Exhibit 10.3
April 24, 2009
Environmental Tectonics Corporation
125 James Way
Southampton, PA 18966
Attention: Duane Deaner
H.F. Lenfest
300 Barr Harbor Drive, Suite 460
Conshohocken, PA 19428

Re:   Committed Line of Credit to Environmental Tectonics Corporation (the
“Borrower”)

Dear Mssrs. Deaner and Lenfest:
     You have requested that PNC Bank, National Association (“Bank”) increase
the Borrower’s existing revolving line of credit (the “Line of Credit”) to
$20,000,000, pursuant to the terms and conditions of a certain letter agreement
between Bank and Borrower, an Amended and Restated Line of Credit Note by
Borrower in favor of Bank, a Second Amended and Restated Reimbursement Agreement
by Borrower in favor of Bank, an Amended and Restated Guaranty by H.F. Lenfest
(“Guarantor”) in favor of Bank, a Pledge Agreement by Guarantor in favor of
Bank, and a Notification and Control Agreement among Guarantor, Bank, and the
custodian of the securities account identified in the Pledge Agreement
(collectively, the “Amended Loan Documents”). The Amended Loan Documents would
replace the various loan documents evidencing and securing the existing Line of
Credit. This letter confirms that the definitive forms of Amended Loan Documents
are attached, and that the Bank will execute and deliver the attached Amended
Loan Documents, and increase the Line of Credit, upon the simultaneous execution
and delivery thereof by the other parties thereto, together with evidence
satisfactory to the Bank of the due authorization by the Borrower of the Amended
Loan Documents.
     This agreement shall continue from the date hereof to August 6, 2009,
following which the Bank’s commitment to execute and deliver the attached
Amended Loan Documents on satisfaction of the condition set forth above will
terminate and the Bank will have no liability or further obligation. The
Borrower agrees that it will reimburse all the Bank’s fees and expenses,
including the fees of Bank’s counsel, incurred in connection with preparation of
the Amended Loan Documents, and that such reimbursement shall be payable by the
Borrower whether or not the Amended Loan Documents are executed and delivered by
the parties thereto.

 

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Environmental Tectonics Corporation
H.F. Lenfest
April 24, 2009
Page 2
     Please indicate your acceptance of this agreement by signing and returning
the enclosed copy of this letter.

            Sincerely,

PNC BANK, NATIONAL ASSOCIATION
      By:   /s/ John DiNapoli        John DiNapoli        Senior Vice President 
   

Agreed and accepted with the intent to be legally bound:

          ENVIRONMENTAL TECTONICS CORPORATION
      By:   /s/ Duane D. Deanes       Name:   Duane D. Deanes       Title:   CFO
      Date:   April 24, 2009      

H.F. Lenfest
H.F. LENFEST

       
Date:
  April 24, 2009  

 

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Amended and Restated Committed
Line Of Credit Note
  (PNC BANK LOGO) [w73712w7371201.gif]

      $20,000,000                       , 2009

FOR VALUE RECEIVED, ENVIRONMENTAL TECTONICS CORPORATION (the “Borrower”), with
an address at 125 James Way, Southampton, PA 18966, promises to pay to the order
of PNC BANK, NATIONAL ASSOCIATION (the “Bank”), in lawful money of the United
States of America in immediately available funds at its offices located at 1000
Westlakes Drive, Suite 200, Berwyn, PA 19312 or at such other location as the
Bank may designate from time to time, the principal sum of TWENTY MILLION
DOLLARS ($20,000,000) (the “Facility”) or such lesser amount as may be advanced
to or for the benefit of the Borrower hereunder, together with interest accruing
on the outstanding principal balance from the date hereof, all as provided
below.
1. Advances. The Borrower may request advances, repay and request additional
advances hereunder until the Expiration Date, subject to the terms and
conditions of this Note and the Loan Documents (as hereinafter defined). The
“Expiration Date” shall mean June 30, 2010, or such later date as may be
designated by the Bank by written notice from the Bank to the Borrower. The
Borrower acknowledges and agrees that in no event will the Bank be under any
obligation to extend or renew the Facility or this Note beyond the Expiration
Date. The Borrower may request advances hereunder upon giving oral or written
notice to the Bank by 11:00 a.m. (Philadelphia, Pennsylvania time) (a) on the
day of the proposed advance, in the case of advances to bear interest under the
Base Rate Option (as hereinafter defined) and (b) three (3) Business Days prior
to the proposed advance, in the case of advances to bear interest under the
LIBOR Option (as hereinafter defined), followed promptly thereafter by the
Borrower’s written confirmation to the Bank of any oral notice. The aggregate
unpaid principal amount of advances under this Note shall not exceed the face
amount of this Note.
2. Rate of Interest. Each advance outstanding under this Note will bear interest
at a rate or rates per annum as may be selected by the Borrower from the
interest rate options set forth below (each, an “Option”):
     (i) Base Rate Option. A rate of interest per annum which is at all times
equal to (A) the Base Rate plus (B) fifty (50) basis points (0.50%). If and when
the Base Rate (or any component thereof) changes, the rate of interest with
respect to any advance to which the Base Rate Option applies will change
automatically without notice to the Borrower, effective on the date of any such
change. There are no required minimum interest periods for advances bearing
interest under the Base Rate Option.
     (ii) LIBOR Option. A rate per annum equal to (A) LIBOR plus (B) two hundred
fifty (250) basis points (2.50%), for the applicable LIBOR Interest Period.
     For purposes hereof, the following terms shall have the following meanings:
“Base Rate” shall mean the highest of (A) the Prime Rate, (B) the sum of the
Federal Funds Open Rate plus fifty (50) basis points (0.50%), and (C) the sum of
the Daily LIBOR Rate plus one hundred (100) basis points (1.0%), so long as a
Daily LIBOR Rate is offered, ascertainable and not unlawful.

 

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“Business Day” shall mean any day other than a Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in Philadelphia, Pennsylvania.
“Daily LIBOR Rate” shall mean, for any day, the rate per annum determined by the
Bank by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the
LIBOR Reserve Percentage.
“Federal Funds Open Rate” shall mean, for any day, the rate per annum (based on
a year of 360 days and actual days elapsed) which is the daily federal funds
open rate as quoted by ICAP North America, Inc. (or any successor) as set forth
on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on
such other substitute Bloomberg Screen that displays such rate), or as set forth
on such other recognized electronic source used for the purpose of displaying
such rate as selected by the Bank (an “Alternate Source”) (or if such rate for
such day does not appear on the Bloomberg Screen BTMM (or any substitute screen)
or on any Alternate Source, or if there shall at any time, for any reason, no
longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate
Source, a comparable replacement rate determined by the Bank at such time (which
determination shall be conclusive absent manifest error); provided however, that
if such day is not a Business Day, the Federal Funds Open Rate for such day
shall be the “open” rate on the immediately preceding Business Day. The rate of
interest charged shall be adjusted as of each Business Day based on changes in
the Federal Funds Open Rate without notice to the Borrower.
“LIBOR” shall mean, with respect to any advance to which the LIBOR Option
applies for the applicable LIBOR Interest Period, the interest rate per annum
determined by the Bank by dividing (the resulting quotient rounded upwards, at
the Bank’s discretion, to the nearest 1/100th of 1%) (i) the rate of interest
determined by the Bank in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the eurodollar
rate two (2) Business Days prior to the first day of such LIBOR Interest Period
for an amount comparable to such advance and having a borrowing date and a
maturity comparable to such LIBOR Interest Period by (ii) a number equal to 1.00
minus the LIBOR Reserve Percentage.
“LIBOR Interest Period” shall mean, as to any advance to which the LIBOR Option
applies, the period of one (1), two (2), three (3) or six (6) months as selected
by the Borrower in its notice of borrowing or notice of conversion, as the case
may be, commencing on the date of disbursement of an advance (or the date of
conversion of an advance to the LIBOR Option, as the case may be) and each
successive period selected by the Borrower thereafter; provided that, (i) if a
LIBOR Interest Period would end on a day which is not a Business Day, it shall
end on the next succeeding Business Day unless such day falls in the next
succeeding calendar month in which case the LIBOR Interest Period shall end on
the next preceding Business Day, (ii) the Borrower may not select a LIBOR
Interest Period that would end on a day after the Expiration Date, and (iii) any
LIBOR Interest Period that begins on the last Business Day of a calendar month
(or a day for which there is no numerically corresponding day in the last
calendar month of such LIBOR Interest Period) shall end on the last Business Day
of the last calendar month of such LIBOR Interest Period.
“LIBOR Reserve Percentage” shall mean the maximum effective percentage in effect
on such day as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the reserve requirements (including,
without limitation, supplemental, marginal

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and emergency reserve requirements) with respect to eurocurrency funding
(currently referred to as “Eurocurrency liabilities”).
“Prime Rate” shall mean the rate publicly announced by the Bank from time to
time as its prime rate. The Prime Rate is determined from time to time by the
Bank as a means of pricing some loans to its borrowers. The Prime Rate is not
tied to any external rate of interest or index, and does not necessarily reflect
the lowest rate of interest actually charged by the Bank to any particular class
or category of customers.
“Published Rate” shall mean the rate of interest published each Business Day in
the Wall Street Journal “Money Rates” listing under the caption “London
Interbank Offered Rates” for a one month period (or, if no such rate is
published therein for any reason, then the Published Rate shall be the
eurodollar rate for a one month period as published in another publication
selected by the Bank).
LIBOR and the Daily LIBOR Rate shall be adjusted with respect to any advance to
which the LIBOR Option or Base Rate Option applies, as applicable, on and as of
the effective date of any change in the LIBOR Reserve Percentage. The Bank shall
give prompt notice to the Borrower of LIBOR or the Daily LIBOR Rate as
determined or adjusted in accordance herewith, which determination shall be
conclusive absent manifest error.
If the Bank determines (which determination shall be final and conclusive) that,
by reason of circumstances affecting the eurodollar market generally, deposits
in dollars (in the applicable amounts) are not being offered to banks in the
eurodollar market for the selected term, or adequate means do not exist for
ascertaining LIBOR, then the Bank shall give notice thereof to the Borrower.
Thereafter, until the Bank notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (a) the availability of the LIBOR
Option shall be suspended, and (b) the interest rate for all advances then
bearing interest under the LIBOR Option shall be converted at the expiration of
the then current LIBOR Interest Period(s) to the Base Rate Option.
In addition, if, after the date of this Note, the Bank shall determine (which
determination shall be final and conclusive) that any enactment, promulgation or
adoption of or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by a governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any guideline, request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for the
Bank to make or maintain or fund loans based on LIBOR, the Bank shall notify the
Borrower. Upon receipt of such notice, until the Bank notifies the Borrower that
the circumstances giving rise to such determination no longer apply, (a) the
availability of the LIBOR Option shall be suspended, and (b) the interest rate
on all advances then bearing interest under the LIBOR Option shall be converted
to the Base Rate Option either (i) on the last day of the then current LIBOR
Interest Period(s) if the Bank may lawfully continue to maintain advances based
on LIBOR to such day, or (ii) immediately if the Bank may not lawfully continue
to maintain advances based on LIBOR.
The foregoing notwithstanding, it is understood that the Borrower may select
different Options to apply simultaneously to different portions of the advances
and may select up to four (4) different interest periods to apply simultaneously
to different portions of the advances bearing interest under the LIBOR Option.
Interest hereunder will be calculated based on the actual number of days that
principal is outstanding over a year of 360 days. In no event will the rate of
interest hereunder exceed the maximum rate allowed by law.

