Document:

exhibit101.htm

    CREDIT
AGREEMENT

    

    

    Dated as
of

    

    

    March 10,
2010

    

    

    Among

    

    

    ORBIT
INTERNATIONAL CORP.,

    BEHLMAN
ELECTRONICS, INC.,

    TULIP
DEVELOPMENT LABORATORY, INC., AND

    INTEGRATED
CONSULTING SERVICES, INC. D/B/A

    INTEGRATED
COMBAT SYSTEMS,

    as
Borrowers,

    

    

    and

    

    

    CAPITAL
ONE, N.A.,

    as
Bank

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    CREDIT
AGREEMENT dated as of March 10, 2010 among 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”).

     

    The
parties to this Agreement hereby agree as follows:

     

    ARTICLE I
- DEFINITIONS, ACCOUNTING TERMS, ETC.

     

    Section
1.01. Defined
Terms. As used in this Agreement, the following terms have the following
meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):

     

    “Account”
means any right to payment for goods sold or leased or for services rendered,
regardless of how such right is evidenced and whether or not it has been earned
by performance, whether secured or unsecured, now existing or hereafter arising,
and the proceeds thereof.

     

    “Account
Debtor” means each Person obligated to pay on an Account.

     

    “Affiliate”
means any Person, which directly or indirectly controls, or is controlled by, or
is under common control with Borrower.  The term control means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

     

    “Agreement”
means this Credit Agreement.

     

    “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, zero percent (0%), 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 half of one percent (0.50%).

     

    “Anti-Terrorism
Laws” means any statute, treaty, law (including common law), ordinance,
regulation, rule, order, opinion, release, injunction, writ, decree or award of
any Governmental Authority relating to terrorism or money laundering, including
Executive Order No. 13224 and the USA Patriot Act.

     

    “Bank”
means Capital One, N.A.

     

    “Bank’s
Office” means 275 Broad Hollow Road, Melville, New York 11747.

     

    “Board of
Governors” means the Board of Governors of the Federal Reserve
System.

     

    “Borrower”
or “Borrowers” means Orbit International Corp., Behlman Electronics, Inc., Tulip
Development Laboratory, Inc., Integrated Consulting Services, Inc. d/b/a
Integrated Combat Systems and each Person that becomes a Borrower pursuant to
“New Subsidiaries” (Section 5.11), or any or all of the foregoing, all as the
context may require.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    “Borrowers’
Taxes” means, for any period, the taxes of Borrowers as determined in accordance
with GAAP.

     

    “Borrowing
Base” means at any time an amount equal to the sum of (1) 85% of the face amount
of all Eligible Accounts, plus (2) the lesser of (a) 50% of the face amount of
all domestic raw material Eligible Inventory or (b)  $3,000,000.00 (in
either case not to exceed the amount of the Borrowing Base allocated to Eligible
Accounts except as may be approved by the Bank with respect to certain purchase
orders), plus (3) with respect to the application of the Borrowing Base to the
outstanding principal amount of the Term Loan only, one hundred percent (100%)
of the Borrowers’ cash and marketable securities in excess of
$1,000,000.

     

    “Borrowing
Base Certificate” means a borrowing base certificate substantially in the form
of Exhibit D.

     

    “Business
Day” means any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to remain
closed; provided that, when used in connection with a LIBOR Loan, the term
“Business Day” shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.

     

    “Capital
Expenditures” means, for any period, the Dollar amount of gross expenditures
made by Borrowers (including the principal portion of Capital Leases) for fixed
assets, real property, plant and equipment, and all renewals, improvements and
replacements thereof, but not repairs thereof.

     

    “Capital
Lease” means a lease, which is or should be capitalized in accordance with
GAAP.

     

    “Change
in Law” means (1) the adoption of any law, rule or regulation after the date of
this Agreement, (2) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (3) compliance by Bank (or by any lending office of
Bank or by Bank’s holding company, if any) with any request, guideline or
directive (whether or not having the force of law) of any Governmental Authority
made or issued after the date of this Agreement.

     

    “Closing
Date” means March 10, 2010.

     

    “Code”
means the Internal Revenue Code of 1986.

     

    “Consolidated
Debt Service Coverage Ratio” means the ratio of the Borrowers’ (1) earnings
before interest, taxes, depreciation and amortization, plus non-cash
goodwill impairment charges, plus non-cash
share-based compensation expense, minus cash taxes,
minus cash
stock repurchases, to (2) current maturities of long term Debt and lease
obligations plus interest
expense, all calculated in accordance with GAAP and tested on a rolling four
quarter basis.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Consolidated
Subsidiary” means each Subsidiary of Orbit International Corp. which, in
accordance with GAAP, should be included in the consolidated financial
statements of Orbit International Corp.

     

    “Consolidated
Total Liabilities to Tangible Net Worth” means the Borrowers’ Total Liabilities
divided by Total Shareholder Equity less Intangible Assets, as calculated in
accordance with GAAP.

     

    “Debt”
means, with respect to any Person, each of the following (1) indebtedness or
liability for borrowed money, or for the deferred purchase price of property or
services (including trade obligations), (2) all obligations evidenced by bonds,
debentures, notes or other similar instruments, (3) obligations as lessee under
Capital Leases, (4) current liabilities in respect of unfunded vested benefits
under any Plan, (5) reimbursement obligations under letters of credit issued for
the account of any Person, (6) all reimbursement obligations arising under
bankers’ or trade acceptances, (7) all guarantees, endorsements (other than for
collection or deposit in the ordinary course of business), and other contingent
obligations to purchase any of the items included in this definition, to provide
funds for payment, to supply funds to invest in any Person, or otherwise to
assure a creditor against loss, (8) all obligations secured by any Lien on
property owned by such Person even if the obligations secured by such Lien on
such property have not been assumed, (9) all other liabilities recorded, or
required to be recorded, in such Person’s financial statements in accordance
with GAAP, and (10) all obligations under any agreement providing for a swap,
ceiling rates, ceiling and floor rates, contingent participation or other
hedging mechanisms with respect to interest payable on any of the items
described above in this definition.

     

    “Default”
means any of the events specified in “Events of Default” (Section 8.01), whether
or not any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.

     

    “Default
Rate” means, with respect to an amount of any Type of Loan not paid when due, a
rate per annum equal to (1) if the Loan is a Prime Rate Loan, a variable rate
5.00% above the Prime Rate, and  (2) if the Loan is a LIBOR Loan, a
fixed rate 5.00% above the LIBOR Rate plus the Applicable Margin at the time of
default until the end of the then current Interest Period for such LIBOR Loan
and, thereafter, a variable rate 5.00% above the Prime Rate.

     

    “Dollars”
and the sign “$” mean lawful money of the United States of America.

     

    “Eligible
Account” means an Account owing to any Borrower, now existing or hereinafter
arising, which Account initially and at all times until it is collected in
full:

     

    (1)           is
not more than 90 days past the date of invoice,

    

    (2)           is
not owed by an Account Debtor where 50% of such Account Debtor’s Accounts with
the Borrowers are more than 90 days past the date of invoice;

    

    (3)           is
not deemed a contra Account;

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (4)           arose
in the ordinary course of business from the domestic performance of services or
the outright sale of goods; such services have been performed or such goods have
been shipped to the Account Debtor; and in the case of goods, Borrowers have
possession of or has delivered to Bank shipping and delivery receipts evidencing
shipment; provided, however, (i) Accounts arising from progress billing which is
permitted under particular purchaser orders or contracts shall be Eligible
Accounts if the Bank has received evidence reasonably satisfactory to Bank that
said progress billing is permitted, and (ii) goods which have been sold and
title transferred to an Account Debtor and the risk of loss also transferred to
an Account Debtor but held, in a segregated location, by a Borrower shall be not
be deemed ineligible provided Bank receives evidence reasonably satisfactory to
Bank of same;

    

    (5)           is
not owed by an Account Debtor who is a supplier, employee or parent, subsidiary
or other affiliate of any Borrower;

    

    (6)           is
not evidenced by a promissory note or other instrument, is subject to a first
priority perfected security interest in favor of Bank, is not subject to any
other Lien or other encumbrance and has not been sold or factored;

    

    (7)           is
not owed by an Account Debtor whose principal place of business is located
outside of the United States of America;

    

    (8)           is
a non-contingent obligation that is not subject to set-off, credit, defense,
warranty claim, allowance or adjustment by the Account Debtor except normal
discount allowed in the ordinary course for prompt payment, and such Account
Debtor has not complained as to its liability thereon nor returned any of the
subject goods;

    

    (9)           did
not arise out of any sale with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold (except as
otherwise provided under subsection (4) above), or other terms making the
payment by the Account Debtor conditional;

    

    (10)           did
not arise out of any sale made on an advanced billing, bill and hold (except as
otherwise provided under subsection (4) above), dating or delayed shipment
basis;

    

    (11)           did
not arise out of any sale respecting which the Borrowers’ obligations have been
bonded or to the extent such sale is subject to any retainage
requirement;

    

    (12)           is
owed by an Account Debtor as to which any Borrower has received no notice and
has no knowledge of bankruptcy, insolvency or other facts which make collection
doubtful, and has not been turned over to a collection agency or
attorney;

    

    (13)           respecting
which the Account Debtor is not located in any state denying creditors access to
its courts in the absence of such creditor’s qualification to conduct business
as a foreign corporation in such state or complying with other filing or
reporting requirements, unless such applicable Borrower has made all legally
required filings and reports, obtained any necessary authorizations or
certificates to do business, and paid any applicable taxes and/or fees to the
applicable state agency in such state;

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (14)           is
not an Account from any Account Debtor (other than Federal agencies of the
United States government) to the extent that such Account, individually or in
the aggregate with all Accounts from such Account Debtor exceeds an amount equal
to 20% of the aggregate of all Accounts at such date from any Account Debtor;
and

    

    (15)           after
ten (10) days prior notice to Borrowers, has not been designated by Bank in its
reasonable discretion as otherwise ineligible or unacceptable for any reason by
notice to Borrowers setting forth the reason for such designation.

    

    References to percentages of Accounts
are based on dollar amount of Accounts, and not number of Accounts.

    

    “Eligible Inventory” means at any time
that portion of any Borrower’s raw materials, free from defects, as to which the
Bank has a perfected first priority Lien.  “Eligible Inventory” does
not include any of the following:

    

    
      	
              (1)  

            	
              catalogs
      and other promotional materials of any
kind;

            

    

    

    
      	
              (2)  

            	
              any
      damaged, defective or recalled
items;

            

    

    

    
      	
              (3)  

            	
              any
      obsolete items;

            

    

    

    
      	
              (4)  

            	
              any
      items used as demonstrators, prototypes or salesmen’s
    samples;

            

    

    

            
(5) any items
of inventory which have been consigned to any Borrower or as to which any person
or entity claims a Lien;

    

            
(6) any items
of inventory which have been consigned by a Borrower to a
consignee;

    

    
      	
              (7)  

            	
              packing,
      packaging and shipping materials;

            

    

    

            
(8) inventory
located on premises leased by a Borrower from a landlord with whom the Bank has
not entered into a landlord’s waiver on terms satisfactory to the Bank
(provided, however, with respect to Borrowers’ location in Kentucky, Borrowers
shall use best efforts to obtain said landlord’s waiver but failure to obtain
said waiver shall not, by itself, result in the inventory located in such
location as being ineligible);

    

            
(9) inventory
in the possession of a bailee who has not acknowledged to the Bank such bailee
holds said inventory for the benefit of the Bank and shall act upon the
instructions of the Bank, without the further consent of the
Borrowers;

    

    
      	
                
      (10)  

            	
              perishable
      items of produce; and

            

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    
      	
               

            	 

    

    
      	
              (11)  

            	
              inventory
      located at foreign vendors or
locations.

            

    

    

    Eligible
Inventory shall be valued at lower of (a) cost, (b) market value, or (c) the
valuation consistent with that employed in the preparation of the financial
statements of the Borrowers required under this Agreement.  Anything
to the contrary notwithstanding, the Bank shall have the right, in its sole and
absolute reasonable discretion, to classify any inventory as not being Eligible
Inventory.

    

    “Environmental
Discharge” means any discharge or release of any Hazardous Materials in
violation of any applicable Environmental Law.

     

    “Environmental
Law” means any Law relating to pollution or the environment, including Laws
relating to noise or to emissions, discharges, releases or threatened releases
of Hazardous Materials into the workplace, the community or the environment, or
otherwise relating to the generation, manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials.

     

    “Environmental
Notice” means any complaint, order, citation, letter, inquiry, notice or other
written communication from any Person (1) affecting or relating to Borrower’s
failure to comply or requirements with respect to future compliance with any
Environmental Law in connection with any activity or operations at any time
conducted by the Borrower, (2) relating to the occurrence or presence of or
exposure to, or possible or threatened or alleged occurrence or presence of or
exposure to Environmental Discharges or Hazardous Materials at the Borrower’s
locations or facilities, including, without limitation: (a) the existence of any
contamination or possible or threatened contamination at any such location or
facility, and (b) remediation of any Environmental Discharge or Hazardous
Materials at any such location or facility or any part thereof, and (3) any
material violation or alleged material violation of any relevant Environmental
Law.

     

    “ERISA”
means the Employee Retirement Income Security Act of 1974.

     

    

    "ERISA
Affiliate" means any corporation or trade or business, which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as a Borrower or is under common control (within the meaning of
Section 414(c) of the Code) with a Borrower.

     

    “Event of
Default” means any of the events specified in “Events of Default” (Section
8.01), provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.

     

    “Excluded
Taxes” means with respect to Bank or any other recipient of any payment to be
made by or on account of any obligation of the Borrowers under this Agreement or
the Loans, (1) income or franchise taxes imposed on (or measured by) its net
income  by the United States of America, or by the jurisdiction under
the laws of which such recipient is organized or in which its principal office
is located or, in the case of Bank, in which its applicable lending office is
located,
and (2) any branch profits taxes imposed by the United States of America or any
similar tax imposed by any other jurisdiction in which the applicable Borrower
is located.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    “Financing
Documents” means this Agreement, the Notes, the Security Agreement, and any
documents executed in connection therewith, or any or all of the foregoing, all
as the context may require.

     

    “Fiscal
Year” means each period from January 1 to December 31.

     

    “GAAP”
means generally accepted accounting principles as then in effect in the United
States.

     

    “Good
Faith Contest” means the contest of an item if (1) the item is diligently
contested in good faith by appropriate proceedings timely instituted, (2)
adequate reserves are established with respect to the contested item, (3) during
the period of such contest, the enforcement of any contested item is effectively
stayed, and (4) the failure to pay or comply with the contested item has not and
could not result in a Material Adverse Change (if such Good Faith Contest is in
connection with failure to pay Debt under Section 6.01 herein, it shall not be
necessary for Borrowers to institute any proceedings).

     

    “Governmental
Approvals” means any authorization, consent, or approval of, or any license,
permit, or certification issued by, or any exemption of, registration or filing
with or report or notice to, any Governmental Authority.

     

    “Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.

     

    “Hazardous
Materials” means any pollutant, contaminants, toxic or hazardous wastes or other
substances regulated by Environmental Law, as any of those terms are defined
from time to time in or for the purposes of any relevant Environmental Law,
including asbestos fibers and friable asbestos, polychlorinated biphenyls, and
any petroleum or hydrocarbon-based products or derivatives.

     

    “Indemnified
Taxes” means Taxes other than Excluded Taxes.

     

    “Intangible
Assets” means all intangible assets of the Borrowers properly classified as such
in accordance with GAAP, including, but without limitation, patents, patent
rights, trademarks, trade names, franchises, copyrights, licenses, permits and
goodwill.

     

    

    “Interest
Payment Date” means (1) in the case of a Prime Rate Loan, the first day of each
month and the date such Loan is converted to a LIBOR Loan and the applicable
Maturity Date, and (2) in the case of a LIBOR Loan, the last day of the
applicable Interest Period.

     

    “Interest
Period” means, as to any LIBOR Loan, the period commencing on the date of making
or converting to such LIBOR Loan and ending on the numerically corresponding day
in the calendar month that is one month, two months, or three months thereafter,
as the case may be, provided, however, (1) no
Interest Period for all or any part of such Loans shall 

     

    
      
         

      

      
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    end later
than the Line of Credit Maturity Date, in the case of Line of Credit Loans or
the Term Loan Maturity Date, in the case of the Term Loan, as applicable, (2) if
any Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day, (3) any
Interest Period that commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period, and (4) with respect to the
Term Loan only, no LIBOR Loan shall be for an Interest Period other than one
month.

     

    “Law”
means any treaty, federal, state or local statute, law, rule, regulation,
ordinance, order, code, policy or rule of common law, now or hereafter in
effect, and any judicial or administrative interpretation thereof by a
Governmental Authority or otherwise, including any judicial or administrative
order, consent decree, judgment or agreement with a Governmental
Authority.

     

    “LIBOR
Loan” means any and all of the Loans bearing interest based on the LIBOR
Rate.

