new Note or Notes of this series, of like tenor, for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the surrender of this Note.

In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Notes may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture.

The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Note upon compliance by the Company with certain conditions set forth therein.

As described in the Company Order and Officers’ Certificate, so long as this Note is outstanding, the Company is subject to a limitation on Liens as described therein.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Notes; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Notes of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, or reduce the amount of the principal of a Discount Security that would be due and payable upon a declaration of acceleration of the maturity thereof pursuant to the Indenture, without the consent of the holder of each Note then outstanding and affected; (ii) reduce the aforesaid percentage of Notes, the holders of which are required to consent to any such supplemental indenture, or reduce the percentage of Notes, the holders of which are required to waive any default and its consequences, without the consent of the holder of each Note then outstanding and affected thereby; or (iii) modify any provision of Section 6.01(c) of the Indenture (except to increase the percentage of principal amount of securities required to rescind and annul any declaration of amounts due and payable under the Notes), without the consent of the holder of each Note then outstanding and affected thereby.  The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Notes of all series at the time outstanding affected thereby, on behalf of the Holders of the Notes of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Notes of such series.  Any such consent or waiver by the registered Holder of this Note (unless revoked as pro­vided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and of any Note issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Note.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Note at the time and place and at the rate and in the money herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, this Note is transferable by the registered holder hereof on the Security Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company as may be designated by the Company accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered Holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Notes of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees.  No service charge will be made for any such trans­fer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto.

Prior to due presentment for registration of transfer of this Note, the Company, the Trustee, any paying agent and any Security Registrar may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Security Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Security Registrar shall be affected by any notice to the contrary.

No recourse shall be had for the payment of the principal of or the interest on this Note, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released.

The Notes of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof.  As provided in the Indenture and subject to certain limitations, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series of a different authorized denomination, as requested by the Holder surrendering the same.

All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

This Note shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee.

IN WITNESS WHEREOF, the Company has caused this Instrument to be executed.

	  	
APPALACHIAN POWER COMPANY

	  	  	  
	  	
By:

	
                                              

	  	  	
    Assistant Treasurer

	
Attest:

	  	  
	  	  	  
	
By:                                          

	  	  
	
Assistant Secretary

	  	  

  

  

  

CERTIFICATE OF AUTHENTICATION

This is one of the Notes of the series of Notes designated in accordance with, and referred to in, the within-mentioned Indenture.

Dated May 24, 2010

THE BANK OF NEW YORK MELLON

TRUST COMPANY, N.A.

By:________________                                           

      Authorized Signatory

  

  

  

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

(PLEASE INSERT SOCIAL SECURITY OR OTHER

   IDENTIFYING NUMBER OF ASSIGNEE)

_______________________________________

________________________________________________________________

________________________________________________________________

(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF

________________________________________________________________

ASSIGNEE) the within Note and all rights thereunder, hereby

________________________________________________________________

irrevocably constituting and appointing such person attorney to

________________________________________________________________

transfer such Note on the books of the Issuer, with full

________________________________________________________________

power of substitution in the premises.

Dated:________________________                              _________________________

	
NOTICE:

	
The signature to this assignment must correspond with the name as written upon the face of the within Note in every particular, without alteration or enlargement or any change whatever and NOTICE:  Signature(s) must be guaranteed by a financial institution that is a member of the Securities Transfer Agents Medallion Program (“STAMP”), the Stock Exchange Medallion Program (“SEMP”) or the New York Stock Exchange, Inc. Medallion Signature Program (“MSP”).EXHIBIT 10.1

                    AMENDMENT AND WAIVER TO CREDIT AGREEMENT

     This  Amendment  and Waiver to Credit Agreement is dated as of the 21st day
of  May,  2010  and  is  by  and  between  Orbit  International  Corp.,  Behlman
Electronics,  Inc., Tulip Development Laboratory, Inc. and Integrated Consulting
Services,  Inc.  d/b/a  Integrated  Combat  Systems  (each  a  "BORROWER"  and
collectively,  the  "BORROWERS"),  and  Capital  One,  N.A.  ("BANK")  (this
"AMENDMENT").