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3. Interest Rate Election. Subject to the terms and conditions of this Note, at
the end of each interest period applicable to any advance, the Borrower may
renew the Option applicable to such advance or convert such advance to a
different Option; provided that, during any period in which any Event of Default
(as hereinafter defined) has occurred and is continuing, any advances bearing
interest under the LIBOR Option shall, at the Bank’s sole discretion, be
converted at the end of the applicable LIBOR Interest Period to the Base Rate
Option and the LIBOR Option will not be available to Borrower with respect to
any new advances (or with respect to the conversion or renewal of any existing
advances) until such Event of Default has been cured by the Borrower or waived
by the Bank. The Borrower shall notify the Bank of each election of an Option,
each conversion from one Option to another, the amount of the advances then
outstanding to be allocated to each Option and where relevant the interest
periods therefor. In the case of converting to the LIBOR Option, such notice
shall be given at least three (3) Business Days prior to the commencement of any
LIBOR Interest Period. If no interest period is specified in any such notice for
which the resulting advance is to bear interest under the LIBOR Option, the
Borrower shall be deemed to have selected a LIBOR Interest Period of one month’s
duration. If no notice of election, conversion or renewal is timely received by
the Bank with respect to any advance, the Borrower shall be deemed to have
elected the Base Rate Option. Any such election shall be promptly confirmed in
writing by such method as the Bank may require.
4. Advance Procedures. A request for advance made by telephone must be promptly
confirmed in writing by such method as the Bank may require. The Borrower
authorizes the Bank to accept telephonic requests for advances, and the Bank
shall be entitled to rely upon the authority of any person providing such
instructions. The Borrower hereby indemnifies and holds the Bank harmless from
and against any and all damages, losses, liabilities, costs and expenses
(including reasonable attorneys’ fees and expenses) which may arise or be
created by the acceptance of such telephone requests or making such advances.
The Bank will enter on its books and records, which entry when made will be
presumed correct, the date and amount of each advance, the interest rate and
interest period applicable thereto, as well as the date and amount of each
payment.
5. Payment Terms. The Borrower shall pay accrued interest on the unpaid
principal balance of this Note in arrears: (a) for the portion of advances
bearing interest under the Base Rate Option, on the first day of each month
during the term hereof, (b) for the portion of advances bearing interest under
the LIBOR Option, on the last day of the respective LIBOR Interest Period for
such advance, (c) if any LIBOR Interest Period is longer than three (3) months,
then also on the three (3) month anniversary of such interest period and every
three (3) months thereafter, and (d) for all advances, at maturity, whether by
acceleration of this Note or otherwise, and after maturity, on demand until paid
in full. All outstanding principal and accrued interest hereunder shall be due
and payable in full on the Expiration Date.
If any payment under this Note shall become due on a Saturday, Sunday or public
holiday under the laws of the State where the Bank’s office indicated above is
located, such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in computing interest in connection with
such payment. The Borrower hereby authorizes the Bank to charge the Borrower’s
deposit account at the Bank for any payment when due hereunder. Payments
received will be applied to charges, fees and expenses (including attorneys’
fees), accrued interest and principal in any order the Bank may choose, in its
sole discretion.
6. Late Payments; Default Rate. If the Borrower fails to make any payment of
principal, interest or other amount coming due pursuant to the provisions of
this Note within fifteen (15) calendar days of the date due and payable, the
Borrower also shall pay to the Bank a late charge equal to the lesser of five
percent (5%) of the amount of such payment or $100.00 (the “Late Charge”). Such
fifteen (15) day period shall not be construed in any way to extend the due date
of any such payment. Upon maturity, whether by acceleration, demand or
otherwise, and at the Bank’s option upon the occurrence of any Event of Default
(as hereinafter defined) and during the continuance thereof, each advance
outstanding under

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this Note shall bear interest at a rate per annum (based on the actual number of
days that principal is outstanding over a year of 360 days) which shall be three
percentage points (3%) in excess of the interest rate in effect from time to
time under this Note but not more than the maximum rate allowed by law (the
“Default Rate”). The Default Rate shall continue to apply whether or not
judgment shall be entered on this Note. Both the Late Charge and the Default
Rate are imposed as liquidated damages for the purposes of defraying the Bank’s
expenses incident to the handling of delinquent payments, but are in addition
to, and not in lieu of, the Bank’s exercise of any rights and remedies
hereunder, under the other Loan Documents or under applicable law, and any fees
and expenses of any agents or attorneys which the Bank may employ. In addition,
the Default Rate reflects the increased credit risk to the Bank of carrying a
loan that is in default. The Borrower agrees that the Late Charge and Default
Rate are reasonable forecasts of just compensation for anticipated and actual
harm incurred by the Bank, and that the actual harm incurred by the Bank cannot
be estimated with certainty and without difficulty.
7. Prepayment. The Borrower shall have the right to prepay any advance hereunder
at any time and from time to time, in whole or in part; subject, however, to
payment of any break funding indemnification amounts owing pursuant to paragraph
8 below.
8. Yield Protection; Break Funding Indemnification. The Borrower shall pay to
the Bank on written demand therefor, together with the written evidence of the
justification therefor, all direct costs incurred, losses suffered or payments
made by Bank by reason of any change in law or regulation or its interpretation
imposing any reserve, deposit, allocation of capital, or similar requirement
(including without limitation, Regulation D of the Board of Governors of the
Federal Reserve System) on the Bank, its holding company or any of their
respective assets. In addition, the Borrower agrees to indemnify the Bank
against any liabilities, losses or expenses (including, without limitation, loss
of margin, any loss or expense sustained or incurred in liquidating or employing
deposits from third parties, and any loss or expense incurred in connection with
funds acquired to effect, fund or maintain any advance (or any part thereof)
bearing interest under the LIBOR Option which the Bank sustains or incurs as a
consequence of either (i) the Borrower’s failure to make a payment on the due
date thereof, (ii) the Borrower’s revocation (expressly, by later inconsistent
notices or otherwise) in whole or in part of any notice given to Bank to
request, convert, renew or prepay any advance bearing interest under the LIBOR
Option, or (iii) the Borrower’s payment or prepayment (whether voluntary, after
acceleration of the maturity of this Note or otherwise) or conversion of any
advance bearing interest under the LIBOR Option on a day other than the last day
of the applicable LIBOR Interest Period. A notice as to any amounts payable
pursuant to this paragraph given to the Borrower by the Bank shall, in the
absence of manifest error, be conclusive and shall be payable upon demand. The
Borrower’s indemnification obligations hereunder shall survive the payment in
full of the advances and all other amounts payable hereunder.
9. Other Loan Documents. This Note is issued in connection with a letter
agreement or loan agreement between the Borrower and the Bank, dated on or
before the date hereof, and the other agreements and documents executed and/or
delivered in connection therewith or referred to therein, the terms of which are
incorporated herein by reference (as amended, modified or renewed from time to
time, collectively the “Loan Documents”), and is secured by the property (if
any) described in the Loan Documents and by such other collateral as previously
may have been or may in the future be granted to the Bank to secure this Note.
10. Events of Default. The occurrence of any of the following events will be
deemed to be an “Event of Default” under this Note: (i) the nonpayment of any
principal when due, or the nonpayment of any interest or other indebtedness
under this Note within three days of when due; (ii) the occurrence of any event
of default or any default and the lapse of any notice or cure period, or any
Obligor’s failure to observe or perform any covenant or other agreement, under
or contained in any Loan Document or any other document now or in the future
evidencing or securing any debt, liability or obligation of any Obligor to the
Bank; (iii) the filing by or against any Obligor of any proceeding in
bankruptcy,

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receivership, insolvency, reorganization, liquidation, conservatorship or
similar proceeding (and, in the case of any such proceeding instituted against
any Obligor, such proceeding is not dismissed or stayed within 30 days of the
commencement thereof, provided that the Bank shall not be obligated to advance
additional funds hereunder during such period); (iv) any assignment by any
Obligor for the benefit of creditors, or any levy, garnishment, attachment or
similar proceeding is instituted against any property of any Obligor held by or
deposited with the Bank; (v) a default with respect to any other indebtedness of
any Obligor for borrowed money, if the effect of such default is to cause or
permit the acceleration of such debt; (vi) the commencement of any foreclosure
or forfeiture proceeding, execution or attachment against any collateral
securing the obligations of any Obligor to the Bank; (vii) the entry of a final
judgment against any Obligor and the failure of such Obligor to discharge the
judgment within ten (10) days of the entry thereof; (viii) any material adverse
change in any Obligor’s business, assets, operations, financial condition or
results of operations; (ix) any Obligor ceases doing business as a going
concern; (x) any representation or warranty made by any Obligor to the Bank in
any Loan Document or any other documents now or in the future evidencing or
securing the obligations of any Obligor to the Bank, is false, erroneous or
misleading in any material respect; (xi) the revocation or attempted revocation,
in whole or in part, of any guarantee by any Obligor; or (xii) the death,
incarceration, indictment or legal incompetency of any individual Obligor or, if
any Obligor is a partnership or limited liability company, the death,
incarceration, indictment or legal incompetency of any individual general
partner or member. As used herein, the term “Obligor” means any Borrower and any
guarantor of, or any pledgor, mortgagor or other person or entity providing
collateral support for, the Borrower’s obligations to the Bank existing on the
date of this Note or arising in the future.
Upon the occurrence of an Event of Default: (a) the Bank shall be under no
further obligation to make advances hereunder; (b) if an Event of Default
specified in clause (iii) or (iv) above shall occur, the outstanding principal
balance and accrued interest hereunder together with any additional amounts
payable hereunder shall be immediately due and payable without demand or notice
of any kind; (c) if any other Event of Default shall occur, the outstanding
principal balance and accrued interest hereunder together with any additional
amounts payable hereunder, at the Bank’s option and without demand or notice of
any kind, may be accelerated and become immediately due and payable; (d) at the
Bank’s option, this Note will bear interest at the Default Rate from the date of
the occurrence of the Event of Default; and (e) the Bank may exercise from time
to time any of the rights and remedies available under the Loan Documents or
under applicable law.
11. Power to Confess Judgment. The Borrower hereby empowers any attorney of any
court of record, after the occurrence of any Event of Default hereunder, to
appear for the Borrower and, with or without complaint filed, confess judgment,
or a series of judgments, against the Borrower in favor of the Bank or any
holder hereof for the entire principal balance of this Note, all accrued
interest and all other amounts due hereunder, together with costs of suit and an
attorney’s commission of the greater of 10% of such principal and interest or
$1,000 added as a reasonable attorney’s fee, and for doing so, this Note or a
copy verified by affidavit shall be a sufficient warrant. The Borrower hereby
forever waives and releases all errors in said proceedings and all rights of
appeal and all relief from any and all appraisement, stay or exemption laws of
any state now in force or hereafter enacted. Interest on any such judgment shall
accrue at the Default Rate.
No single exercise of the foregoing power to confess judgment, or a series of
judgments, shall be deemed to exhaust the power, whether or not any such
exercise shall be held by any court to be invalid, voidable, or void, but the
power shall continue undiminished and it may be exercised from time to time as
often as the Bank shall elect until such time as the Bank shall have received
payment in full of the debt, interest and costs. Notwithstanding the attorney’s
commission provided for in the preceding paragraph (which is included in the
warrant for purposes of establishing a sum certain), the amount of attorneys’
fees that the Bank may recover from the Borrower shall not exceed the actual
attorneys’ fees incurred by the Bank.