     

    “LIBOR
Rate” means, with respect to any LIBOR Loan for any Interest Period, the rate
appearing on the Reuters Screen LIBOR01 page (or on any successor or substitute
page, or any successor to or substitute, providing rate quotations comparable to
those currently provided on such page, as determined by Bank from time to time
for purposes of providing quotations of interest rates applicable to Dollar
deposits in the London interbank market) at approximately 11:00 a.m., London
time, two (2) Business Days prior to the commencement of such Interest Period,
as the rate for Dollar deposits with a maturity comparable to such Interest
Period.  In the event that such rate is not available at such time for
any reason, then the “LIBOR Rate” with respect to such LIBOR Loan for such
Interest Period shall be at the rate at which Dollar deposits of $5,000,000 and
for a maturity comparable to such Interest Period are offered by the principal
London office of Bank in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two (2) Business Days prior to
the commencement of such Interest Period.

     

    “Lien”
means any mortgage, deed of trust, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority, or other security agreement or preferential arrangement,
charge, or encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing). To clarify this definition, assets provided under and pursuant to an
operating lease are not subject to a Lien.

     

    “Line of
Credit Commitment” means the principal sum of Three Million and 00/100 Dollars
($3,000,000).

     

    “Line of Credit Maturity Date” means June 1, 2011.

    
      
         

      

      
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        “Line
of Credit Loans” has the meaning specified in Section 2.01.

    

    “Line of
Credit Note” means a promissory note of the Borrowers payable to the order of
the Bank, in substantially the form of Exhibit A annexed hereto, evidencing the
aggregate indebtedness of the Borrower to the Bank resulting from Line of Credit
Loans made by the Bank to the Borrowers pursuant to this Agreement.

     

    “Loan” or
“Loans” means the Line of Credit Loans or the Term Loan, or any or all of the
same as the context may require and includes Prime Rate Loans and LIBOR Loans,
as the context may require.

     

    “Material
Adverse Change” means either (1) a material adverse change in the status of the
business, assets, liabilities, results of operations, conditions (financial or
otherwise), or property of the Borrowers (when taken as a whole), or (2) any
event or occurrence of whatever nature which could reasonably be expected to
have a material adverse effect on the ability of the Borrowers (when taken as a
whole) to perform their obligations under the Financing Documents to which they
are a party or (3) a material adverse effect on the validity or enforceability
of any of the Financing Documents or the rights or remedies of Bank under such
Financing Documents.

     

    “Multiemployer
Plan” means a Plan described in Section 4001(a)(3) of ERISA which covers
employees of Borrowers or any ERISA Affiliate.

     

    “Note” or
“Notes” means the Line of Credit Note and the Term Loan Note, or either or both
of the same as the context may require.

     

    “Other Taxes” means any and all present
or future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies arising from any payment made under this Agreement or
the Notes or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement.

     

    “PBGC”
means the Pension Benefit Guaranty Corporation.

     

    “Permitted
Liens” means each of the Liens permitted under “Liens” (Section
6.03).

     

    “Person”
means an individual, partnership (including limited liability partnerships),
limited liability company, corporation, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.

     

    “Plan”
means any employee benefit or other plan established or maintained, or to which
contributions have been made, by any Borrower or any ERISA
Affiliate.

     

    “Prime
Rate” means the rate of interest established from time to time by Bank as its
“Prime Rate”.

     

    “Prime
Rate Loan” means any or all of the Loans bearing interest based upon the Prime
Rate.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    “Prohibited
Transaction” means any transaction set forth in Section 406 of ERISA or Section
4975 of the Internal Revenue Code of 1986.

     

    “Reportable
Event” means any of the events set forth in Section 4043 of ERISA.

     

    “Security
Agreement” means that certain Security Agreement dated the date of this
Agreement which is being made by the Borrowers for the benefit of Bank together
with any other security agreement required to be executed and delivered pursuant
to Section 6.11 herein.

     

    “Solvent”
means, when used with respect to any Person, that (1) the fair value of the
property of such Person, on a going concern basis, is greater than the total
amount of liabilities (including, without limitation, contingent liabilities) of
such Person, (2) the present fair salable value of the assets of such Person, on
a going concern basis, is not less than the amount that will be required to pay
the probable liabilities of such Person on its debts as they become absolute and
matured, (3) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person’s ability to pay as such debts and
liabilities mature, and (4) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person’s property would constitute unreasonably small capital after giving
due consideration to the prevailing practice in the industry in which such
Person is engaged.  Contingent liabilities will be computed at the
amount that, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.

     

    “Subordinated
Debt” means Debt of any Person owing by a Borrower or any of its Consolidated
Subsidiaries which have been subordinated by such Person to the Debt owing by
the Borrowers to the Bank pursuant to an agreement satisfactory to the Bank in
all respects.

     

    “Subsidiary”
means, as to any Person, any corporation, partnership, limited liability company
or joint venture whether now existing or hereafter organized or acquired (1) in
the case of a corporation, of which a majority of the securities having ordinary
voting power for the election of directors (other than securities having such
power only by reason of the happening of a contingency) are at the time owned by
such Person and/or one or more Subsidiaries of such Person or (2) in the case of
a partnership, limited liability company or joint venture, of which a majority
of the partnership, membership or other ownership interests are at the time
owned by such Person and/or one or more Subsidiaries of such
Person.

     

    “Taxes”
means any and all present or future taxes, levies, imposts, duties, deductions,
charges or withholding imposed by any Governmental Authority on Bank in
connection with, or based upon, this Agreement or any of the other Financing
Documents.

     

    “Term
Loan” shall have the meaning set forth in Section 2.03 hereof.

     

    “Term
Loan Note” means a promissory note of the Borrowers payable to the order of the
Bank, in substantially the form of Exhibit B annexed hereto, evidencing the
indebtedness of the Borrower to the Bank resulting from the Term Loan made by
the Bank to the Borrowers pursuant to this Agreement.

    

    “Term
Loan Maturity Date” means March 1, 2015.

    
      
         

      

      
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    “Total
Shareholder Equity” means the aggregate of all equity of the shareholders of the
Borrowers in the Borrowers.

    

    “Total
Liabilities” means all of the liabilities of the Borrowers, including all items
which, in accordance with GAAP would be included on the liability side of a
balance sheet (other than capital stock, treasury stock, capital surplus and
retained earnings) computed in accordance with GAAP.

    

    “Type”
refers to whether the rate of interest on all or any portion of the Loan is
determined by reference to the Prime Rate or the LIBOR Rate.

     

    “Uniform
Commercial Code” shall mean the Uniform Commercial Code as promulgated by the
American Law Institute and the National Conference of Commissioners on Uniform
State Laws in the form adopted by the jurisdiction where the financing statement
in question is filed.

     

    Section
1.02. Rules of
Construction.  When used in this Agreement (1) "or" is not
exclusive, (2) a reference to a Law includes any amendment or modification to
such Law, (3) a reference to a Person includes its permitted successors and
permitted assigns, and (4) unless otherwise provided for in this Agreement, a
reference to an agreement, instrument or document shall include such agreement,
instrument or document as the same may be amended, modified or supplemented from
time to time in accordance with its terms and as permitted by the Financing
Documents.

     

    Section
1.03. Accounting
Principles and Terms.  Except as otherwise provided in this
Agreement, (1) all computations and determinations as to financial matters, and
all financial statements to be delivered under this Agreement, shall be made or
prepared in accordance with GAAP, and (2) all accounting terms used in this
Agreement shall have the meaning ascribed to such terms by such
principles.

     

    ARTICLE
II

     

    AMOUNT
AND TERMS OF THE LOANS

     

    Section
2.01.  The
Line of Credit Loans.  (a)  The Bank agrees, on the
date of this Agreement, on the terms and conditions of this Agreement (including
the conditions set forth in Section 3.02 herein) and in reliance upon the
representations and warranties set forth in this Agreement, to lend to the
Borrowers prior to the Line of Credit Maturity Date such amounts as any Borrower
may request from time to time (individually, a “Line of Credit Loan” and
collectively, the “Line of Credit Loans”), which amounts may be borrowed, repaid
and reborrowed, provided, however, that the aggregate amount of such Line of
Credit Loans outstanding at any one time shall not exceed the Line of Credit
Commitment.

    

    (b)           Each
Line of Credit Loan shall be a LIBOR Loan or a Prime Rate Loan as a Borrower may
request subject to and in accordance with the terms and conditions hereof.
Subject to the other provisions of this Agreement, Line of Credit Loans of more
than one Type may be outstanding at the same time.  Each such request
shall be submitted to Bank on 

    
      
         

      

      
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    the
Bank’sstandard form, a copy of which is attached hereto as Exhibit
C.  Notwithstanding anything to the contrary contained herein, not
more than four (4) LIBOR Loans shall be outstanding at any time under the Line
of Credit Commitment.

    

    (c)           If
the aggregate principal amount of the outstanding Line of Credit Loans and the
Term Loan exceeds the Borrowing Base then Borrower will immediately prepay the
Line of Credit Loans and/or the Term Loan in an amount so that the aggregate
principal amount of the outstanding Line of Credit Loans and Term Loan does not
exceed the Borrowing Base (together with any amounts required to be paid
pursuant to Section 2.16 herein).

    

    (d)           Notwithstanding
anything to the contrary contained herein, the obligation of the Bank under this
Agreement and the other Loan Documents to make any Line of Credit Loans to the
Borrowers shall be subject to the sole discretion of the Bank.

    

    Section
2.02.  Line
of Credit Note.  (a) Each Line of Credit Loan which is a Prime
Rate Loan shall be in the minimum principal amount of $100,000.00 (except that,
if any requested borrowing would exhaust the remaining available Line of Credit
Commitment, such borrowing may be in an amount equal to the amount of the
remaining available Line of Credit Commitment).  Each Line of Credit
Loan which is a LIBOR Loan shall be in the minimum principal amount of
$250,000.00.  Each Line of Credit Loan shall be evidenced by the Line
of Credit Note of the Borrowers.  The Line of Credit Note shall be
dated the date hereof and be in the principal amount of the Line of Credit
Commitment and shall mature on the Line of Credit Maturity Date, at which time
the entire outstanding principal balance and all interest thereon shall be due
and payable.  The Line of Credit Note shall be entitled to the
benefits and subject to the provisions of this Agreement.

    

    (b)           At
the time of the making of each Line of Credit Loan and at the time of each
payment of principal thereon, the holder of the Line of Credit Note is hereby
authorized by the Borrowers to make the proper notation in the books and records
of the Bank.

    

    Section
2.03.  Term
Loan.  The Bank agrees, upon the terms and subject to the
conditions hereof including, without limitation, the conditions of Section 3.01
hereof, to make a term loan (the “Term Loan”) to the Borrowers, on the Closing
Date in an amount equal to Four Million Six Hundred Fifty Four Thousand Seven
Hundred Sixty One and 84/100 Dollars ($4,654,761.84).

    

    Section
2.04.  Term
Loan Note. 
The Term Loan shall be evidenced by the Term Loan Note of the
Borrowers.  The Term Loan Note shall be dated the Closing Date and
shall mature on the Term Loan Maturity Date at which time the entire outstanding
principal balance and all interest thereon shall be due and
payable.  The Term Loan Note shall be entitled to the benefits and
subject to the provisions of this Agreement.

    

    Section
2.05.  Repayment of Term Loan
Note.  The principal balance of the Term Loan Note shall be
payable in sixty (60) monthly installments, due on the first day of each month
commencing on April 1, 2010, and on the first day of each successive month
thereafter until the Term Loan Maturity Date when the entire principal balance
is to be paid in full. Each of the first fifty-nine (59) such monthly
installments shall be in an amount equal to $77,579.36 and the final such
monthly principal installment shall be in an amount equal to the then
outstanding principal balance of the Term Loan Note.

    
      
         

      

      
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    Section
2.06. Payment of
Interest on All Loans.  (a) The Borrowers shall pay interest to
Bank on the outstanding and unpaid principal amount of all of the Loans then
outstanding at a rate per annum as follows (1) for a Prime Rate Loan at a rate
equal to the Prime Rate plus the Applicable
Margin, and (2) for a LIBOR Loan at a rate equal to the LIBOR Rate plus the Applicable
Margin. Any change in the interest rate based on the Prime Rate resulting from a
change in the Prime Rate shall be effective as of the opening of business on the
day on which such change in the Prime Rate becomes effective. Interest on the
Loans then outstanding shall be calculated on the basis of a year of 360 days
for the actual number of days elapsed. Interest on the Loans then outstanding
shall be payable on each Interest Payment Date. The applicable Prime Rate and
LIBOR Rate shall be determined by Bank, and such determination shall be
conclusive absent manifest error.

    

    (b) Any
principal or interest not paid when due (at maturity, by acceleration, or
otherwise) shall bear interest from the date when due until paid in full,
payable on demand, at the Default Rate.  In addition, there shall be a
late charge imposed of four (4%) percent of the delinquent amount for each
payment which is not paid when due.  Notwithstanding the foregoing,
during the continuance of an Event of Default, at the option of Bank, the Loans
will bear interest at the Default Rate.

    

    Section
2.07. Interest
Periods. In the case of each LIBOR Loan, the Borrowers shall select an
Interest Period in accordance with the definition of Interest Period in
“Definitions”, subject to the following limitations (1) no Interest Period shall
have a duration of less than one (1) month, and (2) no Interest Period of
particular duration with respect to a LIBOR Loan may be selected by the
Borrowers if Bank determines, in its sole discretion, that a LIBOR Loan with
such maturities are not generally available.

     

    Section
2.08.  Alternate Rate of
Interest.  If prior to the commencement of any Interest Period
for a LIBOR Loan, Bank determines (which determination shall be conclusive
absent manifest error) that the LIBOR Rate is unavailable in the marketplace for
such Interest Period, then Bank shall give notice thereof to the Borrowers by
telephone or telecopy as promptly as practicable thereafter and, until Bank
notifies the Borrowers that the circumstances giving rise to such notice no
longer exist, LIBOR Loans will not be available.

     

    Section
2.09. Renewals and
Conversions. The Borrowers may elect from time to time to convert all or
a part of one Type of Loan into another Type of Loan or to renew all or part of
a Loan by giving Bank written notice (effective upon receipt) at least one (1)
Business Day before the conversion into a Prime Rate Loan, and at least three
(3) Business Days before the conversion into or renewal of a LIBOR Loan,
specifying (1) the renewal or conversion date, (2) the amount of the Loan to be
converted or renewed, and (3) in the case of conversions, whether the Loan is to
be converted into a Prime Rate Loan or a LIBOR Loan, provided that (1) after
such renewal or conversions the minimum principal amount of the outstanding
LIBOR Loan with the same Interest Period shall be $250,000.00, (2) LIBOR Loans
can only be renewed or converted on the last day of the Interest Period for such
LIBOR Loan, and (3) LIBOR Loans can only be renewed or converted if there are no
outstanding Defaults or Events of Default.  Notices for conversion of
one Type of Loan into another Type of Loan or to renew all or part of a Loan
with respect to the Term Loan shall be given in the form attached hereto as
Exhibit E.

     

    
      
         

      

      
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    All
notices given under this Section shall be irrevocable and shall be given not
later than 11:00 a.m. (New York City time) on a Business Day which is not less
than the number of Business Days specified above for such notice.  If
the Borrowers fail to give Bank the notice specified above for the renewal or
conversion of a LIBOR Loan prior to the end of the Interest Period of such LIBOR
Loan, such LIBOR Loan shall automatically be converted into a Prime Rate Loan on
the last day of the Interest Period for such LIBOR Loan.

    

    Section
2.10. Method of
Payment. The Borrowers shall make each payment under this Agreement and
under the Notes not later than 11:00 a.m. (New York City time) on the date when
due in Dollars to Bank at Bank’s Office in immediately available funds. The
Borrowers hereby authorize Bank to charge against account no. 7047460195, an
account of a Borrower with Bank, each payment under this Agreement and under the
Notes when due. Whenever any payment to be made under this Agreement or under a
Note is stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of the payment of
interest.

     

    Section
2.11. Optional
Prepayments. In the case of a Prime Rate Loan, Borrowers may at any time
prepay the Loan in whole or in part with accrued interest to the date of such
prepayment on the amount prepaid. In the case of a LIBOR Loan, the Borrowers
may, upon at least three (3) Business Days prior written notice (effective upon
receipt) to Bank, prepay the Loans in whole or in part with accrued interest to
the date of such prepayment on the amount prepaid, provided that (1) each
partial prepayment shall be in a principal amount of not less than $25,000.00,
and (2) unless such LIBOR Loans are prepaid on the last day of the applicable
Interest Period, Borrowers shall pay to the Bank the amount calculated pursuant
to Section 2.16 herein.

     

    Section
2.12.  Designations and Notices
Regarding LIBOR Loans.  A Borrower shall give the Bank
irrevocable written, telex, telephonic (immediately confirmed in writing) or
facsimile notice as the Bank may, in its sole discretion, require from time to
time, prior to each election to designate any Loan (or a portion thereof) as a
LIBOR Loan (subject to availability), in each case, specifying the date (which
shall be a Business Day), and the aggregate principal amount and the initial
Interest Period for each such LIBOR Loan; provided that, if a Borrower shall
request a LIBOR Loan when LIBOR Loans are not available or fail to specify the
duration of the initial Interest Period with regard to a requested LIBOR Loan,
the request shall be deemed to be a request for a Prime Rate Loan.