     WHEREAS,  on March 10, 2010 the Bank made available to the Borrowers a line
of  credit  in  the  amount  of  $3,000,000  and  a  term  loan in the amount of
$4,654,761.84  pursuant  to  a Credit Agreement dated March 10, 2010 between the
Borrowers  and  the  Bank (as amended from time to time, the "CREDIT AGREEMENT")
and  evidenced by, respectively, a Line of Credit Note dated March 10, 2010 from
Borrowers  to Bank (as amended from time to time, the "LINE OF CREDIT NOTE") and
the  Term Loan Note dated March 10, 2010 from Borrowers to Bank (as amended from
time  to  time,  the "TERM LOAN NOTE") and secured by a Security Agreement dated
March  10,  2010  from the Borrowers to the Bank (the "SECURITY AGREEMENT") (the
Credit  Agreement,  the  Line  of  Credit Note, the Term Loan Note, the Security
Agreement,  and  all  other  documents  executed  and  delivered  in  connection
therewith,  collectively,  the  "FINANCING  DOCUMENTS");

     WHEREAS,  the  Borrowers  have  requested  that  the  Bank  modify  certain
covenants  set  forth  in the Credit Agreement and waive compliance with certain
covenants  set  forth  in  the  Credit  Agreement  to  which the Bank has agreed
provided  the  Borrowers  enter  into  this  Amendment;

     NOW,  THEREFORE,  for  good  and  valuable  consideration,  the receipt and
sufficiency  of  which is hereby acknowledged, the Borrowers and the Bank hereby
agree  as  follows:

1.          Capitalized  terms  not  defined  herein  shall have the meaning set
forth  in  the  Credit  Agreement.

2.     The  definition  of  "Applicable Margin" set forth in Section 1.01 of the
Credit  Agreement  is  hereby  amended  to  read  in  its  entirety  as follows:

     "Applicable  Margin"  means  (i) with respect to Line of Credit Loans which
are  LIBOR  Loans,  two percent (2.00%) and with respect to Line of Credit Loans
which  are  Prime  Rate Loans, one percent (1.00%), and (ii) with respect to the
Term  Loan  which is a LIBOR Loan, three percent (3.00%) and with respect to the
Term  Loan  which is a Prime Rate Loan, one and one half of one percent (1.50%).

3.     Section  2.01(b) of the Credit Agreement is hereby amended to read in its
entirety  as  follows:

     (b)     Commencing  May 21, 2010, each Line of Credit Loan shall be a Prime
Rate  Loan as a Borrower may request subject to and in accordance with the terms
and  conditions  hereof.  Each  such  request  shall be submitted to Bank on the
Bank's  standard  form,  a  copy  of  which  is  attached  hereto  as Exhibit C.
Notwithstanding  anything  to  the  contrary  contained  in  this Agreement, the
Borrowers  may  not  convert  any Prime Rate Loan into a LIBOR Loan.  All or any
portion  of any Line of Credit Loan that is currently a LIBOR Loan as of May 21,
2010  may remain a LIBOR Loan until the end of the applicable Interest Period at
which  time  such  LIBOR  Loan  shall  convert  to  a  Prime  Rate  Loan.

4.     The  following  sentence is hereby added to the end of Section 2.01(c) of
the  Credit  Agreement:

     Notwithstanding the foregoing, until July 15, 2010, the aggregate principal
amount of outstanding Line of Credit Loans plus the outstanding principal amount
of  the  Term  Loan  may exceed by the Borrowing Base by an amount not to exceed
Eight  Hundred  Thousand Dollars ($800,000.00) (the "Overdraft").  So long as an
Overdraft  is existing, no additional Line of Credit Loans shall be available to
the  Borrowers.