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12. Right of Setoff. In addition to all liens upon and rights of setoff against
the Borrower’s money, securities or other property given to the Bank by law, the
Bank shall have, with respect to the Borrower’s obligations to the Bank under
this Note and to the extent permitted by law, a contractual possessory security
interest in and a contractual right of setoff against, and the Borrower hereby
grants the Bank a security interest in, and hereby assigns, conveys, delivers,
pledges and transfers to the Bank, all of the Borrower’s right, title and
interest in and to, all of the Borrower’s deposits, moneys, securities and other
property now or hereafter in the possession of or on deposit with, or in transit
to, the Bank or any other direct or indirect subsidiary of The PNC Financial
Services Group, Inc., whether held in a general or special account or deposit,
whether held jointly with someone else, or whether held for safekeeping or
otherwise, excluding, however, all IRA, Keogh, and trust accounts. Every such
security interest and right of setoff may be exercised without demand upon or
notice to the Borrower. Every such right of setoff shall be deemed to have been
exercised immediately upon the occurrence of an Event of Default hereunder
without any action of the Bank, although the Bank may enter such setoff on its
books and records at a later time.
13. Indemnity. The Borrower agrees to indemnify each of the Bank, each legal
entity, if any, who controls, is controlled by or is under common control with
the Bank, and each of their respective directors, officers and employees (the
“Indemnified Parties”), and to hold each Indemnified Party harmless from and
against any and all claims, damages, losses, liabilities and expenses (including
all fees and charges of internal or external counsel with whom any Indemnified
Party may consult and all expenses of litigation and preparation therefor) which
any Indemnified Party may incur or which may be asserted against any Indemnified
Party by any person, entity or governmental authority (including any person or
entity claiming derivatively on behalf of the Borrower), in connection with or
arising out of or relating to the matters referred to in this Note or in the
other Loan Documents or the use of any advance hereunder, whether (a) arising
from or incurred in connection with any breach of a representation, warranty or
covenant by the Borrower, or (b) arising out of or resulting from any suit,
action, claim, proceeding or governmental investigation, pending or threatened,
whether based on statute, regulation or order, or tort, or contract or
otherwise, before any court or governmental authority; provided, however, that
the foregoing indemnity agreement shall not apply to any claims, damages,
losses, liabilities and expenses solely attributable to an Indemnified Party’s
gross negligence or willful misconduct. The indemnity agreement contained in
this Section shall survive the termination of this Note, payment of any advance
hereunder and the assignment of any rights hereunder. The Borrower may
participate at its expense in the defense of any such action or claim.
14. Miscellaneous. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder (“Notices”) must be in writing
(except as may be agreed otherwise above with respect to borrowing requests) and
will be effective upon receipt. Notices may be given in any manner to which the
parties may separately agree, including electronic mail. Without limiting the
foregoing, first-class mail, facsimile transmission and commercial courier
service are hereby agreed to as acceptable methods for giving Notices.
Regardless of the manner in which provided, Notices may be sent to a party’s
address as set forth above or to such other address as any party may give to the
other for such purpose in accordance with this paragraph. No delay or omission
on the Bank’s part to exercise any right or power arising hereunder will impair
any such right or power or be considered a waiver of any such right or power,
nor will the Bank’s action or inaction impair any such right or power. The
Bank’s rights and remedies hereunder are cumulative and not exclusive of any
other rights or remedies which the Bank may have under other agreements, at law
or in equity. No modification, amendment or waiver of, or consent to any
departure by the Borrower from, any provision of this Note will be effective
unless made in a writing signed by the Bank, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. The Borrower agrees to pay on demand, to the extent permitted by law, all
costs and expenses incurred by the Bank in the enforcement of its rights in this
Note and in any security therefor, including without limitation reasonable fees
and expenses of the Bank’s counsel. If any provision of this Note is found to be
invalid, illegal or unenforceable in any respect by a

7

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court, all the other provisions of this Note will remain in full force and
effect. The Borrower and all other makers and indorsers of this Note hereby
forever waive presentment, protest, notice of dishonor and notice of
non-payment. The Borrower also waives all defenses based on suretyship or
impairment of collateral. If this Note is executed by more than one Borrower,
the obligations of such persons or entities hereunder will be joint and several.
This Note shall bind the Borrower and its heirs, executors, administrators,
successors and assigns, and the benefits hereof shall inure to the benefit of
the Bank and its successors and assigns; provided, however, that the Borrower
may not assign this Note in whole or in part without the Bank’s written consent
and the Bank at any time may assign this Note in whole or in part.
This Note has been delivered to and accepted by the Bank and will be deemed to
be made in the State where the Bank’s office indicated above is located. This
Note will be interpreted and the rights and liabilities of the Bank and the
Borrower determined in accordance with the laws of the State where the Bank’s
office indicated above is located, excluding its conflict of laws rules. The
Borrower hereby irrevocably consents to the exclusive jurisdiction of any state
or federal court in the county or judicial district where the Bank’s office
indicated above is located; provided that nothing contained in this Note will
prevent the Bank from bringing any action, enforcing any award or judgment or
exercising any rights against the Borrower individually, against any security or
against any property of the Borrower within any other county, state or other
foreign or domestic jurisdiction. The Borrower acknowledges and agrees that the
venue provided above is the most convenient forum for both the Bank and the
Borrower. The Borrower waives any objection to venue and any objection based on
a more convenient forum in any action instituted under this Note.
15. Authorization to Obtain Credit Reports. By signing below, each Borrower who
is an individual provides written authorization to the Bank or its designee (and
any assignee or potential assignee hereof) to obtain the Borrower’s personal
credit profile from one or more national credit bureaus. Such authorization
shall extend to obtaining a credit profile in considering this Note and
subsequently for the purposes of update, renewal or extension of such credit or
additional credit and for reviewing or collecting the resulting account.
16. WAIVER OF JURY TRIAL. The Borrower irrevocably waives any and all rights the
Borrower may have to a trial by jury in any action, proceeding or claim of any
nature relating to this Note, any documents executed in connection with this
Note or any transaction contemplated in any of such documents. The Borrower
acknowledges that the foregoing waiver is knowing and voluntary.
17. Amendment and Restatement. This Note amends and restates, and is in
substitution for, that certain Committed Line of Credit Note in the original
principal amount of $15,000,000 payable to the order of the Bank and dated
July 31, 2007 (the “Existing Note”). However, without duplication, this Note
shall in no way extinguish, cancel or satisfy Borrower’s unconditional
obligation to repay all indebtedness evidenced by the Existing Note or
constitute a novation of the Existing Note.
The Borrower acknowledges that it has read and understood all the provisions of
this Note, including the confession of judgment and the waiver of jury trial,
and has been advised by counsel as necessary or appropriate.

8

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WITNESS the due execution hereof as a document under seal, as of the date first
written above, with the intent to be legally bound hereby.

            ENVIRONMENTAL TECTONICS CORPORATION
      By:           (SEAL)        Print Name:           Title: 
 

 

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Disclosure for Confession of Judgment

     
Undersigned:
  Environmental Tectonics Corporation
125 James Way
Southampton, PA 18966
 
   
Lender:
  PNC Bank, National Association
1000 Westlakes Drive, Suite 200
Berwyn, PA 19312

The undersigned has executed, and/or is executing, on or about the date hereof,
a Committed Line of Credit Note in the principal amount of $20,000,000, under
which the undersigned is obligated to repay monies to Lender.
     A. The undersigned acknowledges and agrees that the above documents contain
provisions under which Lender may enter judgment by confession against the
undersigned. Being fully aware of its rights to prior notice and a hearing on
the validity of any judgment or other claims that may be asserted against it by
Lender thereunder before judgment is entered, the undersigned hereby freely,
knowingly and intelligently waives these rights and expressly agrees and
consents to Lender’s entering judgment against it by confession pursuant to the
terms thereof.
     B. The undersigned also acknowledges and agrees that the above documents
contain provisions under which Lender may, after entry of judgment and without
either notice or a hearing, foreclose upon, attach, levy, take possession of or
otherwise seize property of the undersigned in full or partial payment of the
judgment. Being fully aware of its rights after judgment is entered (including
the right to move to open or strike the judgment), the undersigned hereby
freely, knowingly and intelligently waives its rights to notice and a hearing
and expressly agrees and consents to Lender’s taking such actions as may be
permitted under applicable state and federal law without prior notice to the
undersigned.
     C. The undersigned certifies that a representative of Lender specifically
called the confession of judgment provisions in the above documents to the
attention of the undersigned, and/or that the undersigned was represented by
legal counsel in connection with the above documents.
     D. The undersigned hereby certifies: that its annual revenues exceed
$10,000; that all references to “the undersigned” above refer to all persons and
entities signing below; and that the undersigned received a copy hereof at the
time of signing.

          Dated:                     , 2009  ENVIRONMENTAL TECTONICS CORPORATION
      By:           (SEAL)        Print Name:           Title: 
 

 

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_______________ ___, 2009

Environmental Tectonics Corporation
125 James Way
Southampton, PA 18966
Attention: Duane Deaner
Re:   $20,000,000 Committed Line of Credit
Dear Duane:
     We are pleased to inform you that PNC Bank, National Association (the
“Bank”) has approved your request for a committed line of credit to
Environmental Tectonics Corporation (the “Borrower”). This letter agreement
amends, restates and replaces (but does not constitute a novation of) the
existing Letter Agreement dated July 31, 2007 between the Bank and the Borrower
(as heretofore amended, the “Existing Loan Agreement”).
          1. Facility and Use of Proceeds. This is a committed revolving line of
credit under which the Borrower may request and the Bank, subject to the terms
and conditions of this letter, will make advances to the Borrower from time to
time until the Expiration Date, in an amount in the aggregate at any time
outstanding not to exceed $20,000,000 (the “Line of Credit” or the “Loan”). The
“Expiration Date” means June 30, 2010, or such later date as may be designated
by the Bank by written notice to the Borrower. Advances under the Line of Credit
will be used for working capital or other general business purposes of the
Borrower.
     The Borrower may request that the Bank, in lieu of cash advances, issue
standby letters of credit (individually, each a “Letter of Credit” and
collectively the “Letters of Credit”) having expiration dates not later than one
year after the Expiration Date. The existing Letters of Credit heretofore issued
by the Bank and listed on Schedule I (the “Existing Letters of Credit”) hereto
shall constitute Letters of Credit for all purposes hereunder. The availability
of advances under the Line of Credit shall be reduced by the face amount of each
Letter of Credit issued and outstanding (whether or not drawn). Each payment by
the Bank under a Letter of Credit shall in Bank’s discretion constitute an
advance of principal under the Line of Credit and shall be evidenced by the Note
(as defined below). The Letters of Credit shall be governed by the terms of this
letter and by a reimbursement agreement, in form and content satisfactory to the
Bank, executed by the Borrower in favor of the Bank (the “Reimbursement
Agreement”). Each request for the issuance of a Letter of Credit must be
accompanied by the Borrower’s execution of an application on the Bank’s standard
forms (each, an “Application”), together with all supporting documentation. Each
Letter of Credit will be issued in the Bank’s sole discretion and in a form
acceptable to the Bank. The Borrower shall pay to the Bank fees on the face
amount of each Letter of Credit for the period from and excluding the date of
issuance of same to and including the date of expiration or termination, equal
to the average daily face amount of each outstanding Letter of Credit
(including, effective as of the date hereof, Existing Letters of Credit)
multiplied by 2.50% per annum, such fees to be calculated on the basis of a
360-day year for the actual number of days elapsed and to be payable quarterly
in arrears on the first day of each fiscal quarter and on the Expiration Date,
provided that in no event shall such fees for any Letter

 