    

    Section
2.13. Use of
Proceeds. The proceeds of the Line of Credit Loans will be used by the
Borrowers for working capital and for general corporate purposes.  The
proceeds of the Term Loan will be used to refinance an existing term loan
previously made to the Borrowers by Merrill Lynch Commercial Finance Corp.
Borrowers will not, directly or indirectly, use any part of the proceeds of the
Loans for the purpose of purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of Governors or to extend credit to any
Person for the purpose of purchasing or carrying any such margin
stock.

     

    
      
         

      

      
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    Section
2.14.  Taxes.  Any
and all payments by or on account of any obligation of Borrowers under this
Agreement and each Note shall be made free and clear of and without deduction
for any Indemnified Taxes or Other Taxes; provided that if the Borrowers shall
be required to deduct any Indemnified Taxes or Other Taxes from such payments,
then (1) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section) Bank receives an amount equal to the sum it
would have received had no such deductions been made, (2)  Borrowers shall
make such deductions and (3) Borrowers shall pay the full amount deducted
to the relevant Governmental Authority in accordance with applicable
law.  In addition, Borrowers shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

     

    The
Borrowers shall indemnify Bank, within ten (10) days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
Bank on or with respect to any payment by or on account of any obligation of
Borrowers under this Agreement or the Notes (including Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate as to the amount of such payment or
liability delivered to Borrowers by Bank shall be conclusive absent manifest
error.

     

    As soon
as practicable after any payment of Indemnified Taxes or Other Taxes by the
Borrowers to a Governmental Authority, Borrowers shall deliver to Bank the
original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other
evidence of such payment reasonably satisfactory to Bank.

     

    If Bank
determines, in its sole discretion, that it has received a refund of any Taxes
or Other Taxes as to which it has been indemnified by Borrowers or with respect
to which the Borrowers have paid additional amounts pursuant to this Section, it
shall pay over such refund to Borrowers (but only to the extent of indemnity
payments made, or additional amounts paid, by the Borrowers under this Section
with respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of Bank and without interest (other than any interest
paid by the relevant Governmental Authority with respect to such refund);
provided, that Borrowers, upon the request of Bank, agree to repay the amount
paid over to Borrowers (plus any penalties, interest or other charges imposed by
the relevant Governmental Authority) to Bank in the event Bank is required to
repay such refund to such Governmental Authority. This Section shall not be
construed to require Bank to make available its tax returns (or any other
information relating to its taxes which it deems confidential) to Borrowers or
any other Person.

     

    Section
2.15. Increased
Costs.  If any Change in Law shall: (1)  impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
Bank (except any such reserve requirement reflected in the LIBOR Rate); or (2)
impose on Bank or the London interbank market any other condition affecting this
Agreement or LIBOR Loans made by Bank; and the result of any of the foregoing
shall be to increase the cost to Bank of making or main­taining any LIBOR
Loan (or of maintaining its obligation to make any such Loan) or to reduce the
amount of any sum received or receivable by Bank under this Agreement or the
Notes (whether of 

     

    
      
         

      

      
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    principal,
interest or otherwise), then Borrowers will pay to Bank such additional amount
or amounts as will compensate Bank for such additional costs incurred or
reduction suffered.

     

    If Bank
reasonably determines that any Change in Law regarding capital requirements has
or would have the effect of reducing the rate of return on Bank’s capital or on
the capital of Bank’s holding company, if any, as a consequence of this
Agreement or the Loans made by Bank, to a level below that which Bank or Bank’s
holding company could have achieved but for such Change in Law (taking into
consideration Bank’s policies and the policies of Bank’s holding company with
respect to capital adequacy), then from time to time Borrowers will pay to Bank
such additional amount or amounts as will compensate Bank or Bank’s holding
company for any such reduction suffered.

     

    A
certificate of Bank setting forth the amount or amounts necessary to compensate
Bank or its holding company, as the case may be, as specified in the prior
paragraphs of this Section shall be delivered to Borrowers and shall be
conclusive absent manifest error unless Borrowers give written notice of
reasonable exception within twenty (20) days after receipt. The Borrowers shall
pay Bank the amount shown as due on any such certificate within ten
(10) days after final determination of such costs.  Failure or delay
on the part of Bank to demand compensation pursuant to this Section shall not
constitute a waiver of Bank’s right to demand such compensation.

     

    Section
2.16.  Break
Funding Payments.  In the event of (1) the payment of any
principal of any LIBOR Loan other than on the last day of an Interest Period
applicable thereto (including as a result of an Event of Default), (2) the
conversion of any LIBOR Loan other than on the last day of the Interest Period
applicable thereto, or (3) the failure to borrow, convert, continue or prepay
any LIBOR Loan on the date specified in any notice delivered pursuant hereto
then, in any such event, Borrowers shall compensate Bank for the loss, cost and
expense attributable to such event.  In the case of a LIBOR Loan, such
loss, cost or expense to Bank shall be deemed to include an amount reasonably
determined by Bank to be the excess, if any, of (1) the amount of interest which
would have accrued on the principal amount of such Loan had such event not
occurred, at the LIBOR Rate that would have been applicable to such Loan, for
the period from the date of such event to the last day of the then current
Interest Period therefor (or, in the case of a failure to borrow, convert or
continue, for the period that would have been the Interest Period for such
Loan), over (2) the amount of interest which would accrue on such principal
amount for such period at the interest rate which Bank would bid were it to bid,
at the commencement of such period, for dollar deposits of a comparable amount
and period from other banks in the eurodollar market. The Borrowers shall pay
Bank the amount shown as due on any such certificate within ten (10) days after
receipt thereof.

     

    Section
2.17.  Equal
Access By All Borrowers.  Any Borrower, acting alone, can
borrow up to the full amount of the Line of Credit Commitment (subject to the
terms of this Agreement).  Each Borrower will be liable for all
extensions of credit made under this Agreement to any other
Borrower.

     

    
      
         

      

      
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    ARTICLE
III CONDITIONS PRECEDENT

     

    Section
3.01. Conditions
Precedent to All Loans. The obligation of Bank to enter into this
Agreement and to make the Loans is subject to the condition precedent that Bank
shall have received on or before the Closing Date each of the following, each in
form and substance satisfactory to Bank and its counsel:

     

    (1)           Certificates of
Secretary. A certificate of the Secretary of each Borrower, dated the
Closing Date, certifying to (a) the certificate of incorporation, and the
by-laws of each respective Borrower and all amendments to such certificate or
by-laws, (b) all corporate actions taken by each respective Borrower, including
resolutions of their respective directors and, if required, shareholders,
authorizing the execution, delivery and performance of each of the Financing
Documents to which they are each a party and each other document or agreement to
be delivered pursuant to any of the Financing Documents, and (c) the names and
true signatures of the each party authorized to act on behalf of each
Borrower.

     

    (2)           Good Standing
Certificates/Certificates of Existence. Certificates of the Secretary of
State (or other appropriate official) of the jurisdiction of formation of each
Borrower, dated reasonably near the Closing Date, certifying to the due
formation and good standing/legal existence of each Borrower. For each
jurisdiction in which a Borrower is required to be qualified to conduct
business, a certificate of the Secretary of State (or other appropriate
official) of such jurisdiction, dated reasonably near the Closing Date,
certifying to the due qualification, authority and good standing/legal existence
of such Borrower in such jurisdiction.

     

    (3)           Notes.  The
Line of Credit Note and Term Note duly executed and delivered by the
Borrowers.

     

    (4)           Security
Agreement.  The Security Agreement, which shall be duly
executed and delivered by the Borrowers, together with Uniform Commercial Code
searches identifying all financing statements on file with respect to each
Borrower in all applicable jurisdictions indicating that no Person, other than
Bank, has a Lien (other than a Permitted Lien) on any of the Collateral as to
which perfection is obtained by the filing of a financing
statement.

     

    (5)           Evidence of
Insurance.  Evidence that (a) all insurance required to be
maintained under the Financing Documents is in full force and effect, and (b) to
the extent required under the Financing Documents, Bank has been designated a
loss payee and additional insured under such insurance.

     

    (6)           Landlord’s
Waiver.  For all leased locations in which a Borrower stores or
maintains any Collateral (as defined in the Security Agreement), a landlord’s
waiver, in form and substance satisfactory to Bank and its counsel (with respect
to Borrowers’ location in Kentucky, Borrower shall use best efforts to obtain
said landlord’s waiver (which shall not require Borrowers to pay said
landlord)).

     

    (7)           Certificate.  The
following statements shall be true and Bank shall have received a certificate
signed by a duly authorized representative of each Borrower (dated the Closing
Date) stating that:

     

    
      
         

      

      
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(a) The representations and warranties contained in each of the Financing
Documents are correct on and as of the Closing Date, as though made on and as of
such date, and

     

                                                  
(b) No
Default or Event of Default has occurred and is continuing, or would result from
the transactions contemplated by this Agreement and the other Financing
Documents.

     

    (8)           Opinion of
Counsel.  A favorable opinion of counsel to each
Borrower.

     

    (9)           Repayment of Prior Credit
Facilities.  Confirmation of the amounts required to repay all
obligations due to Merrill Lynch Commercial Finance Corp. to be refinanced with
the proceeds of the Loans together with confirmation that the Liens which secure
such credit facilities will be assigned to Bank upon repayment of such
obligations.  Simultaneously with the making of the initial Line of
Credit Loan and the Term Loan, the Bank shall receive confirmation that Merrill
Lynch Commercial Finance Corp. has received payment in full and shall have
delivered or released to the Bank its assignment or termination
documents.

     

    (10)           Borrowing Base
Certificate.  Receipt of a Borrowing Base Certificate with (a)
an accounts receivable aging schedule (from the end of the previous month)
(including the scheduling of all respective due dates and cancel dates and
setting forth those due more than 30 days, 60 days, 90 days, 120 days and over
121 days) certified to be true and correct by the Chief Financial Officer of
each of the Borrowers, and (ii) a summary report of inventory (from the previous
quarter end) broken down by raw material, finished goods and
work-in-process.

     

    (11)           Financial
Statements.  Receipt, at least five (5) Business Days prior to
the Closing Date, of a draft of the annual audited financial statements of Orbit
International Corp. and all of its Subsidiaries, presented on a consolidated
basis with all present subsidiaries and related party entities for Fiscal Year
end December 31, 2009, which shall include balance sheets with related
statements of income and retained earnings and statements of cash flows of the
Borrowers, all in reasonable detail and setting forth in comparative form the
figures for the previous Fiscal Year, together with a draft of an unqualified
opinion by independent certified public accounting firm selected by Borrowers
and satisfactory to Bank, such financial statements to be prepared in accordance
with GAAP, together with a certified statement from the Chief Financial Officer
of Orbit International Corp. that no material changes will arise with the final
audited financial statements (which draft financial statements shall be
consistent with the projections previously provided by the Borrowers to
Bank).

     

    (12)           Fees and Expense.
Payment of all fees and expenses required to be paid in accordance with the
Financing Documents, including the fees and expenses of counsel to
Bank.

     

    (13)           Additional
Documentation.  Bank shall have received such other approvals,
opinions and documents as Bank may reasonably request.

     

    Section
3.02 Conditions
Precedent to All Line of Credit Loans.  The obligation of Bank
to make each Line of Credit Loan after the Closing Date is subject to the
further conditions precedent that on the date of making such Line of Credit
Loan:

     

    
      
         

      

      
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      (1)  Request for
Advance.  The Bank shall have received the request for advance
duly executed by a Borrower in the form attached hereto as Exhibit
C.

    (2) Representations and
Warranties, No Defaults or Events of Default. The following statements
shall be true:

    

    (a) The
representations and warranties contained in each of the Financing Documents are
correct, in all material respects, on and as of the date of making such Line of
Credit Loan as though made on and as of such date (except for such
representations and warranties that speak as of a specific date, which shall be
true and correct in all material respects at and as of that time),

    

    (b) No
Default or Event of Default has occurred and is continuing, or would result from
making such Line of Credit Loan, and

    

    (3) Additional
Documentation.  Bank shall have received such other approvals,
opinions or documents as Bank may reasonably request.

    

    Each
request for a Line of Credit Loan and acceptance by a Borrower of the proceeds
of such Line of Credit Loan constitute a representation and warranty that the
statements contained in subsection (2) of this Section are true and correct both
on the date of such request and, unless a Borrower otherwise notifies Bank prior
to the receipt of the proceeds of such Line of Credit Loan, as of the date of
making such Line of Credit Loan (except for such representations and warranties
that speak as of a specific date, which shall be true and correct in all
material respects at and as of that time).

    

    

    ARTICLE
IV REPRESENTATIONS AND WARRANTIES

     

    The
Borrowers represent and warrant to Bank as follows:

     

    Section
4.01. Formation, Good
Standing, Corporate Power and Due Qualification. Each Borrower (1) is a
corporation duly formed, validly existing, and in good standing/existence under
the laws of the respective jurisdiction of its formation, (2) has the corporate
power and authority to own its assets and to transact the business in which it
now engages or proposes to engage in, and (3) is duly qualified as a foreign
corporation and in good standing/existence under the laws of each jurisdiction
in which such qualification is required, except where failure to so qualify is
not reasonably likely to result in a Material Adverse Change.

     

    Section
4.02. Corporate
Authority, No Contravention.  The execution, delivery and
performance by the Borrowers of each Financing Document to which they are a
party are within their respective corporate powers, have been duly authorized by
all necessary corporate action, and do not and will not (1) require any consent
or approval of their shareholders which has not been obtained, (2) contravene
their respective certificate of incorporation and by-laws, (3) violate any
provision of any Law, order, writ, judgment, injunction, decree, determination,
or award presently in effect applicable to them, (4) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease, or instrument to which they are a party or by which they
or their properties may be bound or affected, or (5) result in, or require, the
creation or imposition of any Lien other than in favor of the Bank upon or with
respect to any of the properties now owned or hereafter acquired by
them.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    Section
4.03. Governmental
Authority. No authorization, approval or other action by, and no notice
to or filing with, any Governmental Authority is required for the due execution,
delivery and performance by any Borrower of any Financing Document to which it
is a party.

     

    Section
4.04. Legally
Enforceable Financing Documents. Each Financing Document to which a
Borrower is a party is the legal, valid and binding obligation of such Borrower,
enforceable against such Borrower in accordance with its terms, except to the
extent that such enforcement may be limited by (1) applicable bankruptcy,
insolvency, and other similar laws affecting creditors’ rights generally, or (2)
general equitable principles, regardless of whether the issue of enforceability
is considered in a proceeding in equity or at law.

     

    Section
4.05. Financial
Statements.  The audited financial statements of Orbit
International Corp. and its Subsidiaries of the fiscal year ending December 31,
2008 prepared by McGladrey & Pullen, and the interim financial statements
for the fiscal nine month period ending September 30, 2009 prepared by
management of Borrowers, copies of which have been furnished to the Bank, fairly
reflect the financial condition of the Borrowers as of such date, and since such
date there has not been a Material Adverse Change.

     

    Section
4.06. Material Adverse
Change. No Material Adverse Change has occurred since September 30,
2009.

     

    Section
4.07. Information. No
information, exhibit or report furnished by any Borrower or any other Person to
Bank in connection with the Financing Documents or any transaction contemplated
by any such Document contained any material misstatement of fact or omitted to
state a material fact or any fact necessary to make the statements contained
therein not misleading. Each Borrower has disclosed to Bank in writing any and
all facts known to such Borrower which relate to the business of such Borrower
which are reasonably likely to result in a Material Adverse Change. Bank
acknowledges that it has had a full opportunity to speak to representatives of
each such Borrower or other Person with regard to any questions it has about any
such information, exhibit or report.

     

    Section
4.08. Litigation. There is
no action, suit or proceeding pending or, to the knowledge of any Borrower,
threatened against or affecting any Borrower before any Governmental Authority
or arbitrator which could, in any one case or in the aggregate, which could
reasonably be expected to result in a Material Adverse Change.

     

    Section
4.09. Ownership and
Liens.  The Borrowers each have title to, or valid leasehold
interests in, all of their respective properties and assets, real and personal,
including the properties and assets and leasehold interests reflected in the
Borrowers’ financial statements referred to in “Financial Statements” (Section
4.05) (other than any properties or assets disposed of in the ordinary course of
business), and none of the properties and assets owned by the Borrowers and none
of the leasehold interests of the Borrowers are subject to any Lien, except for
Permitted Liens.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    
      Section
4.10. Subsidiaries. Neither
any Borrower nor any of its Consolidated Subsidiaries have any Subsidiaries,
except for each of the entities listed on “Schedule of Subsidiaries”
(Exhibit F) and except for TDL Manufacturing, Inc. and Orbit Instrument
of California, Inc. which are each a Subsidiary of Orbit International Corp. and
are each inactive.

    

    

    Section
4.11. Compliance with
Laws.  No Borrower is in violation of any Law or in default
with respect to any judgment, writ, injunction or decree where such violation or
default has resulted in, or could reasonably result in, a Material Adverse
Change.  The Credit Parties each possess and are in compliance in all
material respects with all Governmental Approvals required to conduct their
respective business as now conducted and as presently proposed to be
conducted.