5.     The  following sentence is hereby added to the end of Section 2.03 of the
Credit  Agreement:

     Notwithstanding  anything  to  the  contrary  contained  in this Agreement,
commencing  on  and after May 21, 2010, the Term Loan shall only be a Prime Rate
Loan  and  the  Borrowers may not convert any Prime Rate Loan into a LIBOR Loan.
All or any portion of the Term Loan that is currently a LIBOR Loan as of May 21,
2010  may remain a LIBOR Loan until the end of the applicable Interest Period at
which  time  such  LIBOR  Loan  shall  convert  to  a  Prime  Rate  Loan.

6.     The  last  sentence  of  Section  5.07  of the Credit Agreement is hereby
amended  to  read  in  its  entirety  as  follows:

     In addition, the Bank shall have the right to obtain a field examination of
the  Borrowers'  Accounts  and  inventory,  at Borrowers' expense, by the Bank's
field examiner or an outside firm engaged by the Bank, at any time provided that
so  long  as  no  Event  of  Default  has occurred and is continuing, such field
examination shall not be required more than four (4) times in any calendar year.
Currently,  the cost of a field examination is $850.00 per day per examiner plus
expenses.
7.     Section  5.10(4) of the Credit Agreement is hereby amended to read in its
entirety  as  follows:

     (4)     Borrowing  Base Certificate; Monitoring Reports. (i) Within fifteen
             -----------------------------------------------
(15)  days  of  the  end of each month, a Borrowing Base Certificate with (a) an
accounts  receivable  aging schedule (including the scheduling of all respective
due  dates  and  cancel  dates and setting forth those due more than 30 days, 60
days,  90  days  and  120  days) and (b) a quarterly summary report of inventory
broken  down by raw material, finished goods and work-in-process which quarterly
summary  report  shall  be  as  of the date of the end of the most recent fiscal
quarter;  and  (ii) no later than on Wednesday of each week for the prior week's
end  through  June  25,  2010  and thereafter on a daily basis by 3:00 pm on the
following  Business  Day a Certificate in the form of Exhibit H attached hereto;
and  (iii)  within fifteen (15) days of the end of each month, a schedule of all
backlog, work-in-process and completed contracts, in the form attached hereto as
Exhibit  I,  in  substance  reasonably  satisfactory  to  Bank.

8.     The  following  subsection  (13)  is  hereby added to Section 5.10 of the
Credit  Agreement:

     (10)     Cash  Receipt and Disbursement Schedule.  No later June 3, 2010, a
              ---------------------------------------
cash receipts and disbursement projection schedule for the next ensuing thirteen
(13)  weeks,  in  form  and  substance  reasonably  satisfactory  to  Bank.

9.     Section  6.11 of the Credit Agreement is amended to delete the following:

(provided  the  repurchase  of  stock shall be permitted only if such repurchase
will  not  cause a violation of any financial covenants set forth in Article VII
herein)

10.     Section  7.01 of the Credit Agreement is amended to read in its entirety
as  follows:

     Section 7.01. Consolidated Debt Service Coverage Ratio. Commencing with the
                   ----------------------------------------
period  ending  March  31, 2011 and at all times thereafter, the Borrowers shall
maintain  a  Consolidated  Debt  Service Coverage Ratio of not less than 1.25 to
1.00  (to  be  tested  as  of  the end of March 31, 2011 and each Fiscal Quarter
thereafter  on  a  rolling  four  (4)  quarter  basis).

11.     The  following  Section  7.03  is  hereby added to the Credit Agreement:

     Section  7.03  Net  Profit.  The  Borrowers, on a consolidated basis, shall
                    -----------
have  a  net  profit  before interest, taxes, goodwill impairment and intangible
asset  charges  and  Bank  and  other legal fees associated with the waivers and
amendments  to  this  Agreement  dated  as  of May 21, 2010 of not less than (i)
Twenty  Two Thousand Dollars ($22,000.00) for the Fiscal Quarter ending June 30,
2010,  (ii)  Three  Hundred  Twenty  One  Thousand Dollars ($321,000.00) for the
Fiscal  Quarter  ending September 30, 2010, and (iii) Eight Hundred Ten Thousand
Dollars  ($810,000.00)  for  the  Fiscal  Quarter  ending  December  31,  2010.