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Environmental Tectonics Corporation
March ___, 2009
Page 2
of Credit be less than the standard minimum amount charged for letters of credit
issued by the Bank from time to time for its customers, together with such other
customary issuance fees, commissions and expenses therefor as shall be required
by the Bank. This letter is not a pre-advice for the issuance of a letter of
credit and is not irrevocable.
          2. Note. The obligation of the Borrower to repay advances under the
Line of Credit shall be evidenced by a promissory note (the “Note”) in form and
content satisfactory to the Bank. This letter (the “Letter Agreement”), the
Note, the Reimbursement Agreement, the Guaranty, the Pledge Agreement and the
other agreements and documents executed and/or delivered pursuant hereto, as
each may be amended, modified, extended or renewed from time to time, will
constitute the “Loan Documents.” Capitalized terms not defined herein shall have
the meaning ascribed to them in the Loan Documents.
          3. Interest Rate. Interest on the unpaid balance of the Line of Credit
advances will be charged at the rates, and be payable on the dates and times,
set forth in the Note.
          4. Repayment. Subject to the terms and conditions of this Letter
Agreement, the Borrower may borrow, repay and reborrow under the Line of Credit
until the Expiration Date, on which date the outstanding principal balance and
any accrued but unpaid interest shall be due and payable. Interest will be due
and payable as set forth in the Note, and will be computed on the basis of a
year of 360 days and paid on the actual number of days that principal is
outstanding.
          5. Security. The Borrower must cause to be executed and delivered to
the Bank, in form and content satisfactory to the Bank as security for the Line
of Credit, an amended and restated guaranty agreement, under which H. F. Lenfest
(the “Guarantor”) will unconditionally guarantee the due and punctual payment of
all indebtedness owed to the Bank by the Borrower under the Line of Credit (the
“Guaranty”), and a pledge agreement, under which the Guarantor will grant to the
Bank a security interest in certain investment property (the “Pledge Agreement”)
as collateral for Guarantor’s obligations under the Guaranty.
          6. Covenants. Unless compliance is waived in writing by the Bank,
until payment in full of the Loan and all of the obligations of the Borrower in
respect of the Letters of Credit and termination of the commitment for the Line
of Credit:
               (a) The Borrower will promptly submit to the Bank such
information as the Bank may reasonably request relating to the Borrower’s
affairs (including but not limited to annual Financial Statements (as
hereinafter defined) and tax returns for the Borrower and/or any security for
the Line of Credit.
               (b) The Borrower will not make or permit any change in its form
of organization or any material change in the nature of its business as carried
on as of the date of this Letter Agreement.

 

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Environmental Tectonics Corporation
March ___, 2009
Page 3
               (c) The Borrower will notify the Bank in writing of the
occurrence of any Event of Default or an act or condition which, with the
passage of time, the giving of notice or both might become an Event of Default.
               (d) The Borrower will comply with the financial and other
covenants included in Exhibit “A” hereto.
          7. Representations and Warranties. To induce the Bank to extend the
Line of Credit and upon the making of each advance to the Borrower or issuance
of any Letter of Credit under the Line of Credit, the Borrower represents and
warrants as follows:
               (a) The Borrower’s latest Financial Statements provided to the
Bank are true, complete and accurate in all material respects and fairly present
the financial condition, assets and liabilities, whether accrued, absolute,
contingent or otherwise, and the results of the Borrower’s operations for the
period specified therein. The Borrower’s Financial Statements have been prepared
in accordance with generally accepted accounting principles consistently applied
from period to period subject, in the case of interim statements, to normal
year-end adjustments. Since the date of the latest Financial Statements provided
to the Bank, the Borrower has not suffered any damage, destruction or loss which
has materially adversely affected its business, assets, operations, financial
condition or results of operations.
               (b) There are no actions, suits, proceedings or governmental
investigations pending or, to the knowledge of the Borrower, threatened against
the Borrower which could result in a material adverse change in its business,
assets, operations, financial condition or results of operations and there is no
basis known to the Borrower or its officers, directors or shareholders for any
such action, suit, proceedings or investigation.
               (c) The Borrower has filed all returns and reports that are
required to be filed by it in connection with any federal, state or local tax,
duty or charge levied, assessed or imposed upon the Borrower or its property,
including unemployment, social security and similar taxes and all of such taxes
have been either paid or adequate reserve or other provision has been made
therefor.
               (d) The Borrower is duly organized, validly existing and in good
standing under the laws of the state of its incorporation or organization and
has the power and authority to own and operate its assets and to conduct its
business as now or proposed to be carried on, and is duly qualified, licensed
and in good standing to do business in all jurisdictions where its ownership of
property or the nature of its business requires such qualification or licensing.
               (e) The Borrower has full power and authority to enter into the
transactions provided for in this Letter Agreement and has been duly authorized
to do so by all necessary and appropriate action and when executed and delivered
by the Borrower, this Letter Agreement and the other Loan Documents will
constitute the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their terms.

 

--------------------------------------------------------------------------------

 

Environmental Tectonics Corporation
March ___, 2009
Page 4
               (f) There does not exist any default or violation by the Borrower
of or under any of the terms, conditions or obligations of: (i) its
organizational documents; (ii) any indenture, mortgage, deed of trust,
franchise, permit, contract, agreement, or other instrument to which it is a
party or by which it is bound; or (iii) any law, regulation, ruling, order,
injunction, decree, condition or other requirement applicable to or imposed upon
the Borrower by any law or by any governmental authority, court or agency.
          8. Fees. Beginning on the first day of the quarter after the date
hereof and continuing on the first day of each quarter thereafter until the
Expiration Date, the Borrower shall pay a commitment fee to the Bank, in
arrears, at the rate of one-eighth of one percent (.125%) per annum on the
average daily balance of the Line of Credit which is undisbursed and uncancelled
during the preceding quarter. For purposes of calculating such fee, outstanding
Letters of Credit shall constitute disbursements under the Line of Credit. The
commitment fee shall be computed on the basis of a year of 360 days and paid on
the actual number of days elapsed.
          9. Expenses. The Borrower shall reimburse the Bank for the Bank’s
expenses (including the reasonable fees and expenses of the Bank’s outside and
in-house counsel) in documenting and closing this transaction, in connection
with any amendments, modifications or renewals of the Line of Credit, and in
connection with the collection of all of the Borrower’s Obligations to the Bank,
including but not limited to enforcement actions relating to the Loan.
          10. Depository. The Borrower will establish and maintain at the Bank
the Borrower’s primary depository account.
          11. Additional Provisions. Before the first advance under the Loan
and/or the issuance of any additional Letter of Credit, the Borrower shall
execute and deliver to the Bank the Note, an Application for each Letter of
Credit, the Reimbursement Agreement, and the other required Loan Documents and
such other instruments and documents as the Bank may reasonably request, such as
certified resolutions, incumbency certificates or other evidence of authority.
The Bank will not be obligated to make any advance or issue any additional
Letter of Credit under the Line of Credit if any Event of Default or event which
with the passage of time, provision of notice or both would constitute an Event
of Default shall have occurred and be continuing.
     Prior to execution of the final Loan Documents, the Bank may terminate this
Letter Agreement if a material adverse change occurs with respect to the
Borrower, the Guarantor, or any other person or entity connected in any way with
the Loan, or if the Borrower fails to comply with any of the terms and
conditions of this Letter Agreement, or if the Bank reasonably determines that
any of the conditions cannot be met.
     This Letter Agreement is governed by the laws of the Commonwealth of
Pennsylvania. No modification, amendment or waiver of any of the terms of this
Letter Agreement, nor any consent to any departure by the Borrower therefrom,
will be effective unless made in a writing

 

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Environmental Tectonics Corporation
March ___, 2009
Page 5
signed by the party to be charged, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
When accepted, this Letter Agreement and the other Loan Documents will
constitute the entire agreement between the Bank and the Borrower concerning the
Line of Credit, and shall replace all prior understandings, statements,
negotiations and written materials relating to the Line of Credit or the Letters
of Credit, including but not limited to the Existing Loan Agreement.
     The Bank will not be responsible for any damages, consequential,
incidental, special, punitive or otherwise, that may be incurred or alleged by
any person or entity, including the Borrower and the Guarantor, as a result of
this Letter Agreement, the other Loan Documents, the transactions contemplated
hereby or thereby, or the use of the Letters of Credit.
     THE BORROWER AND THE BANK IRREVOCABLY WAIVE ANY AND ALL RIGHTS THEY MAY
HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE ARISING
OUT OF THIS LETTER AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED IN ANY OF SUCH DOCUMENTS AND ACKNOWLEDGE THAT THE FOREGOING WAIVER
IS KNOWING AND VOLUNTARY.
     If and when a loan closing occurs, this Letter Agreement (as the same may
be amended from time to time) shall survive the closing and will serve as our
loan agreement throughout the term of the Loan.
     To accept these terms, please sign the enclosed copy of this Letter
Agreement as set forth below and the Loan Documents and return them to the Bank
within thirty (30) days from the date of this Letter Agreement, or this Letter
Agreement may be terminated at the Bank’s option without liability or further
obligation of the Bank.
     Thank you for giving PNC Bank this opportunity to work with your business.
We look forward to other ways in which we may be of service to your business or
to you personally.

            Very truly yours,

PNC BANK, NATIONAL ASSOCIATION
      By:           Title:             

 

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Environmental Tectonics Corporation
March ___, 2009
Page 6
ACCEPTANCE
     With the intent to be legally bound hereby, the above terms and conditions
are hereby agreed to and accepted as of this ___ day of _________, 2009.

            BORROWER:

ENVIRONMENTAL TECTONICS CORPORATION
      By:           (SEAL)       Print Name:          Title:     

 

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EXHIBIT A
TO LETTER AGREEMENT
DATED_________ __, 2009
A. FINANCIAL REPORTING COVENANTS:
     (1) The Borrower will deliver to the Bank:
          (a) Financial Statements for its fiscal year, within 90 days after
fiscal year end, audited and certified without qualification by a certified
public accountant acceptable to the Bank.
          (b) Financial Statements for each of the first three fiscal quarters,
within 60 days after the quarter end, together with year-to-date and comparative
figures for the corresponding periods of the prior year, certified as true and
correct by its chief financial officer.
          (c) With each delivery of Financial Statements, a certificate of the
Borrower’s chief financial officer as to the Borrower’s compliance with the
financial covenants set forth below for the period then ended and whether any
Event of Default exists, and, if so, the nature thereof and the corrective
measures the Borrower proposes to take. This certificate shall set forth all
detailed calculations necessary to demonstrate such compliance.
     (2) Within 45 days after fiscal year end the Borrower will deliver to the
Bank financial projections for the current fiscal year in a form reasonably
satisfactory to the Bank.
     “Financial Statements” means the consolidated balance sheet and statements
of income and cash flows prepared in accordance with generally accepted
accounting principles in effect from time to time (“GAAP”) applied on a
consistent basis (subject in the case of interim statements to normal year-end
adjustments).
B. FINANCIAL COVENANTS:
     (1) The Borrower will maintain as of the end of each fiscal quarter a
Consolidated Tangible Net Worth of at least $3,500,000.
     (2) The Borrower will maintain as of the end of each fiscal quarter ending
during the periods indicated a minimum EBITDA as set forth below:

          Period   EBITDA
December 1, 2008 through February 28, 2009
    500,000  
March 1, 2009 through May 31, 2009
    300,000  
June 1, 2009 through August 31, 2009
    1,200,000  
September 1, 2009 through November 30, 2009
    1,000,000  
December 1, 2009 through February 28, 2010
    900,000  
March 1, 2010 and thereafter
    1,300,000  

A-1

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     “Consolidated Tangible Net Worth” means as of any date of determination,
the sum of (a) the aggregate amount of all assets of the Borrower and its
subsidiaries on a consolidated basis at such date as may be properly classified
as such in accordance with GAAP, excluding such other assets as are properly
classified as intangible assets under GAAP, (b) minus the aggregate amount of
all liabilities of the Borrower and its subsidiaries and minority interests in
the Borrower or any of its subsidiaries on a consolidated basis at such date, as
may be properly classified as such in accordance with GAAP, plus
(c) Subordinated Debt.
     “EBITDA” means net income plus interest expense plus income tax expense
plus amortization plus depreciation.
     “Subordinated Debt” means indebtedness that has been subordinated to the
Borrower’s indebtedness to the Bank pursuant to a subordination agreement in
form and content satisfactory to the Bank.
C. NEGATIVE COVENANTS:
     (1) The Borrower will not liquidate, or dissolve, or merge or consolidate
with any person, firm, corporation or other entity, or sell, lease, transfer or
otherwise dispose of all or substantially all of its property or assets, whether
now owned or hereafter acquired.
     (2) The Borrower will not create, assume, incur or suffer to exist any
mortgage, pledge, encumbrance, security interest, lien or charge of any kind
upon any of its property, now owned or hereafter acquired, or acquire or agree
to acquire any kind of property under conditional sales or other title retention
agreements; provided, however, that the foregoing restrictions shall not prevent
the Borrower from:
          (a) incurring liens for taxes, assessments or governmental charges or
levies which shall not at the time be due and payable or can thereafter be paid
without penalty or are being contested in good faith by appropriate proceedings
diligently conducted and with respect to which it has created adequate reserves;
or
          (b) making pledges or deposits to secure obligations under workers’
compensation laws or similar legislation; or
          (c) granting purchase money security interests in personal property of
the Borrower existing or created when such property is acquired, provided that
the principal amount of the indebtedness secured by each such security interest
does not exceed the purchase price of the related property; or
          (d) granting subordinate liens or security interests to secure future
Subordinated Debt to H.F. Lenfest; or
          (e) granting liens or security interests in favor of the Bank.