     

    Section
4.12. Taxes.  Each
Borrower has filed all tax returns (foreign, federal, state, and local) required
to be filed and has paid all taxes, assessments, and governmental charges and
levies due pursuant either to such returns or any assessment received by such
Borrower.  The charges, accruals and reserves on the books of each
Borrower for taxes or other governmental charges are adequate.

     

    Section
4.13. ERISA.  Each
Borrower is in compliance in all material respects with all applicable
provisions of ERISA applicable to such Borrower.  Neither a Reportable
Event nor a Prohibited Transaction has occurred and is continuing with respect
to any Plan.  No notice of intent to terminate a Plan has been filed
nor has any Plan been terminated.  No circumstances exist which
constitute grounds under Section 4042 of ERISA entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administrate, a Plan, nor has
the PBGC instituted any such proceedings.  Neither any Borrower nor
any ERISA Affiliate has completely or partially withdrawn under Sections 4201 or
4204 of ERISA from a Multiemployer Plan.  Each Borrower and each ERISA
Affiliate have met their respective minimum funding requirements under ERISA
with respect to all of their respective Plans and there are no unfunded vested
benefits.  Neither any Borrower nor any ERISA Affiliate have incurred
any liability to the PBGC under ERISA.

     

    Section
4.14. Environmental
Protection.  Each Borrower has obtained all Governmental
Approvals, if any, required of such Borrower under all Environmental
Laws.  The Borrowers are in compliance in all material respects with
all such Governmental Approvals, all Environmental Laws, and all agreements
entered into with any Governmental Authority under or pursuant to or with
respect to any such Governmental Approval or Environmental Law.  The
Borrowers have not received any Environmental Notice nor are the Borrowers aware
that any Governmental Authority is contemplating delivering to any Borrower an
Environmental Notice.  There are no governmental, administrative
actions or judicial proceedings pending or, to the knowledge of any officer of
the Borrowers, contemplated under any Environmental Laws to which any Borrower
is or will be named as a party, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Laws
with respect to any of the properties of any Borrower.

     

    Section
4.15. No Defaults on
Outstanding Judgments or Orders.  The Borrowers have satisfied
all judgments against each Borrower and the Borrowers are not in default in any
material respect with respect to (i) any judgment, writ, injunction, decree of
any Governmental Authority or arbitrator or (ii) any rule, or regulation which
could reasonably be expected to result in a Material Adverse
Change.

     

    
      
         

      

      
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    Section
4.16. Licenses and
Intellectual Property.  The Borrowers each possess all
licenses, franchises, patents, copyrights, trademarks, and trade names, or
rights thereto, to conduct their respective business as now conducted and as
presently proposed to be conducted, and the Borrowers are not in violation of
any valid rights of others with respect to any of the items noted
above.

     

    Section
4.17. Labor Disputes
and Acts of God.  Neither the business nor the properties of
any Borrower are affected by any fire, explosion, accident, strike, lockout or
other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of
the public enemy, or other casualty (whether or not covered by
insurance).

     

    Section
4.18. Other
Agreements.  The Borrowers are not a party to any indenture,
loan, or credit agreement, or to any lease or other agreement or instrument, or
subject to any organizational document restriction, which has resulted in, or is
reasonably likely to result in, a Material Adverse Change.  The
Borrowers are not in default in any respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which they are a party which has resulted in or is
reasonably likely to result in a Material Adverse Change.

     

    Section
4.19. Governmental
Regulation.  The Borrowers are not subject to any Law limiting
their ability to incur their obligations under any of the Financing Documents to
which they are a party, including the Public Utility Holding Company Act of
1935, the Investment Company Act of 1940, the Interstate Commerce Act, or the
Federal Power Act.

     

    Section
4.20. Solvent.
Each Borrower is Solvent.

     

    Section
4.21.  Anti-Terrorism
Laws.

     

    (a) General.  No
Borrower is in violation of any Anti-Terrorism Law or engages in or conspires to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.

     

    (b) Executive Order No.
13224.  No Borrower, or to Borrowers’ knowledge, any of their
respective agents acting or benefiting in any capacity in connection with the
Loans or other transactions hereunder, is any of the following (each a “Blocked
Person”):

     

    (i) A Person
that is listed in the annex to, or is otherwise subject to the provisions of,
the Executive Order No. 13224;

     

    (ii) A Person
owned or controlled by, or acting for or on behalf of, any Person that is listed
in the annex to, or is otherwise subject to the provisions of, the Executive
Order No. 13224;

     

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    (iii) A Person
with which Bank is prohibited from dealing or otherwise engaging in any
transaction by any Anti-Terrorism Law;

    (iv) A Person
that commits, threatens or conspires to commit or supports “terrorism” as
defined in the Executive Order No. 13224;

     

    (v) A Person
that is named as a “specially designated national” on the most current list
published by the U.S. Treasury Department Office of Foreign Asset Control at its
official website or any replacement website or other replacement official
publication of such list; or

     

    (vi) A Person
who is affiliated with a Person listed above.

     

    

     

    ARTICLE V
AFFIRMATIVE COVENANTS

     

    So long
as any Note remains unpaid, the Line of Credit Commitment is outstanding or any
other amount is owing under this Agreement by any Borrower to Bank under any of
the Financing Documents, the Borrowers shall:

     

    Section
5.01. Maintenance of
Existence. Preserve and maintain their respective corporate existence and
good standing/existence in the jurisdiction of their formation, and, if
applicable, qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is required.

     

    Section
5.02. Maintenance of
Records.  Keep adequate records and books of account in which
complete entries reflecting all financial transactions will be made in material
conformity with GAAP consistently applied.

     

    Section
5.03. Maintenance of
Properties.  Maintain, keep and preserve all of their
respective properties (tangible and intangible) necessary or useful in the
proper conduct of their respective business in good working order and condition,
ordinary wear and tear excepted.  To the extent necessary to conduct
the business of each Borrower, preserve, protect, renew and keep in full force
and effect their rights, licenses, permits, patents, trademarks, trade names and
franchises.

     

    Section
5.04. Conduct of
Business. Continue to engage in a business of the same general type as
conducted by them on the Closing Date.

     

    Section
5.05. Maintenance of
Insurance. Maintain insurance with financially sound and reputable
insurance companies or associations rated “A” or better by A.M. Best and Company
in such amounts and covering such risks as is usually carried by companies
engaged in the same or a similar business and similarly situated.

     

    Section
5.06. Compliance With
Laws. Comply in all material respects with all applicable Laws and
Governmental Approvals, such compliance to include, paying before the same
become delinquent all taxes, assessments and governmental charges imposed upon
them or upon their respective property except in the case of taxes, such taxes
are the subject of a 

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    Good
Faith Contest. Without limiting the generality of the foregoing sentence, comply
with all applicableEnvironmental Laws and pay or cause to be paid all costs and
expenses incurred in connection with such compliance.

     

    Section
5.07. Right of
Inspection; Field Exams.  Upon reasonable notice and at any
reasonable time and from time to time, permit Bank or any agent or
representative of Bank at Bank’s expense (1) to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of
the Borrowers or, and (2) to discuss the affairs, finances and accounts of the
Borrowers, with any of their officers, and directors, and the independent
accountants for the Borrowers, as applicable.  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, in either case at Borrowers’ expense, 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 once in any twelve (12)
month period.  Currently, the cost of a field examination is $850.00
per day per examiner plus expenses.

     

    Section
5.08. Other
Agreements. Perform and comply with each of the provisions of each and
every agreement to which they are each a party where the failure to perform or
comply could reasonably be expected to result in a Material Adverse
Change.

     

    Section
5.09. Payment of
Obligations. Promptly pay all Debt and other obligations when due and
payable.

     

    Section
5.10. Reporting
Requirements. Furnish to Bank:

     

    (1) Quarterly Financial
Statements.  Within sixty (60) days after the end of each
fiscal quarter of each Fiscal Year of the Borrowers, a financial statement and
10Q Report of Orbit International Corp. and its Subsidiaries, presented on a
consolidated basis with all its present and future Subsidiaries for such fiscal
quarter, all such financial statements to include balance sheets with related
statements of income and retained earnings and statements of cash flows of the
Borrowers, all in reasonable detail and setting forth in comparative from the
figures for the corresponding period of the previous Fiscal Year, prepared by
the Borrowers, all such financial statements to be prepared in accordance with
GAAP, subject to normal
year-end adjustments.

     

    (2) Annual Financial
Statements.  Within 105 days of the end of each Fiscal Year of
the Borrowers, annual audited financial statements and 10K Report of Orbit
International Corp. and all of its Subsidiaries, presented on a consolidated
basis with all present and future Subsidiaries and related party entities for
such Fiscal Year, all such financial statements to include balance sheets with
related statements of income and retained earnings and statements of cash flows
of the Borrowers, all in reasonable detail and setting forth in comparative form
the figures for the previous Fiscal Year, together with an unqualified opinion
by Amper Politziner & Mattia or another independent certified public
accounting firm selected by the Borrowers and reasonably satisfactory to the
Bank, all such financial statements to be prepared in accordance with
GAAP.

     

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    
      (3) Certificate of Chief
Financial Officer. Accompanying the quarterly and annual financial
statements to be delivered under subsections (1) and (2) above, a calculation
of financial
covenants required in “Financial Covenants” (Article VII”) and a statement
signed by the Chief Financial Officer of Orbit International Corp. certifying,
to his knowledge, to the accuracy of the
information and compliance with all financial and non-financial
covenants;

    

     

    (4) Borrowing Base
Certificate. Within fifteen (15) days of the end of each month, a
Borrowing Base Certificate with (i) 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, 120 days and over
121 days) and (ii) 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.

     

    (5) Management
Letters.  Promptly after their receipt, copies of all
management letters or reports submitted to the Borrowers by their independent
public accountants in connection with the examination of the financial
statements of the Borrowers made by such accountants.

     

    (6) Litigation. Promptly
after their commencement, notice of all actions, suits, and proceedings before
any Governmental Authority or arbitrator involving or affecting any Borrower,
which, if determined against such Borrower, would reasonably be expected to
result in a Material Adverse Change.

     

    (7) Notice of Defaults and
Events of Default.  As soon as possible and in any event within
five (5) days after the occurrence of each Default or Event of Default, a
written notice setting forth the details of such Default or Event of Default and
the action which is proposed to be taken with respect to such Default or Event
of Default.

     

    (8) Insurance.  Promptly
after the occurrence of any casualty, damage or loss to any Borrower, whether or
not giving rise to a claim under any insurance policy, in an amount greater than
$100,000.00 notice of such event, together with copies of any documents relating
to such event, including copies of any such claim, in possession or control of
such Borrower or any agent of such Borrower, and immediately after the
occurrence thereof, written notice of any cancellation of any insurance policy
required to be maintained by the Borrowers pursuant to any of the Financing
Documents.

     

    (9) Environmental
Notices.  Promptly after their receipt, copies of all
Environmental Notices received by a Borrower.

     

    (10) Material Adverse
Change.  As soon as possible and in any event within three (3)
Business Days after the occurrence of any event or circumstance which has
resulted in, or could result in, a Material Adverse Change, written notice of
such event or circumstance.

     

    (11) ERISA
Reports.  Promptly after their filing or receipt, copies of all
reports, including annual reports, and notices which the Borrowers file with or
receive from the PBGC or the U.S. Department of Labor under ERISA, and as soon
as possible and in any event within three (3) Business Days after any Borrower
knows or has reason to know that any Reportable Event or Prohibited Transaction
has occurred with respect to any Plan or that the PBGC or any Borrower or any
ERISA Affiliate has instituted or will institute proceedings under

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    under Title IV
of ERISA to terminate any Plan, the Borrowers will deliver to Bank a certificate
of the chief financial officer of the Borrowers setting forth details as to such
Reportable Event or Prohibited Transaction or Plan termination and the action
the Borrowers propose to take with respect to such Event, Transaction or
termination.

     

    (12) General
Information.  Such other information respecting the status of
the business, assets, liabilities, results of operations, condition (financial
or otherwise), property or prospects of any Borrower as Bank may reasonably
request from time to time.

     

    Section
5.11. New
Subsidiaries.  Within ten (10) days after any Person becomes a
Subsidiary of any Borrower, (1) give the Bank written notice of same, and (2)
cause such to become a Borrower under and to be bound by the provisions of this
Agreement and the Notes and to execute and deliver a Security Agreement which
grants to the Bank a first priority security interest in all of the assets of
such Person (subject to Permitted Liens), together with the receipt and
satisfactory review by Bank and its counsel of such documentation as shall be
required by the Bank, including legal opinions.

     

    

     

    ARTICLE
VI NEGATIVE COVENANTS

     

    So long
as any Note remains unpaid, the Line of Credit Commitment is outstanding or any
other amount is owing under this Agreement by any Borrower to Bank under any of
the Financing Documents, the Borrowers shall not:

     

    Section
6.01. Debt.  Create,
incur, assume, or suffer to exist, any Debt, except (1) Debt under the Financing
Documents, or any other Debt owed to Bank, (2) current operating liabilities
(other than for borrowed money) which are not more than one hundred twenty (120)
days past due, incurred in the ordinary course of business and paid within the
specified time, unless they are the subject of a Good Faith Contest, (3) Debt
secured by liens and purchase money Liens permitted by “Liens” (Section 6.03),
and (4) Debt which is subordinated on terms and provisions and pursuant to
documentation acceptable to Bank to Debt owed to Bank.

     

    Section
6.02. Guarantees. Assume,
guaranty, endorse or otherwise be or become directly or contingently responsible
or liable for the obligations of any Person, including but not limited to, an
agreement to purchase any obligation, stock, assets, goods or services or to
supply or advance any funds, assets, goods or services, or an agreement to
maintain or cause such Person to maintain a minimum working capital or net worth
or otherwise to assure the creditors of any Person against loss, except
guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business and except for guaranties from one Borrower to
another Borrower.

     
 

    Section
6.03. Liens.  Create,
incur, assume, or suffer to exist, any Lien, upon or with respect to any of its
properties or assets, now owned or hereafter acquired, except

     

    (1) Liens in
favor of Bank,

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    (2) Liens for
taxes or assessments or other governmental changes or levies if not yet due and
payable or if they are due and payable they are the subject of a Good Faith
Contest,

     

    (3) Liens
imposed by Law, such as mechanic’s, materialmen’s, landlord’s, warehousemen’s,
and carrier’s Liens, and other similar Liens, securing obligations incurred in
the ordinary course of business which are not past due or which are being
contested pursuant to a Good Faith Contest,

     

    (4) Liens
under worker’s compensation, unemployment insurance, social security, or similar
legislation,

     

    (5) Liens,
deposits, or pledges to secure the performance of bids, tenders, contracts
(other than contracts for the payment of money), leases (permitted under the
terms of this Agreement), public or statutory obligations, surety, stay, appeal,
indemnity, performance or other similar bonds, or other similar obligations
arising in the ordinary course of business,

     

    (6) Judgment
and other similar Liens arising in connection with court proceedings, provided
the execution or other enforcement of such Liens is effectively stayed and the
claims secured by such Liens are the subject of a Good Faith
Contest,

     

    (7) Easements,
rights-of-way, restrictions, and other similar encumbrances which, in the
aggregate, do not materially interfere with the occupation, use, and enjoyment
by the applicable Borrower of the property or assets so encumbered in the
ordinary course of its business or materially impair the value of the property
subject to such encumbrance,

     

    (8) Purchase
money Liens on any property hereafter acquired or the assumption of any Lien on
property existing at the time of such acquisition, or a Lien incurred in
connection with any conditional sale or other title retention agreement or a
Capital Lease, provided that:

     

    (a) Any
property subject to any of the foregoing is acquired by a Borrower in the
ordinary course of its business and the Lien on any such property is created
contemporaneously with such acquisition,

     

    (b) The Debt
secured by any Lien so created, assumed, or existing shall not exceed 100% of
the purchase price of such property,

     

    (c) Each such
Lien shall attach only to the property so acquired and fixed improvements on
such property, and

     

    (d) The
aggregate Debt outstanding at any time secured by all such Liens shall not
exceed $250,000.00.

     

    Section
6.04. Lease
Obligations. Create, incur, assume, or suffer to exist any obligation as
lessee for the rental or hire of any real or personal property, except (1)
Capital Leases permitted by “Liens” (Section 6.03), and (2) leases existing on
the date of this Agreement and any extensions or renewals thereof and other
leases entered into after the date of this 

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    Agreement
(other than Capital Leases) which, in the aggregate, do not require the
Borrowers to make payments in excess of $1,000,000.00 in the aggregate in any
Fiscal Year, subject to annual increases of not more than five percent
(5%).