12.     The  following  Exhibit  H  is  hereby  added  to  the  Agreement:

                             CONTINUED ON NEXT PAGE

<PAGE>
                                   EXHIBIT H

CAPITAL ONE, N.A.                                                EXHIBIT "H"
ASSET BASED LENDING DEPARTMENT                        BORROWING BASE CERTIFICATE

COMPANY NAME:         ORBIT INTERNATIONAL CORP AND SUBSIDIARIES   DATE:
-------------         -----------------------------------------   ---------
                               Orbit International    Behlman     Tulip    ICS
1.Accounts Receivable
 (line 5 of previous BBC)      $                      $           $        $

2.Additions to Accounts
Receivable since last BBC
New Sales Dated _____/_____/_____
 to _____/_____/_____
(Attach Sales Register)        $                      $          $          $

3.Reductions to Accounts
Receivable since last BBC
(A) Gross Reductions (Remit #
________ to ________)          $                      $          $           $

(B) Credit Memos issued
    since last BBC             $                      $          $           $

(C) Total Reductions           $                      $          $           $

4. Other Adjustments to
Accounts Receivable (*Explain) $                      $          $            $

5. New Accounts Receivable
   Balance                     $                      $          $            $

6. Total Ineligible Accounts
(line G. from last Monthly BBC)$                      $          $            $

7.Eligible Accounts Receivable
(line 5 minus line 6)          $                      $          $            $

8.Accounts Receivable
Availability (85% of line 7)    $                     $          $            $

9.Total Accounts Receivable
Avail. (Orbit, Behlman, Tulip
and ICS - line 8)               $

10. Gross Eligible Inventory
 (From last monthly BBC)        $                     $          $             $

11.Total Gross Eligible
Inventory (Orbit, Behlman, Tulip
and ICS - line 10)              $

12.Inventory Avail.
(the lesser of $3MM, 50% of
line 11 or Line 9)               $

13.TOTAL GROSS AVAILABILITY - A/R
 & INVENTORY (line 9 + 12)       $

14.NEW LINE OF CREDIT LOAN
  BALANCE                        $

15.AVAILABILITY BEFORE
 TERM LOAN (13-14)               $

16.TERM LOAN OUTSTANDING         $

17.AVAILABILITY BEFORE
CASH AND MKT. SECURITIES (15-16) $

18.If shortfall CASH AND MKT.
Securities over $1,000M          $

19.If shortfall enter APPROVED
OVERADVANCE ONLY                 $

19.Collateral Availability/
Shortfall                        $

   *Explain:

If a collateral shortfall exists, the loan balance MUST be reduced, or cash
collateral provided, for an amount greater than or equal to the shortfall.

The  undersigned hereby certifies to Capital One, N.A. (the "Bank") that (1) the
information  provided  herein  is true, correct, complete and accurate as of the
dates  stated  above  and  has  been  prepared  in  a manner consistent with the
preparation  of prior Borrowing Base Certificates to the Bank, (2) except as set
forth  below,  the  undersigned  is  currently  in  compliance  with  all terms,
covenants,  conditions  contained  in  any  agreement  between  the Bank and the
undersigned  and  in  each  of  the  other  loan  documents,  and  all  of  the
undersigned's  representations  and  warranties  in any other loan documents are
currently  true  and  correct,  and (3) except as set forth below, no default or
event  of  default  has occurred and is currently continuing under any agreement
between  the  undersigned and the Bank, or will occur after giving effect to any
loan  requested  herewith.  The  undersigned  agrees  that  in  the event of any
conflict  between  the  Borrowing Base Certificate and other loan documents, the
terms  of  the  other  loan  documents  shall  control.  The undersigned further
acknowledges that the Bank will rely on the foregoing in making credit available
to  the  undersigned.