A-2

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SCHEDULE I
Existing Letters of Credit

                  Number   Amount   Expiration Date
 
               
00259738
  $ 43,190.00       6/30/2009  
00262405
  $ 39,820.00       11/9/2009  
00263283
  $ 161,000.00       1/31/2010  
18104493
  $ 63,365.00       6/30/2009  
18104640
  $ 100,000.00       6/30/2009  
18107336
  $ 2,356.50       10/31/2009  
18107339
  $ 75,000.00       10/31/2009  
18107341
  $ 785.50       10/31/2009  
18107342
  $ 225,000.00       10/31/2009  
18107610
  $ 58,948.42       9/15/2010  
18107611
  $ 318,825.00       9/15/2009  
18110007
  $ 286,250.00       6/30/2010  
18110104
  $ 286,250.00       8/30/2010  
00260691
  $ 21,341.75       6/30/2009  
18101978
  $ 195,000.00       3/26/2010  
18101979
  $ 585,000.00       3/26/2010  
18103494
  $ 15,131.00       6/30/2009  
18109757
  $ 22,020.31       3/30/2009  
18110169
  $ 60,000.00       10/30/2009  
18110170
  $ 40,000.00       10/30/2009  
18110563
  $ 66,297.00       6/30/2010  

 

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Amended and Restated Guaranty Agreement
(PNCBANK LOGO) [w73712w7371201.gif]
     THIS AMENDED AND RESTATED GUARANTY AGREEMENT (this “Guaranty”) is made and
entered into as of this       day of           , 2009, by H.F. LENFEST, an
individual (the “Guarantor”), with an address at 300 Barr Harbor Drive,
Suite 460, West Conshohocken, PA 19428, in consideration of the extension of
credit by PNC BANK, NATIONAL ASSOCIATION (the “Bank”), with an address at 1000
Westlakes Drive, Suite 200, Berwyn, PA 19312, to ENVIRONMENTAL TECTONICS
CORPORATION (the “Borrower”), and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged. This Guaranty amends,
restates and replaces (but does not constitute a novation of) the existing
Restated Guaranty Agreement from the Guarantor to the Bank dated as of July 31,
2007.
1. Guaranty of Obligations. The Guarantor hereby unconditionally guarantees, as
a primary obligor, and becomes surety for, the prompt payment and performance of
all loans, advances, debts, liabilities, reimbursement and other obligations,
covenants and duties owing by the Borrower to the Bank of any kind or nature,
present or future (including any interest accruing thereon after maturity, or
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding relating to the Borrower, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect (including those acquired by assignment
or participation), absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising under (i) the revolving credit facility
established under that certain amended and restated Letter Agreement between the
Borrower and the Bank dated as of                 , 2009 (as hereafter amended,
modified or supplemented, the “Credit Agreement”), the Second Amended and
Restated Reimbursement Agreement for Letters of Credit from the Borrower in
favor of the Bank dated as of                 , 2009 (as hereafter amended,
modified or supplemented, the “Reimbursement Agreement”), the Note and Letters
of Credit (as those terms are defined in the Credit Agreement) heretofore or
hereafter issued pursuant thereto, and any amendments, extensions, renewals and
increases of or to the foregoing, and (ii) the “Transaction” entered into
pursuant to and as defined in that certain ISDA Master Agreement between the
Borrower and the Bank dated as of August 6, 2007 (as hereafter amended, modified
or supplemented, the “Master Agreement”) and the confirmation letter agreement
between the Borrower and the Bank dated as of September 12, 2008 (the
“Confirmation Letter”), and all costs and expenses of the Bank incurred in the
modification, enforcement, collection and otherwise in connection with any of
the foregoing, including reasonable attorneys’ fees and expenses (hereinafter
referred to collectively as the “Obligations”); provided, however, that the
Guarantor’s liability hereunder solely with respect to those Obligations arising
under the Credit Agreement, the Reimbursement Agreement, the Note and the
Letters of Credit (the “Line of Credit Obligations”) shall not exceed
$20,000,000 of principal plus all accrued and unpaid interest on such principal
and all costs and expenses arising from the Line of Credit Obligations and the
Guarantor’s liability hereunder with respect to the Obligations arising under
the Master Agreement shall not exceed the maximum liability that the Borrower
may incur to the Bank under the Confirmation Letter and the Master Agreement as
it applies to the Transaction described in the Confirmation Letter. If the
Borrower defaults under any Obligations, the Guarantor will pay the amount due
to the Bank.

 

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2. Nature of Guaranty; Waivers. This is a guaranty of payment and not of
collection and the Bank shall not be required, as a condition of the Guarantor’s
liability, to make any demand upon or to pursue any of its rights against the
Borrower, or to pursue any rights which may be available to it with respect to
any other person who may be liable for the payment of the Obligations.
     This is an absolute, unconditional, irrevocable and continuing guaranty and
will remain in full force and effect until all of the Obligations have been
indefeasibly paid in full, and the Bank has terminated this Guaranty. This
Guaranty will remain in full force and effect even if there is no principal
balance or other amounts outstanding under the Obligations at a particular time
or from time to time. This Guaranty will not be affected by any surrender,
exchange, acceptance, compromise or release by the Bank of any other party, or
any other guaranty or any security held by it for any of the Obligations, by any
failure of the Bank to take any steps to perfect or maintain its lien or
security interest in or to preserve its rights to any security or other
collateral for any of the Obligations or any guaranty, or by any irregularity,
unenforceability or invalidity of any of the Obligations or any part thereof or
any security or other guaranty thereof. The Guarantor’s obligations hereunder
shall not be affected, modified or impaired by any counterclaim, set-off,
recoupment, deduction or defense based upon any claim the Guarantor may have
(directly or indirectly) against the Borrower or the Bank, except payment or
performance of the Obligations.
     Notice of acceptance of this Guaranty, notice of extensions of credit to
the Borrower from time to time, notice of default, diligence, presentment,
notice of dishonor, protest, demand for payment, and any defense based upon the
Bank’s failure to comply with the notice requirements under Sections 9-611 and
9-612 of the Uniform Commercial Code as in effect from time to time are hereby
waived. The Guarantor waives all defenses based on suretyship or impairment of
collateral.
     The Bank at any time and from time to time, without notice to or the
consent of the Guarantor, and without impairing or releasing, discharging or
modifying the Guarantor’s liabilities hereunder, may (a) change the manner,
place, time or terms of payment or performance of or interest rates on, or other
terms relating to, any of the Obligations; (b) renew, substitute, modify, amend
or alter, or grant consents or waivers relating to any of the Obligations, any
other guaranties, or any security for any Obligations or guaranties; (c) apply
any and all payments by whomever paid or however realized including any proceeds
of any collateral, to any Obligations of the Borrower in such order, manner and
amount as the Bank may determine in its sole discretion; (d) settle, compromise
or deal with any other person, including the Borrower or the Guarantor, with
respect to any Obligations in such manner as the Bank deems appropriate in its
sole discretion; (e) substitute, exchange or release any security or guaranty;
or (f) take such actions and exercise such remedies hereunder as provided
herein.
3. Repayments or Recovery from the Bank. If any demand is made at any time upon
the Bank for the repayment or recovery of any amount received by it in payment
or on account of any of the Obligations and if the Bank repays all or any part
of such amount by reason of any judgment, decree or order of any court or
administrative body or by reason of any settlement or compromise of any such
demand, the Guarantor will be and remain liable hereunder for the amount so
repaid or recovered to the same extent as if such amount had never been received
originally by the Bank. The provisions of this section will be and remain
effective notwithstanding any contrary action which may have been taken by the
Guarantor in reliance upon such payment, and any such contrary action so taken
will be without prejudice to the Bank’s rights hereunder and will be deemed to
have been conditioned upon such payment having become final and irrevocable.
4. Financial Statements. Unless compliance is waived in writing by the Bank or
until all of the Obligations have been paid in full, the Guarantor will promptly
submit to the Bank such information relating to the Guarantor’s affairs
(including, but not limited to, semi-annual investment statements for the

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Guarantor within 60 days following each June 30 and December 31 and tax returns
for the Guarantor within 30 days following the filing thereof) or any security
for the Guaranty at any time provided by the Guarantor as the Bank may
reasonably request.
5. Enforceability of Obligations. No modification, limitation or discharge of
the Obligations arising out of or by virtue of any bankruptcy, reorganization or
similar proceeding for relief of debtors under federal or state law will affect,
modify, limit or discharge the Guarantor’s liability in any manner whatsoever
and this Guaranty will remain and continue in full force and effect and will be
enforceable against the Guarantor to the same extent and with the same force and
effect as if any such proceeding had not been instituted. The Guarantor waives
all rights and benefits which might accrue to it by reason of any such
proceeding and will be liable to the full extent hereunder, irrespective of any
modification, limitation or discharge of the liability of the Borrower that may
result from any such proceeding.
6. Events of Default. The occurrence of any of the following shall be an “Event
of Default”: (i) any Event of Default (as defined in any of the Obligations);
(ii) any default under any of the Obligations that does not have a defined set
of “Events of Default” and the lapse of any notice or cure period provided in
such Obligation with respect to such default, (iii) the Guarantor’s failure to
perform any of its material obligations hereunder; (iv) the falsity, inaccuracy
or material breach by the Guarantor of any written warranty, representation or
statement made or furnished to the Bank by or on behalf of the Guarantor;
(v) the termination or attempted termination of this Guaranty by the Guarantor;
(vi) the Guarantor shall commence any case, proceeding or other action (A) under
any existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent,
or seeking arrangement, adjustment, winding-up, liquidation, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or the Guarantor shall make a general assignment
for the benefit of its creditors; or (vii) there shall be commenced against the
Guarantor any case, proceeding or other action of a nature referred to in clause
(v) above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or unbonded
for a period of 60 days. Upon the occurrence of any Event of Default, (a) the
Guarantor shall pay to the Bank the amount of the Obligations; or (b) on demand
of the Bank, the Guarantor shall immediately deposit with the Bank, in U.S.
dollars, all amounts due or to become due under the Obligations, and the Bank
may at any time use such funds to repay the Obligations; or (c) the Bank in its
discretion may exercise with respect to any collateral any one or more of the
rights and remedies provided a secured party under the applicable version of the
Uniform Commercial Code; or (d) the Bank in its discretion may exercise from
time to time any other rights and remedies available to it at law, in equity or
otherwise.
7. Right of Setoff. In addition to all liens upon and rights of setoff against
the Guarantor’s money, securities or other property given to the Bank by law,
the Bank shall have, with respect to the Guarantor’s obligations to the Bank
under this Guaranty and to the extent permitted by law, a contractual possessory
security interest in and a contractual right of setoff against, and the
Guarantor hereby grants Bank a security interest in, and hereby assigns,
conveys, delivers, pledges and transfers to the Bank all of the Guarantor’s
right, title and interest in and to, all of the Guarantor’s deposits, moneys,
securities and other property now or hereafter in the possession of or on
deposit with, or in transit to, the Bank or any other direct or indirect
subsidiary of The PNC Financial Services Group, Inc., whether held in a general
or special account or deposit, whether held jointly with someone else, or
whether held for safekeeping or otherwise, excluding, however, all IRA, Keogh,
and trust accounts. Every such security interest and right of setoff may be
exercised without demand upon or notice to the Guarantor. Every such right of
setoff shall be deemed to have been exercised immediately upon the occurrence of
an Event of Default hereunder without any action of the Bank, although the Bank
may enter such setoff on its books and records at a later time.