     

    Section
6.05. Investments.  Make
any loan or advance to any Person, or purchase or otherwise acquire any capital
stock, assets, obligations, or other securities of, make any capital
contribution to, or otherwise invest in or acquire any interest in any Person,
except (1) direct obligations of the United States of America or any agency
thereof backed by the full faith and credit of the United States of America with
maturities of one (1) year or less from the date of acquisition, (2) commercial
paper with maturities of one hundred eighty (180) days or less of a domestic
issuer rated at least “A-1” by Standard & Poor’s Rating Group, a division of
McGraw-Hill Companies or “P-1” by Moody’s Investors Service, Inc., (3)
certificates of deposit with maturities of one (1) year or less from the date of
acquisition issued by any commercial bank having capital and surplus in excess
of $1,000,000,000.00, (4) money market funds with assets in excess of
$2,000,000,000.00, (5) the purchase of marketable securities in the ordinary
course of Borrowers’ business, and (6) the corporate bonds set forth on Exhibit
G annexed hereto and any corporate bonds purchased after the Closing Date which
are rated BBB at the time of purchase provided at the time of any purchase of
such additional corporate bonds the aggregate market value of all corporate
bonds currently owned and to be purchased by the Borrowers shall not exceed
$1,000,000.00.

     

    Section
6.06. Sale of
Assets.  Sell, lease, assign, transfer, or otherwise dispose
of, any of its now owned or hereafter acquired assets, except (1) inventory
disposed of in the ordinary course of business, and (2) the sale or other
disposition of assets no longer used or useful in the conduct of its
business.

     

    Section
6.07. Fundamental
Changes.  Merge or consolidate with, or change its form of
business organization, or liquidate or dissolve (or suffer any liquidation or
dissolution), or sell, assign, lease, or otherwise dispose of (whether in one
transaction or in a series of transactions) all or a material portion of its
assets (whether now owned or hereafter acquired), to any Person or acquire from
any Person assets which will constitute a material portion of any Borrower’s
assets after giving effect to such acquisition, except, however, Borrowers may
dissolve TDL Manufacturing, Inc. and Orbit Instrument of California, Inc. which
are currently inactive.

     

    Section
6.08. Lines of
Business.  Directly or indirectly engage in any business
inconsistent with the general character of the business in which they are
engaged on the Closing Date, or substantially alter the general character of
their respective business.

     

    Section
6.09. Transactions
With Affiliates.  Enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of such Borrower’s business and upon
fair and reasonable terms no less favorable to such Borrower than such Borrower
would obtain in a comparable arm’s length transaction with a Person not an
Affiliate with the exception of (i) power supplies made by Behlman Electronics,
Inc. for Integrated Consulting Services, Inc., and (ii) displays made by Tulip
Development Laboratory, Inc. for Orbit International Corp.

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    Section
6.10. Name, Fiscal
Year Accounting and Organizational Documents.  Change their
names, their Fiscal Year, their method of accounting, except as required by
GAAP, or any of the terms or provisions of their certificates of incorporation
or by-laws or any other organizational document.

     

    Section
6.11. Distributions.  Declare
or pay any dividends or distributions (other than dividends payable solely in
capital stock) or purchase, redeem, retire, or otherwise acquire for value any
of their respective capital stock or securities convertible into capital stock
now or hereafter outstanding (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), or make any distribution of assets
to stockholders as such, whether in cash, assets, or in obligations of any
Borrower, or allocate or otherwise set apart any sum for the payment of any
dividend or distribution on, or for the purchase, redemption, or retirement of
any capital stock, or make any other distribution by reduction of capital or
otherwise in respect of any capital stock, or purchase or otherwise acquire for
value any capital stock, except, as set forth above.

    

    Section
6.12. Prepayment of
Debt.  Prepay any Debt, other than Debt owed to
Bank.

     

    ARTICLE
VII FINANCIAL COVENANTS

     

    So long
as any Note remains unpaid, the Line of Credit Commitment is outstanding or any
other amount is owing under this Agreement by any Borrower to Bank under any of
the Financing Documents:

     

    Section
7.01. Consolidated
Debt Service Coverage Ratio. The Borrowers shall maintain a Consolidated
Debt Service Coverage Ratio of not less than (i) 1.05 to 1.00 as at December 31,
2009 and (ii) 1.25 to 1.00 at all times thereafter (to be tested as of the end
of each Fiscal Quarter on a rolling four (4) quarter basis).

     

    Section 7.02. Ratio of Consolidated Total
Liabilities to Tangible Net Worth. The Borrowers will have as of the end
of each Fiscal Quarter, a ratio of Consolidated Total Liabilities to Tangible
Net Worth of not greater than 1.25 to 1.00 (to be tested
quarterly).

     

    

     

    ARTICLE
VIII EVENTS OF DEFAULT AND REMEDIES

     

    Section
8.01. Events of
Default.  Any of the following events shall be an “Event of
Default”:

     

    (1) Payment Default. (a)
Borrowers fail (i) to pay the principal of any Note when due and payable, (ii)
to pay interest on any Note when due and payable or (b) any Borrower fails to
pay any fees or expenses required to be paid under any of the Financing
Documents within ten (10) calendar days after such fee or expense is due and
payable,

     

    (2) Breach of
Representation. Any representation or warranty made by a Borrower in any
Financing Document to which it is a party or which is contained in any
certificate, document, opinion, or financial or other statement furnished at any
time under or in connection
with any Financing Document shall prove to have been incorrect in any material
respect on or as of the date made,

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

    (3) Breach of Covenant.
The Borrowers shall fail to perform or observe any term, covenant or agreement
contained in “Maintenance of Insurance” (Section 4.05), “Reporting Requirements”
(Section 5.09), “Negative Covenants” (Article VI) or “Financial Covenants”
(Article VII) on their part to be performed or observed, or any Borrower shall
fail, in each case, to perform or observe any other term, covenant or agreement
contained in this Agreement and such failure shall remain unremedied for ten
(10) consecutive calendar days after such occurrence,

     

    (4) Cross Default. Any
Borrower shall fail to pay all or any portion of its Debt where the aggregate
amount of such Debt exceeds $50,000.00 or any interest or premium on such Debt
when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to such
Debt; or any other default under any agreement or instrument relating to any
such Debt, or any other event shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Debt, or any such Debt shall be declared
to be due and payable, or be required to be prepaid (other than by a regularly
scheduled required prepayment) prior to the stated maturity of such
Debt,

     

    (5) Bankruptcy.  Any
Borrower shall generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against any Borrower seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangements,
adjustment, protection, relief, or composition of it or its debts under any Law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any substantial part of its
property and if instituted against any Borrower shall remain undismised for a
period of thirty (30) days; or any Borrower shall take any action to authorize
any of the actions set forth above in this subsection (5),

     

    (6) Judgments. Any
judgment or order or combination of judgments or orders for the payment of
money, in excess of $50,000.00 in the aggregate, shall be rendered against any
Borrower and either (a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order or (b) there shall be any period of thirty
(30) consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in
effect,

     

    (7) ERISA. Any of the
foregoing events occur or exist with respect to either any Borrower or any ERISA
Affiliate: (a) any Prohibited Transaction involving any Plan; (b) any Reportable
Event with respect to any Plan; (c) the filing under Section 4041 of ERISA of a
notice of intent to terminate any Plan or the termination of any Plan; (d) any
event or circumstance that might constitute grounds entitling the PBGC to
institute proceedings under Section 4042 of ERISA for the termination of, or for
the appointment of a trustee to administer, any Plan, or the institution of the
PBGC of any such proceedings; (e) complete or partial withdrawal under Section
4201 or 4204 of ERISA from a Multiemployer Plan or the 

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    reorganization,
insolvency, or termination of any Multiemployer Plan; and in each case above,
such event or condition, together with all other events or conditions, if any,
could in the opinion of Bank subject either any Borrower or any ERISA Affiliate
to any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the
PBGC, or otherwise (or any combination thereof) which in the aggregate exceeds
or may exceed $25,000.00,

     

    (8) Financing Documents.
Any Financing Document shall at any time after its execution and delivery and
for any reason, cease to be in full force and effect or shall be declared to be
null and void, or the validity or enforceability of such Financing Document
shall be contested by any Borrower or any Borrower shall fail to perform any of
its obligations under such Financing Document or any Borrower shall deny that it
has any or further liability or obligation under any such Financing
Document,

     

    (9) Security
Agreement.  The Security Agreement shall at any time and for
any reason cease (a) to create a valid Lien in and to the property purported to
be subject to such Security Agreement, or (b) if the Lien on the property
purported to be subject to such Security Agreement ceases for any reason to be a
perfected first priority Lien in any or all of such property, or

     

    (10) Material Adverse
Change. The occurrence of a Material Adverse Change.

     

    Section
8.02. Remedies.  If
any Event of Default shall occur, Bank may, (1) terminate the Line of Credit
Commitment, (2) declare the outstanding Notes, all interest on the Notes, and
all other amounts payable under any other Financing Document to be forthwith due
and payable, whereupon the Notes, all such interest, and all such amounts due
under such other Financing Documents shall become and be forthwith due and
payable, without presentment, demand, protest, or further notice of any kind,
all of which are hereby expressly waived by the Borrowers, (3) exercise any
remedies provided in any of the Financing Documents and/or (4) exercise any
rights and remedies provided by Law.

     

    No
failure on the part of Bank to exercise, and no delay in exercising, any right
under any Financing Document shall operate as a waiver of such right or preclude
any other or further exercise of such right or the exercises of any other
right.  The remedies provided in the Financing Documents are
cumulative and not exclusive of any remedies provided by Law.

     

    ARTICLE
IX MISCELLANEOUS

     

    Section
9.01. Amendments,
Etc. No amendment, modification, termination, or waiver of any provision
of any Financing Document, nor consent to any departure by a Borrower from any
Financing Document, shall in any event be effective unless the same shall be in
writing and signed by Bank, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which
given.

     

    Section
9.02. Usury.  Anything
herein to the contrary notwithstanding, the obligations of the Borrowers under
this Agreement and the Notes shall be subject to the limitation that payments of
interest shall not be required to the extent that receipt of such payment would
be contrary to provisions of Law applicable to Bank limiting rates of interest
which may be charged or collected by Bank.

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

     

    Section
9.03. Costs and
Expenses. The Borrowers agree to pay on demand all costs and expenses in
connection with the preparation, execution, delivery, filing, recording, and
administration of any of the Financing Documents, including, the reasonable fees
and out-of-pocket expenses of counsel for Bank, and all costs and expenses, if
any, in connection with the enforcement of any of the Financing
Documents.  In addition, the Borrowers agree to pay any and all stamp
and other taxes and fees payable or determined to be payable in connection with
the execution, delivery, filing, and recording of any of the Financing Documents
and the other documents to be delivered under any such Financing Documents, and
agree to save Bank harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees. All such costs and expenses not paid within ten (10) days after
requested by Bank will accrue interest at a rate per annum equal to the Default
Rate.

     

    Section
9.04. Indemnification. The
Borrowers agree to indemnify Bank and its directors, officers, employees and
agents from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them arising out of
or by reason of any investigation or litigation or other proceedings (including
any threatened investigation or litigation or other proceedings) relating to any
actual or proposed use by any Borrower of the proceeds of the Loans, including
without limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation or litigation or other proceedings, but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified.

     

    The
obligations of the Borrowers under this Section shall survive the repayment of
the Loans and all amounts due under or in connection with any of the Financing
Documents.

     

    Section
9.05. Assignment,
Participation. This Agreement shall be binding upon, and shall inure to
the benefit of each Borrower, Bank and their respective successors and assigns.
No Borrower may assign or transfer its rights or obligations under any of the
Financing Documents.  Bank may assign or otherwise transfer all or a
portion of its rights and obligations under this Agreement and the other
Financing Documents to any other party and such other person shall thereupon
become vested with all of the rights and obligations of Bank under this
Agreement and the other Financing Documents.  In the case of an
assignment by Bank, the assignee shall have, to the extent of such assignment
(unless otherwise provided in such assignment), the same rights, benefits and
obligations as it would have if it were Bank.

     

    Bank may
sell participations in all or any part of the Loans to one or more banks or
other institutions.  Bank may furnish any information concerning the
Borrowers in the possession of Bank from time to time to assignees and
participants (including prospective assignees and participants).

     

    Bank has
the right to pledge the Notes to a Federal Reserve Bank.

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    Section
9.06. Notices,
Etc. All notices and other communications provided for under any of the
Financing Documents shall be in writing and shall be delivered by hand or
overnight courier service, mailed or sent by telecopy to any party to this
Agreement, at its address specified on its signature page to this Agreement or,
as to each party, at such other address as shall be designated by such party in
a written notice to the other party complying as to delivery with the terms of
this Section. All such notices and communications shall be effective in the case
of delivery by hand or overnight courier service or by telecopy on the date of
receipt and be effective in the case of delivery by mail two (2) Business Days
after being deposited in the mails.

     

    Section
9.07. Right of
Setoff.  Upon the occurrence and during the continuance of any
Event of Default, Bank is hereby authorized at any time and from time to time,
without notice to any Borrower (any such notice being expressly waived by each
Borrower), to set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other indebtedness at any
time owing by Bank to or for the credit or the account of such Borrower against
any and all of the obligations of each Borrower now or hereafter existing under
any of the Financing Documents, irrespective of whether or not Bank shall have
made any demand under such Financing Document and although such obligations may
be unmatured.  The rights of Bank under this Section are in addition
to other rights and remedies (including, without limitation, other rights of
setoff) which Bank may have.  If the Bank exercises any right of
setoff, it shall notify the Borrowers after the exercise thereof but failure to
provide said notice shall not impose any liability on the Bank nor negate any
setoff previously exercised.

     

    Section
9.08. Jurisdiction,
Immunities. Each Borrower hereby irrevocably submits to the jurisdiction
of any New York State or United States Federal court sitting in County of New
York in the State of New York over any action or proceeding arising out of or
relating to any of the Financing Documents, and each Borrower hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such New York State or Federal court.  Each Borrower
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing of copies of such process to such Borrower at its
address specified on the signature page of this Agreement by registered mail,
return receipt requested.  Each Borrower agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in any
other jurisdictions by suit on the judgment or in any other manner provided by
Law.  Each Borrower further waives any objection to venue in such
State on the basis of inconvenient forum. Each Borrower further agrees that any
action or proceeding brought against Bank shall be brought only in New York
State or United States Federal court sitting in the County of New
York.

     

    Nothing
in this Section shall affect the right of Bank to serve legal process in any
other manner permitted by Law or affect the right of Bank to bring any action or
proceeding against any Borrower or its property in the courts of any other
jurisdictions.

     

    To the
extent that any Borrower has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, each Borrower hereby
irrevocably waives such immunity in respect of its obligations under all of the
Financing Documents.

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    Section
9.09. Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State, without regard to its conflict
of law principles.

     

    Section
9.10. Counterparts.  This
Agreement may be executed in any number of counterparts and by different parties
to this Agreement in separate counterparts, each which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.

     

    Section
9.11. Headings.  The
headings in this Agreement are for reference only, and shall not affect the
interpretation or construction of this Agreement.

     

    Section
9.12. Severability of
Provisions.  Any provision of any Financing Document which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of such Financing Document or affecting
the validity or enforceability of such provision in any other
jurisdiction.

     

    Section
9.13. Integration.  The
Financing Documents set forth the entire agreement among the parties hereto
relating to the transactions contemplated thereby and supersede any prior oral
or written statements or agreements with respect to such
transactions.

     

    Section
9.14.  Joint
and Several.  The obligations of the Borrowers set forth in
this Agreement, the Notes and all other Financing Statements are joint and
several.

     

    Section
9.15. WAIVER OF
SPECIAL DAMAGES.  THE BORROWERS HEREBY WAIVE, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THE BORROWERS MAY HAVE TO CLAIM OR
RECOVER FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES.

    

    Section
9.16. WAIVER OF JURY
TRIAL.  THE BANK AND EACH BORROWER HEREBY WAIVE THEIR RIGHT TO
A JURY TRIAL.

     

    Section
9.17.  Patriot
Act.

     

    Each
Borrower represent, warrant and covenant as follows:

     

    (a) Neither
any Borrower nor any Borrower’s principals, constituents, investors or
affiliates is in violation of any legal requirements relating to terrorism or
money laundering, including Executive Order No. 13224 on Terrorist Financing
(effective September 24, 2001, (the “Executive Order”) and the Uniting and
Strengthening America by providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (Public Law 107-56, the “Patriot
Act”).

     

    (b) Neither
any Borrower nor any Borrower’s principals, constituents, investors or
affiliates is a “Prohibited Person” which is defined as follows:

     

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

    a person
or entity that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order;

     

    a person
or entity owned or controlled by, or acting for or on behalf of, any person or
entity that is listed in the annex to, or is otherwise subject to the provisions
of, the Executive Order;

     

    a person
or entity with whom Mortgagor is prohibited from dealing or otherwise engaging
in any transaction by any terrorism or money laundering legal requirements,
including the Executive Order and the Patriot Act;

     

    a person
or entity who commits, threatens or conspires to commit or supports “terrorism”
as defined in the Executive Order;

     

    a person
or entity that is named as a “specially designated national or blocked person”
on the most current list published by the U.S. Treasury Department Office of
Foreign Assets Control; and

     

    a person
or entity who is affiliated with a person or entity listed above.

     

    (c) Neither
any Borrower nor any Borrower’s principals, constituents, investors or
affiliates will (i) conduct any business or engage in any transaction or dealing
with any Prohibited Person, including the making or receiving of any
contribution of funds, goods or services to or for the benefit of any Prohibited
Person, (ii) deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to the Executive Order; or
(iii) engage in or conspire to engage in any transaction that evades or avoids,
or has the purposes of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in the Executive Order or the Patriot Act.