ORBIT INTERNATIONAL CORP AND SUBSIDIARIES

Prepared by: ______________________________________Authorized Signature:
____________________________________________

<PAGE>

13.     The following Exhibit I is hereby added to the Agreement:

                             CONTINUED ON NEXT PAGE

<PAGE>
                                   EXHIBIT I

<TABLE>
<CAPTION>

                                    Orbit Instruments - Backlog/WIP/Completed Contracts
                                                   As of Example 12/15/10

                             Total Contract                                Scheduled Shipments           Actual Shipments
                             --------------                                -------------------           ----------------
<S>              <C>       <C>        <C>         <C>       <C>    <C>        <C>       <C>       <C>    <C>        <C>
                                      Total       Est.      Est.   Sched.                                Actual
                 Date      Est. 1st.  Contract    Gross     GP     Shipment                              Shipment
Contract Name    Awarded   Ship Date  Amount      Profit    %      Quarter    $ Amount  Cost      GP %   Quarter    Amount
---------------  --------  ---------  ----------  --------  -----  ---------  --------  --------  -----  ---------  --------
ABC Co. SR228    3/2/2010  4/30/2010  $1,000,000  $700,000  30.0%  Q2   2010  $300,000  $210,000  30.0%  Q2   2010
                                                                   Q3   2010  $400,000  $280,000  30.0%  Q3   2010  $300,000
                                                                   Q4   2010  $200,000  $140,000  30.0%  Q4   2010  $400,000
                                                                   Q1   2011  $100,000  $ 70,000  30.0%  Q1   2011
                                                                   Q2   2011                             Q2   2011
                                                                   Q3   2011                             Q3   2011
Prime Co. CC099                       $  300,000  $200,000  33.3%  Q2   2010                             Q2   2010
                                                                   Q3   2010  $150,000  $100,050  33.3%  Q3   2010  $150,000
                                                                   Q4   2010  $150,000  $100,050  33.3%  Q4   2010  $150,000

                 Actual Shipments Cumulative
                 ---------------- ----------
<S>              <C>       <C>    <C>       <C>       <C>       <C>         <C>
                                  Shipped   Cost      GP %      Balance
Contract Name    Cost      GP %   To Date   To Date   To Date   Remaining   Comments
---------------  --------  -----  --------  --------  --------  ----------  ----------------
ABC Co. SR228                     $      0  $      0      0.0%  $1,000,000  Delayed due to
                 $215,000  28.3%  $300,000  $215,000     28.3%  $  700,000  testing at Prime
                 $300,000  25.0%  $700,000  $515,000     26.4%  $  300,000  Level - expect
                                                                            fully shipped by
                                                                            Q3 2011

Prime Co. CC099
                 $100,050  33.3%  $150,000  $100,050     33.3%  $  150,000  On schedule
                 $100,050  33.3%  $300,000  $200,100     33.3%  $        0

</TABLE>

<PAGE>
14.     The  Bank  hereby  waives  compliance  with  Section 7.01 for the Fiscal
Quarter  ending  March  31,  2010  provided the actual Consolidated Debt Service
Coverage  Ratio  was  not  less  than  0.88  to  1.0  as  at  March  31,  2010.

15.     The  Borrowers  ratify  and  reaffirm  the  Financing  Documents and the
Financing  Documents,  as hereby amended, shall remain in full force and effect.

16.     The  Borrowers  represent  and  warrant that (a) the representations and
warranties  contained  in  the  Credit  Agreement  are  true  and correct in all
material  respects  as  of  the date of this Amendment, (b) no condition, at, or
event which could constitute an event of default under the Credit Agreement, the
Notes  or any other Financing Documents exists, and (c) no condition, event, act
or  omission  has occurred, which, with the giving of notice or passage of time,
would  constitute  an  event of default under the Credit Agreement, the Notes or
any  other  Financing  Document.