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8. Collateral. This Guaranty is secured by the property described in any
collateral security documents which the Guarantor executes and delivers to the
Bank and by such other collateral as may in the future be granted to the Bank to
secure any Obligations of the Guarantor to the Bank.
9. Costs. To the extent that the Bank incurs any costs or expenses in protecting
or enforcing its rights under the Obligations or this Guaranty, including
reasonable attorneys’ fees and the costs and expenses of litigation, such costs
and expenses will be due on demand, will be included in the Obligations and will
bear interest from the incurring or payment thereof at the default interest rate
provided under the Credit Agreement.
10. Postponement of Subrogation. Until the Obligations are indefeasibly paid in
full, expire, are terminated and are not subject to any right of revocation or
rescission, the Guarantor postpones and subordinates in favor of the Bank or its
designee (and any assignee or potential assignee) any and all rights which the
Guarantor may have to (a) assert any claim whatsoever against the Borrower based
on subrogation, exoneration, reimbursement, or indemnity or any right of
recourse to security for the Obligations with respect to payments made
hereunder, and (b) any realization on any property of the Borrower, including
participation in any marshalling of the Borrower’s assets.
11. Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder (“Notices”) must be in writing
and will be effective upon receipt. Notices may be given in any manner to which
the Bank and the Guarantor may separately agree, including electronic mail.
Without limiting the foregoing, first-class mail, facsimile transmission and
commercial courier service are hereby agreed to as acceptable methods for giving
Notices. Regardless of the manner in which provided, Notices may be sent to
addresses for the Bank and the Guarantor as set forth above or to such other
address as either may give to the other for such purpose in accordance with this
section.
12. Preservation of Rights. No delay or omission on the Bank’s part to exercise
any right or power arising hereunder will impair any such right or power or be
considered a waiver of any such right or power, nor will the Bank’s action or
inaction impair any such right or power. The Bank’s rights and remedies
hereunder are cumulative and not exclusive of any other rights or remedies which
the Bank may have under other agreements, at law or in equity. The Bank may
proceed in any order against the Borrower, the Guarantor or any other obligor
of, or collateral securing, the Obligations.
13. Illegality. If any provision contained in this Guaranty should be invalid,
illegal or unenforceable in any respect, it shall not affect or impair the
validity, legality and enforceability of the remaining provisions of this
Guaranty.
14. Changes in Writing. No modification, amendment or waiver of, or consent to
any departure by the Guarantor from, any provision of this Guaranty will be
effective unless made in a writing signed by the Bank, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on the Guarantor will entitle the Guarantor
to any other or further notice or demand in the same, similar or other
circumstance.
15. Entire Agreement. This Guaranty (including the documents and instruments
referred to herein) constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, between the
Guarantor and the Bank with respect to the subject matter hereof; provided,
however, that this Guaranty is in addition to, and not in substitution for, any
other guarantees from the Guarantor to the Bank.
16. Successors and Assigns. This Guaranty will be binding upon and inure to the
benefit of the Guarantor and the Bank and their respective heirs, executors,
administrators, successors and assigns;

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provided, however, that the Guarantor may not assign this Guaranty in whole or
in part without the Bank’s prior written consent and the Bank at any time may
assign this Guaranty in whole or in part.
17. Interpretation. In this Guaranty, unless the Bank and the Guarantor
otherwise agree in writing, the singular includes the plural and the plural the
singular; references to statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute referred to; the
word “or” shall be deemed to include “and/or”, the words “including”, “includes”
and “include” shall be deemed to be followed by the words “without limitation”;
and references to sections or exhibits are to those of this Guaranty. Section
headings in this Guaranty are included for convenience of reference only and
shall not constitute a part of this Guaranty for any other purpose. If this
Guaranty is executed by more than one party as Guarantor, the obligations of
such persons or entities will be joint and several.
18. Governing Law and Jurisdiction. This Guaranty has been delivered to and
accepted by the Bank and will be deemed to be made in the State where the Bank’s
office indicated above is located. This Guaranty will be interpreted and the
rights and liabilities of the Bank and the Guarantor determined in accordance
with the laws of the State where the Bank’s office indicated above is located,
excluding its conflict of laws rules. The Guarantor hereby irrevocably consents
to the exclusive jurisdiction of any state or federal court in the county or
judicial district where the Bank’s office indicated above is located; provided
that nothing contained in this Guaranty will prevent the Bank from bringing any
action, enforcing any award or judgment or exercising any rights against the
Guarantor individually, against any security or against any property of the
Guarantor within any other county, state or other foreign or domestic
jurisdiction. The Guarantor acknowledges and agrees that the venue provided
above is the most convenient forum for both the Bank and the Guarantor. The
Guarantor waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this Guaranty.
19. Equal Credit Opportunity Act. If the Guarantor is not an “applicant for
credit” under Section 202.2 (e) of the Equal Credit Opportunity Act of 1974
(“ECOA”), the Guarantor acknowledges that (i) this Guaranty has been executed to
provide credit support for the Obligations, and (ii) the Guarantor was not
required to execute this Guaranty in violation of Section 202.7(d) of ECOA.
20. Authorization to Obtain Credit Reports. By signing below, the Guarantor
provides written authorization to the Bank or its designee (and any assignee or
potential assignee) to obtain the Guarantor’s personal credit profile from one
or more national credit bureaus. Such authorization shall solely extend to
obtaining a credit profile in considering this Guaranty and subsequently for the
purposes of update, renewal or extension of such credit or additional credit and
for reviewing or collecting the resulting account.
21. Waiver of Jury Trial. The Guarantor irrevocably waives any and all right the
Guarantor may have to a trial by jury in any action, proceeding or claim of any
nature relating to this Guaranty, any documents executed in connection with this
Guaranty or any transaction contemplated in any of such documents. The Guarantor
acknowledges that the foregoing waiver is knowing and voluntary.
     The Guarantor acknowledges that it has read and understood all the
provisions of this Guaranty, including the waiver of jury trial, and has been
advised by counsel as necessary or appropriate.

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WITNESS the due execution hereof as a document under seal, as of the date first
written above, with the intent to be legally bound hereby.

         
WITNESS:
       
 
             
 
           H.F. Lenfest                                  
                        (SEAL)
Print Name:
       

Acknowledged and accepted:

          PNC BANK NATIONAL ASSOCIATION
      By:           Title:                 

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Pledge Agreement
(Stocks, Bonds and Commercial Paper)   (PNCBANK LOGO) [w73712w7371201.gif]

     THIS PLEDGE AGREEMENT, dated as of this ___day of                     ,
2009, is made by H.F. LENFEST (the “Pledgor”), with an address at 300 Barr
Harbor Drive, Suite 460, West Conshohocken, PA 19428, in favor of PNC BANK,
NATIONAL ASSOCIATION (the “Secured Party”), with an address at 1000 Westlakes
Drive, Suite 200, Berwyn, PA 19312.
     1. Pledge. In order to induce the Secured Party to extend the Obligations
(as defined below), the Pledgor hereby grants a security interest in and pledges
to the Secured Party all of the Pledgor’s right, title and interest in and to
the investment property and other assets described in Exhibit A attached hereto
and made a part hereof, and all security entitlements of the Pledgor with
respect thereto, whether now owned or hereafter acquired, together with all
additions, substitutions, replacements and proceeds thereof and all income,
interest, dividends and other distributions thereon (collectively, the
“Collateral”). If the Collateral includes certificated securities, documents or
instruments, such certificates are herewith delivered to the Secured Party
accompanied by duly executed blank stock or bond powers or assignments as
applicable. The Pledgor hereby authorizes the transfer of possession of all
certificates, instruments, documents and other evidence of the Collateral to the
Secured Party.
     2. Obligations Secured. The Collateral secures payment of all loans,
advances, debts, liabilities, obligations, covenants and duties owing from
Environmental Tectonics Corporation (the “Borrower”) to the Secured Party any
kind or nature, present or future (including any interest accruing thereon after
maturity, or after the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding relating to the Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect (including those acquired by
assignment or participation), absolute or contingent, joint or several, due or
to become due, now existing or hereafter arising under the revolving credit
facility established under that certain amended and restated Letter Agreement
between the Borrower and the Bank dated as of                      ___, 2009 (as
hereafter amended, modified or supplemented, the “Credit Agreement”), the Second
Amended and Restated Reimbursement Agreement for Letters of Credit from the
Borrower in favor of the Bank dated as of                      ___, 2009 (as
hereafter amended, modified or supplemented, the “Reimbursement Agreement”), the
Note and Letters of Credit (as those terms are defined in the Credit Agreement)
heretofore or hereafter issued pursuant thereto, and that certain ISDA Master
Agreement between the Borrower and the Bank dated as of August 6, 2007 (as
hereafter amended, modified or supplemented, the “Master Agreement”) and any
“Transaction” pursuant to and as defined in the Master Agreement heretofore or
hereafter entered into from time to time, and any amendments, extensions,
renewals and increases of or to the foregoing, and all costs and expenses of the
Secured Party incurred in the documentation, negotiation, modification,
enforcement, collection and otherwise in connection with the foregoing,
including reasonable attorneys’ fees and expenses (hereinafter referred to
collectively as the “Obligations”).
     3. Representations and Warranties. The Pledgor represents and warrants to
the Secured Party as follows:
          3.1 There are no restrictions on the pledge or transfer of any of the
Collateral, other than restrictions referenced on the face of any certificates
evidencing the Collateral.
          3.2 The Pledgor is the legal owner of the Collateral, which is
registered in the name of the Pledgor, the Custodian (as hereinafter defined) or
a nominee.
          3.3 The Collateral is free and clear of any security interests,
pledges, liens, encumbrances, charges, agreements, claims or other arrangements
or restrictions of any kind, except as referenced in Section 3.1 above; and the
Pledgor will not incur, create, assume or permit to exist any pledge, security
interest, lien, charge or other encumbrance of any nature whatsoever on any of
the Collateral or assign, pledge or otherwise encumber any right to receive
income from the Collateral, other than in favor of the Secured Party.