     

    

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the
parties hereto have duly executed this Agreement as of the year and date first
above written.

     

    BORROWERS:

     

    ORBIT
INTERNATIONAL CORP.

    

    By:
________________________________

    Name:  Mitchell
Binder

    Title:   Chief
Financial Officer

    

    BEHLMAN
ELECTRONICS, INC.

    

    By:
________________________________

    Name:  Mitchell
Binder

    Title:  Chief
Financial Officer

    

    TULIP
DEVELOPMENT LABORATORY, INC.

    

    By:
________________________________

    Name:
Mitchell Binder

    Title:  Chief
Financial Officer

    

    INTEGRATED
CONSULTING SERVICES, INC.

    

    By:
________________________________

    Name:
Mitchell Binder

    Title:  Chief
Financial Officer

    

    Address
for Notices for all Borrowers:

    

    80 Cabot
Court

    Hauppauge,
New York 11788

    Attention:  Chief
Financial Officer

    

    BANK:

    

    CAPITAL
ONE, N.A.

    

    By:
________________________________

    Name:           Dawn
Juliano

    Title:           Vice
President

    

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    Address
for Notices:

    

    Capital
One, N.A.

    275 Broad
Hollow Road

    Melville,
New York 11747

    Attention:
Dawn Juliano

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    37

    
      
        
        

        
          

        

      

      
        EXHIBIT
A

        
          
            
            

          

        

        
        

      

    

     

    Line of Credit
Note

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
       
LINE OF
CREDIT NOTE

    

    

    
      	
              $3,000,000.00

            	 
      	
              Melville,
      New York

            
	 
      	 
      	
              March
      10, 2010

            

    

    

    

    FOR VALUE RECEIVED, on the
Line of Credit Maturity Date, ORBIT INTERNATIONAL CORP., a Delaware corporation,
BEHLMAN ELECTRONICS, INC., a Delaware corporation, TULIP DEVELOPMENT LABORATORY,
INC., a Pennsylvania corporation, and INTEGRATED CONSULTING SERVICES, INC. D/B/A
INTEGRATED COMBAT SYSTEMS, a Kentucky corporation, each having their principal
place of business at 80 Cabot Court, Hauppauge, New York 11788 (collectively,
the “Borrowers”), jointly and severally, promise to pay to the order of CAPITAL
ONE, N.A. (“Bank”) at its office located at 275 Broad Hollow Road, Melville, New
York 11747 the principal sum of the lesser of: (a) Three Million and 00/100
Dollars ($3,000,000.00) Dollars; or (b) the aggregate unpaid principal amount of
all Revolving Credit Loans made by Bank to Borrowers pursuant to the
Agreement.

    

    Borrowers shall pay interest
on the unpaid principal balance of this Note from time to time outstanding, at
said office, at the rates of interest, at the times and for the periods set
forth in the Agreement.

    

    All payments including prepayments on
this Note shall be made in lawful money of the United States of America in
immediately available funds.  Except as otherwise provided in the
Agreement, if a payment becomes due and payable on a day other than a Business
Day, the maturity thereof shall be extended to the next succeeding Business Day,
and interest shall be payable thereon at the rate  specified in the
Agreement during such extension.

    

    Borrowers hereby authorize Bank to
enter from time to time the amount of each Loan to Borrowers and the amount of
each payment on a Loan on the books and records of the Bank.  Failure
of Bank to record such information on such books and records shall not in any
way effect the obligation of Borrowers to pay any amount due under this
Note.

    

    This Note is the Line of Credit Note
referred to in that certain Credit Agreement between Borrowers and Bank of even
date herewith (the “Agreement”), as such Agreement may be further amended from
time to time, and is subject to prepayment and its maturity is subject to
acceleration upon the terms contained in said Agreement.  All
capitalized terms used in this Note and not defined herein shall have the
meanings given them in the Agreement.

    

    If
any action or proceeding be commenced to collect this Note or enforce any of its
provisions, Borrowers further agree to pay all costs and expenses of such action
or proceeding and attorneys’ fees and expenses and further expressly waives any
and every right to interpose any counterclaim (except mandatory counterclaims)
in any such action or proceeding.  Borrowers hereby submit to the
jurisdiction of the Supreme Court of the State of New York and agree with Bank
that personal jurisdiction over Borrowers shall rest with the Supreme Court of
the State of New York for purposes of any action on or related to this Note, the
liabilities, or the enforcement of either or all of the
same.  Borrowers hereby waive personal service by manual delivery and
agree that service of process may be made by post-paid certified mail directed
to the Borrowers at the Borrowers’ address set forth above or at 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    such
other address as may be designated in writing by the Borrowers to Bank in
accordance with the terms of the Agreement, and that upon mailing of such
process such service be effective with the same effect as though personally
served.  Borrowers hereby expressly waive any and every right to a
trial by jury in any action on or related to this Note, the liabilities or the
enforcement of either or all of the same.

    

    Bank may transfer this Note and may
deliver the security or any part thereof to the transferee or transferees, who
shall thereupon become vested with all the powers and rights above given to Bank
in respect thereto, and Bank shall thereafter be forever relieved and fully
discharged from any liability or responsibility in the matter.  The
failure of any holder of this Note to insist upon strict performance of each
and/or all of the terms and conditions hereof shall not be construed or deemed
to be a waiver of any such term or condition.

    

    Borrowers and all endorsers and
guarantors hereof waive presentment and demand for payment, notice of
non-payment, protest, and notice of protest.

    

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

    

    
      	
              Witness:

            	
              ORBIT INTERNATIONAL
      CORP.

            

    

    

    
      	
              ____________________________

            	
              By:
      ________________________________

            

    

    Name:  Mitchell
Binder

    Title:  Chief
Financial Officer

    

    BEHLMAN ELECTRONICS, INC.

    

    By:
________________________________

    Name:  Mitchell
Binder

    Title:  Chief Financial
Officer

    

    TULIP
DEVELOPMENT LABORATORY, INC.

    

    By:
________________________________

    Name:  Mitchell
Binder

    Title:  Chief
Financial Officer

    

    INTEGRATED
CONSULTING SERVICES, INC.

    

    By:
________________________________

    Name:  Mitchell
Binder

    Title:  Chief
Financial Officer

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    EXHIBIT
B

     

    
       
Term Loan
Note

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     TERM
LOAN NOTE

    

    
      	
              $4,654,761.84

            	 
      	
              Melville,
      New York

            
	 
      	 
      	
              Dated
      as of March 10, 2010

            

    

    

    

    

    FOR VALUE RECEIVED, on the
Term Loan Maturity Date, ORBIT INTERNATIONAL CORP., a Delaware corporation,
BEHLMAN ELECTRONICS, INC., a Delaware corporation, TULIP DEVELOPMENT LABORATORY,
INC., a Pennsylvania corporation, and INTEGRATED CONSULTING SERVICES, INC. D/B/A
INTEGRATED COMBAT SYSTEMS, a Kentucky corporation, each having their principal
place of business at 80 Cabot Court, Hauppauge, New York 11788 (collectively,
the “Borrowers”), jointly and severally, promise to pay to the order of CAPITAL
ONE, N.A. (“Bank”) at its office located at 275 Broad Hollow Road, Melville, New
York 11747 the principal amount of FOUR MILLION SIX HUNDRED FIFTY FOUR THOUSAND
SEVEN HUNDRED SIXTY ONE AND 84/100 DOLLARS ($4,654,761.84) DOLLARS.

    

    The principal balance shall
be payable in sixty (60) monthly installments, due on the first day of each
month commencing on the first day of the month following the date hereof, and on
the first day of each successive month thereafter.  Each of the first
fifty-nine (59) monthly payments shall equal $77,579.36.  The final
payment, which shall be due and payable on the Term Loan Maturity Date, shall
equal the outstanding principal balance of this Note together with all accrued
and unpaid interest.

    

    Borrowers shall pay interest
on the unpaid principal balance of this Note from time to time outstanding, at
said office at the rates of interest, at the times and for the periods set forth
in the Agreement.

    

    All payments including
prepayments on this Note shall be made in lawful money of the United States of
America in immediately available funds.  Except as otherwise provided
in the Agreement, if a payment becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon at the rate specified in the
Agreement during such extension.

    

    This Note is the Term Loan
Note referred to in that certain Credit Agreement between Borrowers and Bank
dated as of even date herewith (the “Agreement”), as such Agreement may be
further amended from time to time, and is subject to prepayment and its maturity
is subject to acceleration upon the terms contained in said
Agreement.  All capitalized terms used in this Note and not defined
herein shall have the meanings given them in the Agreement.

    

    If any action or proceeding
be commenced to collect this Note or enforce any of its provisions, Borrowers
further agree to pay all costs and expenses of such action or proceeding and
attorneys’ fees and expenses and further expressly waive any and every right to
interpose any counterclaim (except mandatory counterclaims) in any such action
or proceeding.  Borrowers hereby submit to the jurisdiction of the
Supreme Court of the State of New York and agree with Bank that personal
jurisdiction over Borrowers shall rest with the Supreme Court of the State of
New York for purposes of any action on or related to this Note, the liabilities,
or the enforcement of either or all of the same.  Borrowers hereby
waive personal service by manual delivery and agree that service of process may
be made by postpaid certified mail directed to Borrowers at Borrowers’ address
designated in the Agreement or at such other address as may be designated in
writing by Borrowers to Bank in accordance with the terms of the Agreement, and
that upon mailing of such process such service be effective with the same effect
as though personally served.  Borrowers hereby expressly waive any and
every right to a trial by jury in any action on or related to this Note, the
liabilities or the enforcement of either or all of the same.

    

    Bank may transfer this Note
and may deliver the security or any part thereof to the transferee or
transferees, who shall thereupon become vested with all the powers and rights
above given to Bank in respect thereto, and Bank shall thereafter be forever
relieved and fully discharged from any liability or responsibility in the
matter.  The failure of any holder of this Note to insist upon strict
performance of each and/or all of the terms and conditions hereof shall not be
construed or deemed to be a waiver of any such term or condition.

    

    Borrowers authorize Bank to
complete this Note as to any terms not set forth herein at the time of delivery
hereof.

    

    Borrowers and all endorsers
and guarantors hereof waive presentment and demand for payment, notice of
non-payment, protest, and notice of protest.

    

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

    

    
      	
              Witness:

            	
              ORBIT INTERNATIONAL
      CORP.

            

    

    

    
      	
              ____________________________

            	
              By:
      ________________________________

            

    

    Name:  Mitchell
Binder

    Title:
Chief Financial Officer

    

    BEHLMAN ELECTRONICS, INC.

    

    By:
________________________________

    Name:  Mitchell
Binder

    Title: Chief Financial
Officer

    

    TULIP
DEVELOPMENT LABORATORY, INC.

    

    By:
________________________________

    Name:  Mitchell
Binder

    Title:
Chief Financial Officer

    

    

    [SIGNATURES
CONTINUE ON NEXT PAGE]

    

    INTEGRATED
CONSULTING SERVICES, INC.

    

    By:
________________________________

    Name:  Mitchell
Binder

    Title:  Chief
Financial Officer

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
C

    

    

    Request for Advance Form for
Line of Credit Loans

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    REQUEST
FOR ADVANCE

    

    

    To:          Capital
One, N.A.

    275 Broad Hollow Road

    Melville, New York 11747

    Attn:  Dawn
Juliano

    

    Request for a Line of Credit
Loan pursuant to Credit Agreement, dated March 10, 2010 (the “Credit Agreement”)
among Orbit International Corp., Behlman Electronics, Inc., Tulip Development
Laboratory, Inc. and Integrated Consulting Services, Inc. d/b/a Integrated
Combat Systems (individually a “Borrower” and collectively the “Borrowers”) and
Capital One, N.A. (the “Bank”).

    

    Pursuant to the Credit
Agreement, the underlying Borrower hereby requests that the Bank make a Line of
Credit Loan in the amount of ____________________________ and 00/100 Dollars
($_________), which amount shall be absolutely due and owing under the terms of
the Credit Agreement and should be deposited into account no.
____________________ with the Bank.

    

    Interest
Rate Option:

    □
Prime     or                                 □ LIBOR

    

    

    If LIBOR,
the duration of the Interest Rate Period applicable to this advance shall
be:

    □ one month

    □
two months

    □
three months

    

    If this is a Libor Loan
renewal:

    

    The
renewal date
is                                .

    

    The
amount of the Loan to be renewed is  ($ ).

    

    The
duration of the Interest Period applicable to this renewal is:

    □ one month

    □
two months

    □
three months

    

    OR

    

     Convert
$   loan
to Prime Rate Loan

    

    

    

    In
connection with this request for advance or renewal, the Borrowers hereby
certify to the Bank that:

    

    1. The representations
and warranties contained in the Credit Agreement and the Line of Credit Note
dated as of the date of the Credit Agreement issued by the Borrowers to the Bank
(the “Note”) are true and accurate in all material respects on and as of the
date hereof as though made on and as of such date;

    

    2. No Default or Event
of Default as defined in the Credit Agreement has occurred and is continuing, or
would result from such advance; and

    

    3. The Credit Agreement
and the Note, inclusive of the amount of the requested advance or renewal, are
valid and binding obligations of the Borrowers, each enforceable in accordance
with its respective terms.

    

    

    Dated: as of _________ __,
20__                                
    BORROWER:

    

    ___________________________________

    

    By:
________________________________

    Name:

    Title:

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
D

    

    

    Form of Borrowing Base
Certificate

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    BORROWING
BASE CERTIFICATE

    For The
Period Ending:  ______________________

    

    
      	
              A.

            	
              Total
      Gross Account Receivables

            	 
      	
              $0

            	 
      
	
              B.

            	
              Less:  A/R's
      over 90 Days Past Invoice Date

            	
              $0

            	 
      	 
      
	
              C.

            	
              Less:  Foreign
      Receivables

            	
              $0

            	 
      	 
      
	
              D.

            	
              Less:  Intercompany
      Receivables             
      

            	
              $0

            	 
      	 
      
	
              E.

            	
              Less:  Cross-Aged
      > 50%

            	
              $0

            	 
      	 
      
	
              F.

            	
              Less:  Receivables
      due from one debtor >20% of total

            	 
      	 
      	 
      
	 
      	
                         Receivables
      (excluding US Gov't)

            	 
      	 
      	 
      
	
              G.

            	
              Less:  Other
      Ineligible Accounts

            	
              $0

            	 
      	 
      
	
              H.

            	
              Total
      Ineligible Receivables

            	 
      	
              $0

            	 
      
	
              I.

            	
              Total
      Eligible Accounts Receivable:  (A minus H)

            	 
      	
              $0

            	 
      
	
              J.

            	
              Accounts
      Receivable Margined (85% times I)

            	 
      	 
      	
              $0

            
	 
      	 
      	 
      	 
      	 
      
	
              K.

            	
              Total
      Gross Eligible Inventory

            	 
      	
              $0

            	 
      
	
              L.

            	
              Inventory
      Margins (50% times K)

            	 
      	
              $0

            	 
      
	
              M.

            	
              Inventory
      Cap (lesser of (i) amount in J, (ii) $3,000,000 or (iii) amount in
      L)

            	 
      	
              $0

            	 
      
	 
      	 
      	 
      	 
      	 
      
	
              N.

            	
              Inventory
      Availability (lesser of L or M)

            	 
      	 
      	
              $0

            
	 
      	 
      	 
      	 
      	 
      
	
              O.

            	
              Total
      Available A/R and Inventory Collateral (J + N)

            	 
      	 
      	
              $0

            
	 
      	 
      	 
      	 
      	 
      
	
              P

            	
              Outstanding
      Line of Credit Loans

            	 
      	 
      	
              $0

            
	 
      	 
      	 
      	 
      	 
      
	
              Q.

            	
              Collateral
      Surplus/(shortfall) before Term Loan* (O-P)

            	 
      	 
      	
              $0

            
	 
      	 
      	 
      	 
      	 
      
	
              R.

            	
              Outstanding
      Under Term Loan

            	 
      	 
      	
              $0

            
	 
      	 
      	 
      	 
      	 
      
	
              S.

            	
              Collateral
      Surplus (shortfall) after Term Loan before

            	 
      	 
      	
              $0

            
	 
      	
              applying
      eligible Cash or Marketable Securities (Q-R)

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
              T.

            	
              If
      shortfall in (S) enter  Eligible Cash and Marketable
      Securities

            	 
      	
              $0

            
	 
      	 
      	 
      	 
      	 
      
	
              U.

            	
              Collateral
      Surplus/(shortfall)*  (S+T)

            	 
      	 
      	
              $0

            
	 
      	 
      	 
      	 
      	 
      
	 
      	
              *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 (a)
      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, (b)
      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 (c) 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.

    BEHLMAN ELECTRONICS, INC.

    TULIP DEVELOPMENT LABORATORY,
INC.

    INTEGRATED CONSULTING SERVICES,
INC.

    

    By:____________________________

    Name:

    Title:  Chief Financial
Officer

    

    

    

    

    Description
of Exceptions to Certification:

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
E

    

    Form of Interest Rate
Conversion for Term Loan

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    CONVERSION
REQUEST

    

    

    To:           Capital
One, N.A.