17.     The Borrower agrees to pay to the Bank its fee for this Amendment in the
amount  of  $25,000.00  together  with  all  other  fees  and  out-of-pocket
disbursements  incurred by the Bank in connection with this Amendment, including
legal fees incurred by the Bank in the preparation, consummation, administration
and  enforcement  of  this  Amendment.

18.     This Amendment shall become effective only after it is fully executed by
the  Borrowers and the Bank and the Bank has received the fees required pursuant
to  Section  17  herein.

19.     The  Borrowers  acknowledge that as of the date of this Amendment it has
no  offsets  or  defenses  with  respect  to  all amounts owed by it to the Bank
arising  under  or related to the Financing Documents on or prior to the date of
this  Amendment.  The Borrowers fully, finally and forever release and discharge
the Bank and its successors, assigns, directors, officers, employees, agents and
representatives  from  any  and  all  claims,  causes  of  action,  debts  and
liabilities,  of whatever kind or nature, in law or in equity, whether now known
or  unknown to them, which they may have and which may have arisen in connection
with  the Financing Documents or the actions or omissions of the Bank related to
the  Financing  Documents  on  or  prior  to  the  date  hereof.  The  Borrowers
acknowledge and agree that this Amendment is limited to the terms outlined above
and  shall  not  be  construed  as  an  agreement  to  change any other terms or
provisions  of  the  Financing  Documents.  This Amendment shall not establish a
course  of  dealing or be construed as evidence of any willingness on the Bank's
part  to  grant  other  or  future  agreements,  should  any  be  requested.

20.     This  Amendment  is  a modification only and not a novation.  Except for
the  above-quoted modification(s), the Financing Documents, any loan agreements,
credit  agreements,  reimbursement  agreements,  security agreements, mortgages,
deeds  of  trust,  pledge  agreements,  assignments,  guaranties, instruments or
documents executed in connection with the Financing Documents, and all the terms
and  conditions  thereof,  shall be and remain in full force and effect with the
changes  herein  deemed  to  be  incorporated  therein.  This Amendment is to be
considered  attached  to  the Financing Documents and made a part thereof.  This
Amendment  shall  not  release  or  affect the liability of any guarantor of the
Notes  or  credit  facility executed in reference to the Financing Documents, if
any,  or  release  any owner of collateral granted as security for the Financing
Documents.  The validity, priority and enforceability of the Financing Documents
shall  not  be  impaired  hereby.  To  the  extent  that  any  provision of this
Amendment  conflicts  with  any  term  or  condition  set forth in the Financing
Documents,  or any document executed in conjunction therewith, the provisions of
this  Amendment  shall  supersede  and control.  The Bank expressly reserves all
rights  against  all  parties  to  the  Financing  Documents.

21.     This  Amendment  shall  be governed and construed in accordance with the
laws  of  the  State  of  New  York

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the undersigned have caused this Amendment to be executed as
of  the  day  and  year  first  above  written.

                                   BORROWERS:
ORBIT INTERNATIONAL CORP.

By:/s/ Mitchell Binder
-----------------------
Name:  Mitchell  Binder
Title:   Chief  Financial  Officer

BEHLMAN ELECTRONICS, INC.

By:/s/ Mitchell Binder
-----------------------
Name:  Mitchell  Binder
Title:   Chief  Financial  Officer

TULIP DEVELOPMENT LABORATORY, INC.

By:/s/ Mitchell Binder
-----------------------
Name:  Mitchell  Binder
Title:   Chief  Financial  Officer

INTEGRATED CONSULTING SERVICES, INC.

By:/s/ Mitchell Binder
------------------------
Name:  Mitchell  Binder
Title:   Chief  Financial  Officer

BANK:

CAPITAL  ONE,  N.A.

By:/s/ Dawn Juliano
--------------------------
Name:     Dawn  Juliano
Title:     Vice  President

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