 

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          3.4 The Pledgor has the right to transfer the Collateral free of any
encumbrances and the Pledgor will defend the Pledgor’s title to the Collateral
against the claims of all persons, and any registration with, or consent or
approval of, or other action by, any federal, state or other governmental
authority or regulatory body which was or is necessary for the validity of the
pledge of and grant of the security interest in the Collateral has been
obtained.
          3.5 The pledge of and grant of the security interest in the Collateral
is effective to vest in the Secured Party a valid and perfected first priority
security interest, superior to the rights of any other person, in and to the
Collateral as set forth herein.
     4. Covenants.
          4.1 Unless otherwise agreed in writing between the Pledgor and the
Secured Party, the Pledgor agrees to maintain at all times Collateral (of the
type listed in Exhibit B attached hereto) having a minimum Market Value of at
least $10,000,000 and to provide additional Collateral (of the type listed in
Exhibit B attached hereto) to the Secured Party promptly upon the Secured
Party’s request if the minimum Market Value is not maintained. At the Pledgor’s
request at any time that no Event of Default has occurred and is continuing, the
Secured Party shall approve the withdrawal of any Collateral, including any
income, interest, dividends and other distributions on such Collateral from the
securities account described on Exhibit A, provided that the Pledgor has
demonstrated to the satisfaction of the Secured Party that after giving effect
to such withdrawal the Market Value of the Collateral remaining in such account
equals or exceeds $10,000,000. Pledgor shall request such withdrawals no more
frequently than monthly, unless agreed otherwise by the Bank. “Market Value”
shall mean as to any Collateral the closing price for such Collateral on the
applicable recognized securities exchange and/or applicable recognized bond
market on the date of valuation, provided if the Collateral is not traded on a
recognized securities exchange and/or recognized bond market, “Market Value”
shall mean the price for such Collateral as may be agreed to by a willing buyer
and willing seller in an arm’s length transaction entered into on such date, as
the same may be determined by the Secured Party in its discretion.
          4.2 If all or part of the Collateral constitutes “margin stock” within
the meaning of Regulation U of the Federal Reserve Board, the Pledgor agrees, or
if the Pledgor is not the Borrower, it shall cause the Borrower, to execute and
deliver Form U-1 to the Secured Party and, unless otherwise agreed in writing
between the Borrower and the Secured Party, no part of the proceeds of the
Obligations may be used to purchase or carry margin stock.
          4.3 Pledgor agrees not to invoke, and hereby waives its rights under,
any statute under any state or federal law which permits the recharacterization
of any portion of the Collateral to be interest or income.
     5. Default.
          5.1 If any of the following occur (each an “Event of Default”):
(i) any Event of Default (as defined in any of the Obligations), (ii) any
default under any of the Obligations that does not have a defined set of “Events
of Default” and the lapse of any notice or cure period provided in such
Obligations with respect to such default, (iii) demand by the Secured Party
under any of the Obligations that have a demand feature, (iv) the failure by the
Pledgor to perform any of its material obligations hereunder if such failure is
not cured within ten (10) days of notice thereof, (v) the falsity, inaccuracy or
material breach by the Pledgor of any written warranty, representation or
statement made or furnished to the Secured Party by or on behalf of the Pledgor,
(vi) the failure of the Secured Party to have a perfected first priority
security interest in the Collateral as a result of any act or failure to act by
Pledgor, (vii) any restriction is imposed on the pledge or transfer of any of
the Collateral after the date of this Agreement without the Secured Party’s
prior written consent, or (viii) the breach of the Control Agreement (referred
to in Section 8 below) by Pledgor, or receipt of notice of termination by
Pledgor of the Control Agreement if no successor custodian acceptable to the
Secured Party has executed a Control Agreement in form and substance acceptable
to the Secured Party on or before 10 days prior to the effective date of the
termination, then the Secured Party is authorized in its discretion to declare
any or all of the Obligations to be immediately due and payable without demand
or notice, which are expressly waived, and may exercise any one or

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more of the rights and remedies granted pursuant to this Pledge Agreement or
given to a secured party under the Uniform Commercial Code of the applicable
state, as it may be amended from time to time, or otherwise at law or in equity,
including without limitation the right to issue a Notice of Exclusive Control
(as defined in the Control Agreement) to the Custodian, and/or to sell or
otherwise dispose of any or all of the Collateral at public or private sale,
with or without advertisement thereof, upon such terms and conditions as it may
deem advisable and at such prices as it may deem best.
          5.2 (a) At any bona fide public sale, and to the extent permitted by
law, at any private sale, the Secured Party shall be free to purchase all or any
part of the Collateral, free of any right or equity of redemption in the Pledgor
or Borrower, which right or equity is hereby waived and released. Any such sale
may be on cash or credit. The Secured Party shall be authorized at any such sale
(if it deems it advisable to do so) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing the
Collateral for their own account in compliance with Regulation D of the
Securities Act of 1933 (the “Act”) or any other applicable exemption available
under such Act. The Secured Party will not be obligated to make any sale if it
determines not to do so, regardless of the fact that notice of the sale may have
been given. The Secured Party may adjourn any sale and sell at the time and
place to which the sale is adjourned. If the Collateral is customarily sold on a
recognized market or threatens to decline speedily in value, the Secured Party
may sell such Collateral at any time without giving prior notice to the Pledgor.
Whenever notice is otherwise required by law to be sent by the Secured Party to
the Pledgor of any sale or other disposition of the Collateral, ten (10) days
written notice sent to the Pledgor at its address specified above will be
reasonable.
               (b) The Pledgor recognizes that the Secured Party may be unable
to effect or cause to be effected a public sale of the Collateral by reason of
certain prohibitions contained in the Act, so that the Secured Party may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire the
Collateral for their own account, for investment and without a view to the
distribution or resale thereof. The Pledgor understands that private sales so
made may be at prices and on other terms less favorable to the seller than if
the Collateral were sold at public sales, and agrees that the Secured Party has
no obligation to delay or agree to delay the sale of any of the Collateral for
the period of time necessary to permit the issuer of the securities which are
part of the Collateral (even if the issuer would agree), to register such
securities for sale under the Act. The Pledgor agrees that private sales made
under the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
          5.3 The net proceeds arising from the disposition of the Collateral
after deducting reasonable expenses incurred by the Secured Party will be
applied to the Obligations in the order determined by the Secured Party. If any
excess remains after the discharge of all of the Obligations, the same will be
paid to the Pledgor. If after exhausting all of the Collateral there is a
deficiency, the Pledgor or, if the Pledgor is not borrowing from the Secured
Party or providing a guaranty of the Borrower’s obligations, the Borrower will
be liable therefor to the Secured Party; provided, however, that nothing
contained herein will obligate the Secured Party to proceed against the Pledgor,
the Borrower or any other party obligated under the Obligations or against any
other collateral for the Obligations prior to proceeding against the Collateral.
          5.4 If any demand is made at any time upon the Secured Party for the
repayment or recovery of any amount received by it in payment or on account of
any of the Obligations and if the Secured Party repays all or any part of such
amount by reason of any judgment, decree or order of any court or administrative
body or by reason of any settlement or compromise of any such demand, the
Pledgor will be and remain liable for the amounts so repaid or recovered to the
same extent as if such amount had never been originally received by the Secured
Party. The provisions of this section will be and remain effective
notwithstanding the release of any of the Collateral by the Secured Party in
reliance upon such payment (in which case the Pledgor’s liability will be
limited to an amount equal to the fair market value of the Collateral determined
as of the date such Collateral was released) and any such release will be
without prejudice to the Secured Party’s rights hereunder and will be deemed to
have been conditioned upon such payment having become final and irrevocable.
This Section shall survive the termination of this Pledge Agreement.

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     6. Voting Rights and Transfer. Prior to the occurrence of an Event of
Default, the Pledgor will have the right to exercise all voting rights with
respect to the Collateral. At any time after the occurrence of an Event of
Default, the Secured Party may transfer any or all of the Collateral into its
name or that of its nominee and may exercise all voting rights with respect to
the Collateral, but no such transfer shall constitute a taking of such
Collateral in satisfaction of any or all of the Obligations unless the Secured
Party expressly so indicates by written notice to the Pledgor.
     7. Dividends, Interest and Premiums. The Pledgor will have the right to
receive all cash dividends, interest and premiums declared and paid on the
Collateral prior to the occurrence of any Event of Default. In the event any
additional shares are issued to the Pledgor as a stock dividend or in lieu of
interest on any of the Collateral, as a result of any split of any of the
Collateral, by reclassification or otherwise, any certificates evidencing any
such additional shares will be immediately delivered to the Secured Party and
such shares will be subject to this Pledge Agreement and a part of the
Collateral to the same extent as the original Collateral. At any time after the
occurrence of an Event of Default, the Secured Party shall be entitled to
receive all cash or stock dividends, interest and premiums declared or paid on
the Collateral, all of which shall be subject to the Secured Party’s rights
under Section 5 above.
     8. Securities Account. If the Collateral includes securities or any other
financial or other asset maintained in a securities account, then the Pledgor
agrees to cause the securities intermediary on whose books and records the
ownership interest of the Pledgor in the Collateral appears (the “Custodian”) to
execute and deliver, contemporaneously herewith, a notification and control
agreement or other agreement (the “Control Agreement”) satisfactory to the
Secured Party in order to perfect and protect the Secured Party’s security
interest in the Collateral.
     9. Further Assurances. By its signature hereon, the Pledgor hereby
irrevocably authorizes the Secured Party, at any time and from time to time, to
execute (on behalf of the Pledgor), file and record against the Pledgor any
notice, financing statement, continuation statement, amendment statement,
instrument, document or agreement under the Uniform Commercial Code that the
Secured Party may consider necessary or desirable to create, preserve, continue,
perfect or validate any security interest granted hereunder or to enable the
Secured Party to exercise or enforce its rights hereunder with respect to such
security interest. Without limiting the generality of the foregoing, the Pledgor
hereby irrevocably appoints the Secured Party as the Pledgor’s attorney-in-fact
to do all acts and things in the Pledgor’s name that the Secured Party
reasonably deems necessary or desirable in furtherance of its rights expressly
set forth in this Agreement. This power of attorney is coupled with an interest
with full power of substitution and is irrevocable. The Pledgor hereby ratifies
all that said attorney shall lawfully do or cause to be done by virtue hereof.
     10. Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder (“Notices”) must be in writing
and will be effective upon receipt. Notices may be given in any manner to which
the parties may separately agree, including electronic mail. Without limiting
the foregoing, first-class mail, facsimile transmission and commercial courier
service are hereby agreed to as acceptable methods for giving Notices.
Regardless of the manner in which provided, Notices may be sent to a party’s
address as set forth above or to such other address as either the Pledgor or the
Secured Party may give to the other for such purpose in accordance with this
section.
     11. Preservation of Rights. (a) No delay or omission on the Secured Party’s
part to exercise any right or power arising hereunder will impair any such right
or power or be considered a waiver of any such right or power, nor will the
Secured Party’s action or inaction impair any such right or power. The Secured
Party’s rights and remedies hereunder are cumulative and not exclusive of any
other rights or remedies which the Secured Party may have under other
agreements, at law or in equity.
               (b) The Secured Party may, at any time and from time to time,
without notice to or the consent of the Pledgor unless otherwise expressly
required pursuant to the terms of the Obligations, and without impairing or
releasing, discharging or modifying the Pledgor’s liabilities hereunder, (i)
change the manner, place, time or terms of payment or performance of or interest
rates on, or other terms relating to, any of