    275 Broad Hollow Road

    Melville, New York 11747

    Attn:  Dawn
Juliano

    

    Request to convert a Type of
Loan into another Type of Loan or to continue a Type of Loan pursuant to the
Credit Agreement dated March 10, 2010 (the “Credit Agreement”) among Orbit
International Corp., Behlman Electronics, Inc., Tulip Development Laboratory,
Inc. and Integrated Consulting Services, Inc. d/b/a Integrated Combat Systems
(individually a “Borrower” and collectively the “Borrowers”) and Capital One,
N.A. (the “Bank”).

    

    Pursuant to the Credit
Agreement, the underlying Borrower hereby requests that the Bank convert or
continue, as applicable, the entire outstanding balance of the Term Loan to one
of the following options:

    

    □
Prime     or                                 □ one month LIBOR

    

    If the
Term Loan is currently a LIBOR Loan the request must be made at least (2)
Business Days prior to the end of the current LIBOR Interest Period and will be
effective on the last day of such LIBOR Interest Period.

    

    In
connection with this request for conversion or continuation, the Borrowers
hereby certify to the Bank that:

    

    4. The representations
and warranties contained in the Credit Agreement are true and accurate in all
material respects on and as of the date hereof as though made on and as of such
date;

    

    5. No Default or Event
of Default as defined in the Credit Agreement has occurred and is continuing, or
would result from such interest rate conversion; and

    

    6. The Credit Agreement
and all other Financing Documents (as defined in the Credit Agreement) are valid
and binding obligations of the Borrowers, each enforceable in accordance with
its respective terms.

    

    

    Dated: as
of _________ __,
20__                                                                       BORROWER:

    

    ___________________________________

    

    By:
________________________________

    Name:

    Title:

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
F

    

    SCHEDULE
OF SUBSIDIARIES

    

    

    NONE

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
G

    

    SCHEDULE
OF CORPORATE BONDSexhibit102.htm

     

    SECURITY
AGREEMENT

    

    

    Security
Agreement dated as of March 10, 2010 (“Security Agreement”), made by ORBIT
INTERNATIONAL CORP., BEHLMAN ELECTRONICS, INC., TULIP DEVELOPMENT LABORATORY,
INC. and INTEGRATED CONSULTING SERVICES, INC. D/B/A INTEGRATED COMBAT SYSTEMS
(individually, a “Grantor” and collectively, the “Grantors”) to CAPITAL ONE,
N.A. (“Bank”).

    

    In
consideration of Bank providing credit to the Grantors, Grantors hereby agree as
follows:

    

    Section
1. Definitions.
As used in this Security Agreement, the following terms have the following
meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):

    

    “Collateral”
has the meaning specified in “Grant of Security Interest” (Section
3).

    

     “Contracts”
means each contract, agreement, instrument and indenture to which any of the
Grantors are a party or under which any Grantor has any right, title and
interest or to which any Grantor or its property is subject.

    

    “Credit
Agreement” means that certain Credit Agreement dated as of the date hereof
between the Borrowers and the Bank, as same may hereafter be amended, modified,
restated or superseded.

    

    “Secured
Obligations” means any and all present and future liabilities and obligations of
each Grantors to Bank, including those under or in connection with the Credit
Agreement and each other Financing Document, whether incurred by each Grantor as
principal or guarantor or otherwise, and whether due or to become due, secured
or unsecured, absolute or contingent, joint or several, direct or indirect,
acquired outright, conditionally or as collateral security by Bank from another,
liquidated or unliquidated, arising by operation of law or otherwise, together
with all fees and expenses incurred in collecting any or all of the items
specified in this definition or enforcing any rights under any of the documents
executed in connection with any such liabilities and obligations, including all
fees and expenses of Bank’s counsel and of any experts and agents which may be
paid or incurred by Bank in collecting any such items or enforcing any such
rights.

    

    “Security
Agreement” means this Security Agreement.

    

    “UCC”
means the Uniform Commercial Code as promulgated by the American Law Institute
and the National Conference of Commissioners on Uniform State Laws in the form
adopted by the jurisdiction where the financing statement with respect to any
Collateral is filed.

    

    Unless
otherwise defined in this Security Agreement, (1) all terms defined in the
Credit Agreement will have the same meaning specified for such term in the
Credit Agreement when used in this Security Agreement, and (2) all terms defined
in the UCC that are used in this Security
Agreement shall have the meaning specified in the UCC when used in this Security
Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section
2. Rules of
Interpretation. When used in this Security Agreement: (1) “or” is not
exclusive, (2) any pronouns used shall include the corresponding masculine,
feminine or neuter forms, (3) the singular form of nouns shall include the
plural and vice versa, (4) a reference to a law includes any amendment or
modification to such law, and (5) a reference to an agreement, instrument or
document includes any amendment or modification of such agreement, instrument or
document, if and to the extent such amendment or modification is permitted under
the applicable Financing Documents.

    

    Section
3. Grant of Security
Interest. The Grantors hereby grant to Bank a continuing security
interest in and lien on all right, title and interest of the Grantors in and to
each of the following items, whether now owned or hereafter acquired, created or
existing: (1) all Accounts, (2) all Chattel Paper (whether tangible or
electronic), (3) all Deposit Accounts, (4) all Documents, (5) all General
Intangibles (including Payment Intangibles and Software), (6) all Goods
(including Inventory), Equipment, Fixtures and Accessions, (7) all Instruments
(including promissory notes), (8) all Investment Property, (9) all
Letter-of-Credit Rights, (10) all Letters of Credit, (11) all Money, (12) all
Supporting Obligations, and (13) all Proceeds and products of the foregoing (the
“Collateral”).

    

    Section
4. Security for
Secured Obligations. Grantors’ Collateral secures the prompt and complete
payment when due of all Secured Obligations of each of the
Grantors.

    

    Section
5. Filing of Financing
Statement. The Grantors hereby authorize Bank, its counsel or its
representative, at any time and from time to time, to file financing statements
and amendments covering its respective Collateral in such jurisdictions as Bank
may deem necessary or desirable to perfect the security interests granted by the
Grantors under this Security Agreement. Such financing statements may describe
the collateral covered by such financing statements as “all assets of Grantors”,
“all personal property of Grantors” or words of similar effect.

    

    Section
6. Actions to Perfect
Security Interest. The Grantors agree that from time to time, they will
promptly execute and deliver all instruments and documents, and take all
actions, that may be necessary or desirable, or that Bank may reasonably
request, for the attachment, perfection and maintenance of the priority of, the
security interest of Bank in any and all of the Collateral of the Grantors or to
enable Bank to exercise and enforce any and all of its rights, powers and
remedies under this Security Agreement with respect to any and all of the
Collateral of the Grantors.

    

    Section
7. Continued
Perfection of Security Interest. The Grantors shall not: (1) change their
respective names, identities or structures, (2) merge or consolidate into, or,
except in the ordinary course of business, transfer any of their respective
Collateral to, any other party, (3) change the location of their chief executive
offices or principal places of business, (4) change the jurisdiction of their
organization, or (5) change the location where the books and records related to
their respective Collateral are maintained.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    Section
8. Waivers and
Consents. The Grantors agree to use commercially reasonable efforts to
(1) obtain all governmental and other third party waivers, consents and
approvals, in form and substance satisfactory to Bank, required for the
execution and performance of this Security Agreement by Bank, including, the
consent of each licensor, lessor or other persons obligated on Collateral and
(2) to the extent requested by Bank, to obtain waivers and subordinations, in
form and substance satisfactory to Bank, from mortgagees and landlords where any
of its Collateral is located.

    

    Section
9. Representations and
Warranties. At the time of execution of this Security Agreement and each
time Bank provides credit as noted above, each Grantor represents and warrants
to Bank as follows:

    

    (1) Names of Grantors.
The exact legal name of each Grantor is the name specified in the preamble to
this Security Agreement. Each Grantor has not been known by any other name
during the five (5) years prior to the date of this Security
Agreement.

    

    (2) Location of Grantors.
Orbit International Corp. and Behlman Electronics, Inc. are each a Delaware
corporation.  Tulip Development Laboratory, Inc. and Integrated
Consulting Services, Inc. d/b/a Integrated Combat Systems are, respectively,
Pennsylvania and Kentucky corporations.  All of the assets used in the
operation of the business of the Grantors are in the possession of, and under
the control of, the Grantors and none of the assets used by the Grantors in the
conduct of their respective business are held by any third party.

    

    (3) Location for Filing of
Financing Statement. With respect to any item of Collateral in which a
security interest can be perfected by the filing of a UCC financing statement,
the filing of such a statement with the Secretary of State of the jurisdiction
of incorporation of each Grantor, as applicable, will perfect the security
interest of Bank in the Collateral of the Grantors.

    

    (4) Formation, Good Standing,
Power and Due Qualification. The Grantors (a) are each a corporation duly
formed, validly existing, and in good standing under the laws of the
jurisdiction of their formation, (b) have the power and authority to own their
respective assets and to transact the business in which they now engage or
propose to engage in, and (c) are duly qualified as a foreign corporation and in
good standing under the laws of each other jurisdiction in which such
qualification is required except where the failure to qualify will not result in
a Material Adverse Change.

    

    (5) Authority, No
Contravention. The execution, delivery and performance by the Grantors of
this Security Agreement are within their respective corporate powers, have been
duly authorized by all necessary corporate action, and do not and will not (a)
require any consent or approval of their officers or shareholders which have not
been obtained, (b) contravene their respective certificates of incorporation or
by-laws, (c) violate any provision of any law, order, writ, judgment,
injunction, decree, determination, or award presently in effect applicable to
them, (d) result in a breach of or constitute a default under any indenture or
loan or credit agreement or any other agreement, lease, or instrument to which
they are a party or by which they or their properties may be bound or affected,
or (e) result in, or require, the creation or imposition of any lien (except in
favor of the Bank) upon or with respect to any of the properties now owned or
hereafter acquired by them.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    (6) Governmental
Authority. No authorization, approval or other action by, and no notice
to or filing with, any governmental authority is required for the due execution,
delivery and performance by the Grantors of this Security
Agreement.  Notwithstanding the foregoing, by its acceptance of this
Agreement, the Bank acknowledges that the Grantors have not complied with the
Assignment of Claims Act with respect to any Collateral the perfection of which
might require compliance with same.

    

    (7) Legally Enforceable Security
Agreement. This Security Agreement is the legal, valid and binding
obligation of the Grantors, enforceable against the Grantors in accordance with
its terms, except to the extent that such enforcement may be limited by (1)
applicable bankruptcy, insolvency, and other similar laws affecting creditors'
rights generally, or (2) general equitable principles, regardless of whether the
issue of enforceability is considered in a proceeding in equity or at
law.

    

    (8) No Restrictions on
Collateral. Except for Permitted Liens, none of the Collateral is subject
to a restriction, which has not been waived with a copy of such waiver delivered
to Bank, that prohibits, restricts or limits the grant of a security interest in
such Collateral pursuant to this Security Agreement, the perfection of the
security interest granted by this Security Agreement (including the priority of
such security interest) or the exercise by Bank of its rights, remedies and
powers under this Security Agreement or otherwise.

    

    (9) Security Interest and
Claims. This Security Agreement creates a valid security interest in the
Collateral and such security interest secures the payment of all Secured
Obligations. Upon the filing of the financing statements in the locations
specified above the security interest of Bank in all of the Collateral will be
perfected (and except for any actions with respect to Accounts which require
compliance with the Assignment of Claims Act). Except with respect to Permitted
Liens, the security interest of Bank in the Collateral is a first priority
security interest and such Collateral is not subject to any other security
interest. The Grantors own their respective Collateral free and clear of any
security interest, except for the security interest created by this Security
Agreement and Permitted Liens.

    

    (10) Acquisition in Ordinary
Course of Business. All of the Collateral, including all Equipment and
all Inventory, was acquired in the ordinary course of business.

    

    (11) Compliance With Law.
All of the Collateral was acquired, used, produced and sold or disposed of in
accordance with all applicable laws, including in the case of inventory, the
Fair Labor Standards Act.

    

    (12) Inventory. None of
the Inventory is held on consignment or subject to a sale or return or sale on
approval or similar arrangement.

    

    (13) Equipment. All
Equipment which is useful or necessary to the business of each Grantor is in
good repair, ordinary wear and tear excepted.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (14) Accounts. All
Accounts have been originated by each respective Grantors. None of the Accounts
have either been sold to another party or otherwise transferred or delivered to
any party for the purpose of collecting such Account. The Grantors are duly
qualified in all states where required to enable each Grantor to enforce
collection of their respective Accounts due from customers residing in that
state.

    

    (15) Contracts. All of the
Contracts material to the operation of the business of the Grantors are in full
force and effect and the Grantors have performed in all material respects their
respective obligations under each such Contract, and to the knowledge of the
Grantors the other parties to each such Contract have performed in all material
respects their respective obligations under each such Contract.

    

    Section
10. Covenants.
The Grantors agree that:

    

    (1) Reporting
Requirements. The Grantors shall promptly notify Bank if (a) any claim,
including any attachment, levy, execution or other legal process, is made
against any or all of its Collateral, (b) any representation and warranty
included in this Security Agreement would no longer be true if made on such
date, (c) there is any material loss or damage to, or material decline in the
value of, or material change in the nature of, any of its Collateral or (d)
there is a redemption or exchange of any or all of its Collateral. The Grantors
will furnish to Bank from time to time statements and schedules further
identifying and describing its Collateral and such other reports in connection
with such Collateral as Bank may request, all in reasonable detail.

    

    (2) Records. The Grantors
will keep and maintain at their expense complete and accurate records related to
their Collateral, including records of all payments made, all credits granted
and all other documentation related to their Collateral.

    

    (3) Inspection. Upon
reasonable notice to the Grantors and during normal business hours the Grantors
will allow Bank or its designees to visit their offices and each location where
any Collateral is located to inspect their books and records, make copies
thereof, and inspect their Collateral.

    

    (4) Restrictions on
Collateral. The Grantors will not enter into any agreement or undertaking
that restricts or limits the right or ability of Grantors or Bank to sell,
assign or transfer any of their Collateral.

    

    (5) Defense of
Collateral. The Grantors will defend their respective Collateral against
all claims and demands of all parties, other than Bank, claiming an interest in
any of their respective Collateral.

    

    (6) No Security Interest or
Claims. The Grantors will not create, permit or suffer to exist, any
security interest on any of their respective Collateral other than the security
interest under this Security Agreement or as permitted pursuant to the Credit
Agreement.  The Grantors will discharge or cause to be discharged all
security interests and claims on any or all of their Collateral, except for the
security interest under this Security Agreement or as permitted
pursuant

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (7) to the
Credit Agreement. The Grantors will pay promptly when due all property and other
taxes that are not the subject of a Good Faith Contest, assessments and
governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against their respective
Collateral.

    

    (8) Transfer and Other Security
Interests. The Grantors shall not sell, assign (by operation of law or
otherwise), transfer or otherwise dispose of any of their Collateral except for
sales, assignments and transfers of Collateral in the ordinary course of
business.

    

    (9) Compliance with Law.
The Grantors will comply in all material respects with all laws applicable to
any or all of their Collateral, except to the extent the failure to comply will
not have a material adverse effect on the rights of Bank under this Security
Agreement, the priority of the security interest of Bank in their Collateral or
the value of their Collateral.

    

    (10) Insurance. The
Grantors shall, at their own expense, maintain insurance with respect to all the
Equipment and all the Inventory in such amounts, against such risks, in such
form and with such insurers as are usually carried by companies engaged in the
same or similar business as the Grantors and such other insurance as reasonably
required by Bank. Each policy  for commercial general liability
insurance (a) shall designate Bank as an additional insured and (b) shall
provide for all losses to be paid on behalf of Bank and the Grantors as their
respective interests may appear. Reimbursement under any liability insurance
maintained by the Grantors may be paid directly to the party who shall have
incurred liability covered by such insurance. Each policy for property damage
insurance shall (a) designate Bank and Grantors as the loss payees and (b)
provide for all losses to be paid directly to Bank.

    

    In
addition, each such policy shall (a) in the case of a liability policy, name
Bank as an insured party under such policy (without any representation or
warranty by or obligation upon Bank), (b) contain the agreement by the insurer
that any loss under such policy shall be payable to Bank notwithstanding any
action, inaction or breach of representation or warranty by any Grantor, (c)
provide that there shall be no recourse against Bank for payment of premiums or
other amounts with respect to such policy and (d) provide that at least 30 days
prior written notice of amendment to, cancellation of or lapse shall be given to
Bank by the insurer.

    

    If
requested by Bank, the Grantors shall deliver to Bank (a) original or duplicate
policies of such insurance policies, (b) a report of Rampart Insurance or such
other reputable insurance broker with respect to such insurance and (c) duly
executed instruments of assignment of such insurance policies to perfect Bank’s
security interest in such policy, including without limitation, acknowledgments
of such assignments from the respective insurers.

    

    In case
of any loss involving damage to Equipment or Inventory Bank will determine
whether such insurance proceeds shall be used (a) to make or cause to be made
the necessary repairs to or replacements of such Equipment or Inventory or (b)
to pay the Secured Obligations, and if there are any contingent Secured
Obligations, to provide cash collateral to cover such Secured
Obligations.  Provided a Default or Event of Default has not occurred
and is not continuing, the Bank shall not unreasonably withhold its consent with
respect to any requests of the Grantors to apply the insurance proceeds towards
necessary repairs to or replacements of Equipment or Inventory.  If
the Bank elects to apply insurance 

    
      
         

      

      
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    proceeds
towards the payment of the Secured Obligations, the Bank shall apply the
insurance proceeds first towards payment of outstanding Line of Credit Loans
before any other Secured Obligations.  Notwithstanding anything to the
contrary contained herein, if there are no outstanding Defaults of Events of
Default and the amount of insurance proceeds to be received in connection with a
loss is equal to or less than $1,000,000, then Bank will make such insurance
proceeds available to Grantors and Grantors will use such proceeds to make or
cause to be made the necessary repairs to or replacements of such Equipment or
Inventory.

    

    (10) Equipment. The
Grantors shall cause the Equipment necessary for the conduct of their respective
business to be maintained and preserved in good working order, repair and
condition, ordinary wear and tear excepted, and shall forthwith, or in the case
of any loss or damage to any of their Equipment as quickly as practicable after
the occurrence thereof, make or cause to be made all repairs, replacements, and
other improvements in connection therewith which are necessary or desirable to
so maintain and preserve such Equipment.

    

    (11) Inventory. In
accordance with reasonable business practice, the Grantors will maintain all
Inventory in good saleable or useable condition.  The Grantors will
(a) not sell, assign, lease, mortgage, transfer or otherwise dispose of any
interest in any Inventory other than sales of Inventory in the ordinary course
of business, and (b) not use or permit any of the Inventory to be used for any
unlawful purpose or in violation of any law, or for hire.

    

    (12) Accounts. The
Grantors will remain duly qualified in all states where required to enable each
Grantor to enforce collection of their respective Accounts due from account
debtors in that state. Except as otherwise provided in this Security Agreement,
it shall continue to collect, at their own expense, all amounts due or to become
due to the Grantors under the Accounts. In connection with such collections, the
Grantors may take (and, at Bank's discretion, shall take) such action, as the
Grantors or Bank may deem necessary or advisable to enforce collection of the
Accounts.

    

    (13) Contracts. The
Grantors will perform all of their duties and obligations under each contract
material to the operation of their respective business. They will require that
all other parties to each such contract perform all of their respective duties
and obligations.

    

    Section
11. Rights and
Remedies. If Grantors fail to perform any agreement contained in this
Security Agreement, Bank may itself perform, or cause performance of, such
agreement.

    

    Upon the
occurrence of an Event of Default Bank may exercise in respect of any or all of
the Collateral each of the following rights, remedies and powers and the
Grantors agree that each of the following rights, remedies and powers are
commercially reasonable:

    

    (a) General Remedies.
Bank may exercise in respect of any or all of the Collateral all rights,
remedies and powers provided for in this Security Agreement, by law, in equity
or otherwise available to it, including all the rights and remedies of a secured
party under the UCC (whether or not the UCC applies to the affected
Collateral).

    
      
         

      

      
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    Right to Accelerate
Obligations Owed to Grantors. To the extent that any obligation to make
payment on any Collateral is not then due or a demand for payment has not been
made and the Grantors have the right, in accordance with the term of such
Collateral, to require or make a demand for payment on such Collateral, Bank has
the right to require and to make a demand for payment on such
Collateral.

    

    (b) Accounts, Contracts, and
Other Collateral. Bank has the right to notify the account debtors or
obligors under any Accounts, Contracts and other Collateral of the security
interest of Bank in such Account, Contract or other Collateral and to direct
such account debtors or obligors to make payment of all amounts due or to become
due to the Grantors thereunder directly to Bank or to an account designated by
Bank and, upon such notification, to enforce collection of any such Accounts,
Contracts and other Collateral, and to adjust, settle or compromise the amount
or payment thereof, in the same manner and to the same extent as the Grantors
might have done. After receipt by the Grantors of such notice from Bank, (a) all
amounts and proceeds (including wire transfers, checks and other instruments)
received by any Grantor in respect of any Accounts, Contracts, or other
Collateral shall be received in trust for the benefit of Bank under this
Security Agreement, shall be segregated from other funds of the Grantors and
shall be forthwith deposited to such account or paid over or delivered to Bank
in the same form as so received (with any necessary endorsement or assignment)
to be held as Collateral, or be applied as provided by this Section, as
determined by Bank and (b) the Grantors shall not adjust, settle or compromise
the amount or payment of any such Account, Contract, or other Collateral or
release wholly or partly any account debtor or obligor thereof, or allow any
discount thereon, other than any discount allowed for prompt
payment.

    

    (i) Assembly of
Collateral. Bank may require the Grantors to, and the Grantors hereby
agree that they will at their expense and upon the request of Bank forthwith,
assemble all or any part of the Collateral as directed by Bank and make it
available to Bank at a place to be designated by Bank that is reasonably
convenient to both Bank and the Grantors.

    

    (ii) Entering Premises.
Bank or its designated agents may enter, with or without judicial process, upon
any premises of the Grantors and take possession of all or any part of the
Collateral, and remove such Collateral to a location specified by
Bank.

    

    (iii) Use of Premises. Bank
shall have the right to enter and remain upon each and every location of the
Grantors without cost or charge to Bank, and use the same together with
materials, supplies, books and records of the Grantors for the purpose of
collecting and liquidating the Collateral, or for preparing for sale and
conducting the sale of the Collateral, whether by foreclosure, auction or
otherwise.

    

    (c) Sale or Other Disposition of
Collateral. Bank may, without notice, except as specified below, sell,
lease, license or otherwise dispose of and grant options to purchase, lease,
license or otherwise acquire, any or all of the Collateral in one or more
parcels at public or private sale or other disposition, for cash, on credit, for
future delivery or otherwise and upon such other terms, including price, as Bank
may deem commercially reasonable.

    
      
         

      

      
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    Notice of Sale or Other
Disposition of Collateral. The Grantors agree that, to the extent notice
of sale shall be required by law, at least ten (10) days notice to the Grantors
of the time and place of any public or private sale is to be made shall
constitute reasonable notification. Bank shall not be obligated to make any sale
of any or all of the Collateral after any notice of sale has been given. Bank
may adjourn any public or private sale from time to time by announcement at the
time and place fixed for such sale, and such sale may, without further notice,
be made at the time and to the place to which it was so adjourned.

    

    (d) Commercially Reasonable
Sale. The Grantors agree that it is not commercially unreasonable for
Bank (a) to restrict the prospective bidders on or purchasers of any of the
investment property to a limited number of sophisticated investors who will
represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or sale of any of such
investment property, (b) to fail to incur expenses reasonably deemed significant
by Bank to prepare Collateral for disposition or otherwise to fail to complete
raw material or work in process into finished goods or other finished products
for disposition, (c) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (d) to fail to
exercise collection remedies against account debtors or other persons obligated
on Collateral or to fail to remove liens or encumbrances on or any adverse
claims against Collateral, (e) to exercise collection remedies against account
debtors and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (f) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (g) to contact other
persons, whether or not in the same business as the Grantors, for expressions of
interest in acquiring all or any portion of the Collateral, (h) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (i) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (j) to dispose of assets
in wholesale rather than retail markets, (k) to disclaim disposition warranties,
including disclaimers of warranties of title, possession, quiet enjoyment and
the like, (l) to purchase insurance or credit enhancements to insure Bank
against risk of loss, collection or disposition of Collateral or to provide to
Bank a guaranteed return from the collection or disposition of Collateral, or
(m) to the extent deemed appropriate by Bank, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist Bank
in the collection or disposition of any of the Collateral. The Grantors agree
that the purpose of this Section is to provide non-exhaustive indications of
what actions or omissions by Bank would fulfill the duties of Bank under the UCC
of the State or any other relevant jurisdiction in the exercise by Bank of
remedies against the Collateral and that other actions or omissions by Bank
shall not be deemed to fail to fulfill such duties solely on account of not
being indicated in this Section. Without limitation upon the foregoing, nothing
contained in this Section shall be construed to grant any rights to the Grantors
or to impose any duties on Bank that would not have been granted or imposed by
this Security Agreement or by applicable law in the absence of this
Section.

    
      
         

      

      
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    Proceeds. If any of
the Collateral is sold by Bank upon credit or for future delivery, Bank shall
not be liable for the failure of the purchaser to purchase or pay for the same
and, in the event of any such failure, Bank may resell such Collateral. In no
event shall the Grantors be credited with any part of the proceeds of sale of
any Collateral until and to the extent cash payment in respect thereof has
actually been received by Bank. To the extent any of the Secured Obligations are
contingent, cash proceeds received by Bank in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral may, in the
discretion of Bank, be held by Bank as collateral for such contingent Secured
Obligations. Any cash held by Bank as Collateral and all cash proceeds received
by Bank in respect of any sale of, collection from, or other realization upon
all or any part of the Collateral may, in the discretion of Bank, be applied,
first, to pay all reasonable costs and expenses incurred by Bank in connection
with or incident to the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any and all of the Collateral,
second, to pay all reasonable attorney’s fees and legal expenses incurred by
Bank in connection with or incident to the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
and all of the Collateral, third, to pay all matured and unpaid Secured
Obligations, in whole or in part by Bank against, all or any part of the Secured
Obligations in such order as Bank shall elect, fourth, if and to the extent any
of the Secured Obligations are unmatured or contingent, to provide cash
collateral for all such Secured Obligations, and fifth, in accordance with
applicable law. If the proceeds of the sale of the Collateral are insufficient
to pay all of the Secured Obligations, the Grantors agree to pay upon demand any
deficiency to Bank.

    

    Bank
shall not by any act, delay, omission or otherwise be deemed to have waived any
of its rights or remedies under this Security Agreement. A waiver by Bank of any
right or remedy under this Security Agreement on any one occasion, shall not be
construed as a bar to or waiver of any such right or remedy which Bank would
have had on any future occasion nor shall Bank be liable for exercising or
failing to exercise any such right or remedy.

    

    Section
12. Appointment of
Bank Attorney-in-Fact. The Grantors hereby irrevocably appoint Bank
attorney-in-fact, with full authority in the place and stead of the Grantors and
in the name of the Grantors, Bank or otherwise (1) to take any and all action
and exercise all rights and remedies granted to Bank under this Security
Agreement and (2) execute any instrument which Bank may deem necessary or
advisable to accomplish the purpose of this Security Agreement.

    

    The
Grantors hereby ratify and approve all acts of Bank as their attorney in-fact
pursuant to this Section, and Bank, as their attorney in-fact, will not be
liable for any acts of commission or omission, nor for any error of judgment or
mistake of fact or law, other than those which result from Bank’s gross
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable so long as this Security Agreement remains in effect.

    

    Bank
agrees not to exercise its rights under this Section unless there is an
outstanding Event of Default.

    

    Section
13. Grantors Remain
Liable. In all events, including the exercise by Bank of any of the
rights under this Security Agreement, the Grantors remain liable to perform all
of their duties and obligations under the contracts and agreements included in
the Collateral to which

    
      
         

      

      
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    they are
a party to the same extent as if this Security Agreement had not been executed.
Bank shall not have any obligation or liability under any such contracts and
agreements by reason of this Security Agreement, nor shall Bank be obligated to
perform any of the obligations or duties of the Grantors under, or to take any
action to collect or enforce any claim or rights under, any such contract or
agreement.

    

    The
powers conferred on Bank under this Security Agreement are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the safe custody of any Collateral in its possession and
the accounting for moneys actually received by it under this Security Agreement,
Bank shall not have any duty as to any such Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any such Collateral.

    

    Section
14. Indemnity and
Expenses. The Grantors agree to indemnify Bank and each of its directors,
officers, employees, agents and affiliates from and against any and all claims,
losses and liabilities growing out of or resulting from this Security Agreement
or the transactions contemplated by this Security Agreement (including, without
limitation, enforcement of this Security Agreement), except claims, losses or
liabilities resulting from the gross negligence or willful misconduct of the
person to be indemnified. The Grantors will upon demand pay to Bank the amount
of any and all expenses, including the reasonable fees and out of pocket
disbursements of its counsel and of any experts and agents, which Bank may incur
in connection with (1) any amendment to this Security Agreement, (2) the
administration of this Security Agreement, (3) filing or recording fees incurred
with respect to or in connection with this Security Agreement, (4) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (5) the exercise or enforcement of any
of the rights of Bank under this Security Agreement, or (6) the failure by any
Grantor to perform or observe any of the provisions of this Security
Agreement.

    

    Section
15. Amendments.
No amendment or waiver of any provision of this Security Agreement nor consent
to any departure by any Grantor from this Security Agreement shall in any event
be effective unless the same shall be in writing and signed by Bank, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.

    

    Section
16. Addresses for
Notices. All notices and other communications provided for under this
Security Agreement shall be given in accordance with the terms of the Credit
Agreement.

    

    Section
17. Continuing
Security Interest, Transfer of Secured Obligations. Notwithstanding the
fact that there may be no Secured Obligations outstanding from time to time,
this Security Agreement shall create a continuing security interest in all of
the Collateral. This Security Agreement shall be binding upon the Grantors,
their successors and assigns, and inure to Bank and its successors, transferees
and assigns. No Grantor may transfer or assign its obligations under this
Security Agreement. Bank may assign or otherwise transfer all or a portion of
its rights or obligations with respect to the Secured Obligations to any other
party, and such other party shall then become vested with all the benefits in
respect of such transferred Secured

    
      
         

      

      
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    Obligations
and the security interest granted to Bank pursuant to this Security Agreement or
otherwise. The Grantors agree that Bank can provide information regarding the
Grantors to any prospective or actual successor, transferee or
assign.

    

    Section
18. Submission to
Jurisdiction. The Grantors hereby irrevocably submit to the jurisdiction
of any federal or state court sitting in the County of New York in the State of
New York over any action or proceeding arising out of or related to this
Security Agreement and agree with Bank that personal jurisdiction over the
Grantors rests with such courts for purposes of any action on or related to this
Security Agreement. The Grantors hereby waive personal service by manual
delivery and agree that service of process may be made by prepaid certified mail
directed to the Grantors at the address of the Grantors for notices under this
Security Agreement or at such other address as may be designated in writing by
the Grantors to Bank, and that upon mailing of such process such service will be
effective as if the Grantors were personally served. The Grantors agree that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any manner
provided by law. The Grantors further waive any objection to venue in any such
action or proceeding on the basis of inconvenient forum. The Grantors agree that
any action on or proceeding brought against Bank shall only be brought in such
courts.

    

    Section
19. Set-off.
The Grantors agree that, in addition to, and without limiting, any right of
setoff, banker’s lien or counterclaim Bank may otherwise have, Bank shall be
entitled, at its option and without notice to the Grantors after the occurrence
and continuance of an Event of Default, to offset balances (general or special,
time or demand, provisional or final) held by it for the account of the
Grantors, at any of the offices of Bank, in Dollars or any other currency,
against any amount payable by the Grantors to Bank under this Security Agreement
which is not paid when demanded (regardless of whether such balances are then
due to the Grantors).

    

    Section
20. Governing
Law. This Security Agreement shall be governed by and construed in
accordance with the laws of New York, except to the extent that the validity or
perfection of the security interest under this Security Agreement, or remedies
under this Security Agreement, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than New York.

    

    Section
21. Miscellaneous. This
Security Agreement is in addition to and not in limitation of any other rights
and remedies Bank may have by virtue of any other instrument or agreement
heretofore, contemporaneously herewith or hereafter executed by the Grantors or
by law or otherwise. If any provision of this Security Agreement is contrary to
applicable law, such provision shall be deemed ineffective without invalidating
the remaining provisions of this Security Agreement. The headings in this
Security Agreement are for convenience of reference only, and shall not affect
the interpretation or construction of this Security Agreement.

    

    Section
22. WAIVER OF JURY
TRIAL. THE GRANTORS AND BANK EXPRESSLY WAIVE ANY AND EVERY RIGHT TO A
TRIAL BY JURY IN ANY ACTION ON OR RELATED TO THIS SECURITY
AGREEMENT.

    

    
      
         

      

      
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OF PAGE INTENTIONALLY LEFT BLANK]

    
      
         

      

      
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    IN
WITNESS WHEREOF, the Grantors have caused this Security Agreement to be duly
executed and delivered as of the date of this Security Agreement.

    

    ORBIT
INTERNATIONAL CORP.

    

    By:
________________________________

    Name:
Mitchell Binder

    Title:  Chief
Financial Officer

    

    BEHLMAN
ELECTRONICS, INC.

    

    By:
________________________________

    Name:
Mitchell Binder

    Title:  Chief
Financial Officer

    

    TULIP
DEVELOPMENT LABORATORY, INC.

    

    By:
________________________________

    Name:
Mitchell Binder

    Title:  Chief
Financial Officer

    

    INTEGRATED
CONSULTING SERVICES, INC.

    

    By:
________________________________

    Name:
Mitchell Binder

    Title:
Chief Financial Officer

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