4

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the Obligations; (ii) renew, substitute, modify, amend or alter, or grant
consents or waivers relating to any of the Obligations, any other pledge or
security agreements, or any security for any Obligations; (iii) apply any and
all payments by whomever paid or however realized including any proceeds of any
collateral, to any Obligations of the Pledgor or the Borrower in such order,
manner and amount as the Secured Party may determine in its sole discretion;
(iv) deal with any other person with respect to any Obligations in such manner
as the Secured Party deems appropriate in its sole discretion; (v) substitute,
exchange or release any security or guaranty; or (vi) take such actions and
exercise such remedies hereunder as provided herein. The Pledgor hereby waives
(a) presentment, demand, protest, notice of dishonor and notice of non-payment
and all other notices to which the Pledgor might otherwise be entitled, and
(b) all defenses based on suretyship or impairment of collateral.
     12. Illegality. In case any one or more of the provisions contained in this
Pledge Agreement should be invalid, illegal or unenforceable in any respect, it
shall not affect or impair the validity, legality and enforceability of the
remaining provisions in this Pledge Agreement.
     13. Changes in Writing. No modification or amendment of any provision of
this Pledge Agreement will be effective unless made in a writing signed by the
Secured Party and the Pledgor. No waiver of, or consent to any departure by the
Pledgor from, any provision of this Pledge Agreement will be effective unless
made in a writing signed by the Secured Party, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on the Pledgor in any case will entitle the
Pledgor to any other or further notice or demand in the same, similar or other
circumstance.
     14. Entire Agreement. This Pledge Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the Pledgor and the Secured Party with respect to the subject matter hereof.
     15. Successors and Assigns. This Pledge Agreement will be binding upon and
inure to the benefit of the Pledgor and the Secured Party and their respective
heirs, executors, administrators, successors and assigns; provided, however,
that the Pledgor may not assign this Pledge Agreement in whole or in part
without the Secured Party’s prior written consent and the Secured Party at any
time may assign this Pledge Agreement in whole or in part.
     16. Interpretation. In this Pledge Agreement, unless the Secured Party and
the Pledgor otherwise agree in writing, the singular includes the plural and the
plural the singular; references to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute referred
to; the word “or” shall be deemed to include “and/or”, the words “including”,
“includes” and “include” shall be deemed to be followed by the words “without
limitation”; and references to agreements and other contractual instruments
shall be deemed to include all subsequent amendments and other modifications to
such instruments, but only to the extent such amendments and other modifications
are not prohibited by the terms of this Pledge Agreement. Section headings in
this Pledge Agreement are included for convenience of reference only and shall
not constitute a part of this Pledge Agreement for any other purpose. If this
Pledge Agreement is executed by more than one party as Pledgor, the obligations
of such persons or entities will be joint and several.

5

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     17. Indemnity. The Pledgor agrees to indemnify each of the Secured Party,
each legal entity, if any, who controls, is controlled by or is under common
control with the Secured Party, and each of their respective directors, officers
and employees (the “Indemnified Parties”), and to hold each Indemnified Party
harmless from and against, any and all claims, damages, losses, liabilities and
expenses (including all fees and charges of internal or external counsel with
whom any Indemnified Party may consult and all expenses of litigation or
preparation therefor) which any Indemnified Party may incur, or which may be
asserted against any Indemnified Party by any person, entity or governmental
authority (including any person or entity claiming derivatively on behalf of the
Pledgor), in connection with or arising out of or relating to the matters
referred to in this Pledge Agreement or under any Control Agreement, whether
(a) arising from or incurred in connection with any breach of a representation,
warranty or covenant by the Pledgor, or (b) arising out of or resulting from any
suit, action, claim, proceeding or governmental investigation, pending or
threatened, whether based on statute, regulation or order, or tort, or contract
or otherwise, before any court or governmental authority; provided, however,
that the foregoing indemnity agreement shall not apply to claims, damages,
losses, liabilities and expenses solely attributable to an Indemnified Party’s
gross negligence or willful misconduct. The indemnity agreement contained in
this Section shall survive the termination of this Pledge Agreement. The Pledgor
may participate at its expense in the defense of any such action or claim.

6

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     18. Governing Law and Jurisdiction. This Pledge Agreement has been
delivered to and accepted by the Secured Party and will be deemed to be made in
the State where the Secured Party’s office indicated above is located. This
Pledge Agreement will be interpreted and the rights and liabilities of the
Pledgor and the Secured Party determined in accordance with the laws of the
State where the Secured Party’s office indicated above is located, excluding its
conflict of laws rules. The Pledgor hereby irrevocably consents to the exclusive
jurisdiction of any state or federal court in the county or judicial district
where the Secured Party’s office indicated above is located; provided that
nothing contained in this Pledge Agreement will prevent the Secured Party from
bringing any action, enforcing any award or judgment or exercising any rights
against the Pledgor individually, against any security or against any property
of the Pledgor within any other county, state or other foreign or domestic
jurisdiction. The Pledgor acknowledges and agrees that the venue provided above
is the most convenient forum for both the Secured Party and the Pledgor. The
Pledgor waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this Pledge Agreement.
     19. Authorization to Obtain Credit Reports. By signing below, each Pledgor
who is an individual provides written authorization to the Secured Party or its
designee (and any assignee or potential assignee hereof) to obtain the Pledgor’s
personal credit profile from one or more national credit bureaus. Such
authorization shall solely extend to obtaining a credit profile in considering
this Pledge Agreement and subsequently for the purposes of update, renewal or
extension of such credit or additional credit and for reviewing or collecting
the resulting account.
20. WAIVER OF JURY TRIAL. THE PLEDGOR IRREVOCABLY WAIVES ANY AND ALL RIGHT THE
PLEDGOR MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS PLEDGE AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION
WITH THIS PLEDGE AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH
DOCUMENTS. THE PLEDGOR ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND
VOLUNTARY.
The Pledgor acknowledges that it has read and understood all the provisions of
this Pledge Agreement, including the waiver of jury trial, and has been advised
by counsel as necessary or appropriate.
     WITNESS the due execution hereof as a document under seal, as of the date
first written above, with the intent to be legally bound hereby.

             
WITNESS:
           
 
           
 
          H.F.
LENFEST                                                                                (SEAL)

 

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EXHIBIT A TO PLEDGE AGREEMENT
(UNCERTIFICATED SECURITIES)
With respect to the following account:

         
     Title of the Securities Account:
       
 
       
     Securities Account No.:
 
 
   
     Custodian:
       

      Check applicable blank. If no blank is checked, Option #1A applies.
 
   
Option #1A o
  The securities account referred to above and all assets in the securities
account (including, without limitation, all financial assets, but excluding any
units in any common trust fund or collective investment fund) are being pledged
as collateral and are restricted from trading and withdrawals. The Secured
Party’s written approval is required prior to any trading or withdrawals of such
assets.
 
   
Option #1B o
  The specific assets listed below, which are in the securities account referred
to above, are being pledged as collateral and are restricted from trading and
withdrawals. The Secured Party’s written approval is required prior to any
trading or withdrawal of such assets:
 
   
 
 
Quantity                                                                          
                          Description of Securities
 
   
Option #2 þ
  The securities account referred to above and all assets in the securities
account (including, without limitation, all financial assets, but excluding any
units in any common trust fund or collective investment fund) are being pledged
as collateral but trading is permitted in the acceptable replacement collateral
listed in Exhibit B hereto. Any withdrawals require the Secured Party’s prior
written approval.

 

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EXHIBIT B TO PLEDGE AGREEMENT
Acceptable Replacement Collateral
(Check all categories that apply)

     
þ
  Certificates of Deposit, with waiver of set-off rights
þ
  Money Market Funds rated “AA” or better with properly executed control
agreement with PNC (such as Provident Institutional Funds)
þ
  All other Money Market Funds with a properly executed control agreement with
PNC
þ
  Treasury bills / Short Term Funds
þ
  Commercial Paper / Banker’s Acceptances
þ
  Federal Agency Discount Notes
þ
  US Government Bonds/Notes with remaining maturity > 1 year
þ
  US Federal Agency Bonds (e.g., GNMAs, FNLMCs, FNMAs)
þ
  Quasi-Government Bonds (e.g., FHLB)
þ
  Municipal Bonds of Investment Grade Rating (BBB Rated)
þ
  Corporate Bonds (Convertible, Asset-Backed, Variable Rate, etc.) of Investment
Grade Rating (BBB Rating)
þ
  Mortgage-Backed Securities
þ
  Treasury Inflation Securities
 
  Collateralized Mortgage Obligations (CMOs) — PACs and TACs only
 
  Preferred Stock/Convertible Preferred Stock
 
  Corporate Equities (listed securities valued at $5.00 or more per share)
 
  Margin stock subject to Regulation “U” (if any of the Obligations are “purpose
credit”)
 
  Publicly Traded Mutual Funds
 
  Other:
                                                                        
        
 
  All of the foregoing

 

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      Notification and Control Agreement
(Trust, Custody or Brokerage Accounts)   (PNCBANK LOGO) [w73712w7371201.gif]

     THIS NOTIFICATION AND CONTROL AGREEMENT (the “Agreement”) is made this
           day of           , 2009, by and among H.F. Lenfest, with an address
at 300 Barr Harbor Drive, Suite 460, Conshohocken, PA 19428 (the “Pledgor”),
                                                              
                   , in its capacity as custodian (the “Custodian”) and PNC
BANK, NATIONAL ASSOCIATION, with an office at 1000 Westlakes Drive, Suite 200,
Berwyn, PA 19312, in its capacity as secured party (the “Secured Party”).
     The Pledgor has granted to the Secured Party a security interest in the
investment property held in its securities account No.                     
maintained with the Custodian (the “Account”), all financial assets now or
hereafter credited to the Account, and all additions, substitutions,
replacements, proceeds, income, dividends and distributions thereon
(collectively, the “Collateral”), pursuant to, and more particularly described
in, a Pledge Agreement dated           , 2009 (as amended, restated or otherwise
modified from time to time, the “Pledge Agreement”) from the Pledgor to the
Secured Party. The Custodian is in possession of the Collateral pursuant to a
certain                      dated                                         
          ,            (the “Custodian Agreement”). Pursuant to the Pledge
Agreement, the Secured Party has required the execution and delivery of this
Agreement.
NOW, THEREFORE, for valuable consideration and intending to be legally bound,
the parties
hereto agree and acknowledge as follows:
     1. Possession of Collateral. The Custodian acknowledges that: (a) the
Collateral is in its possession or in possession of a subcustodian or clearing
corporation, and (b) the Pledgor’s interest in the Collateral appears on the
Custodian’s books and records. The Custodian will treat all property deposited
or credited to the Account as financial assets under Article 8 of the Uniform
Commercial Code (as adopted and enacted and in effect from time to time in the
State where the Secured Party’s office indicated above is located) (“UCC”).
     2. Notice of Security Interest. The Custodian acknowledges that this
Agreement constitutes written notification to the Custodian, pursuant to
Articles 8 and 9 of the UCC and applicable federal regulations for the Federal
Reserve Book Entry System, of the Secured Party’s security interest in the
Collateral. The Pledgor, Secured Party and Custodian are also entering into this
Agreement to provide for the Secured Party’s control of the Collateral and to
perfect, and confirm the priority of, the Secured Party’s security interest in
the Collateral. The Custodian agrees to promptly make all necessary entries or
notations in its books and records to reflect the Secured Party’s security
interest in the Collateral.
     3. Control. The Custodian, without further consent from the Pledgor, hereby
agrees to comply with all entitlement orders, instructions, and directions of
any kind originated by Secured Party concerning the Collateral, to liquidate the
Collateral as and to the extent directed by the Secured Party and to pay over to
the Secured Party all proceeds therefrom to the extent necessary to satisfy the
Pledgor’s obligations, without any setoff or deduction.
     4. Trading and Withdrawals. Prior to receipt by the Custodian of a notice
from the Secured Party that the Secured Party is exercising exclusive control
over the Collateral (a “Notice of Exclusive Control”), the Pledgor shall have
the right at any time and from time to time to purchase and sell securities
included in the Collateral, provided that unless approved in writing by the
Secured Party, no Collateral, including income, interest, dividends and other
distributions on the Collateral, may be
Form 11F Rev. 1/02

 

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withdrawn by the Pledgor from the Account. The Custodian will not comply with
any entitlement order originated by the Pledgor that would require the Custodian
to make a free delivery to the Pledgor or any other person. Upon the Custodian’s
receipt of a Notice of Exclusive Control, Custodian will cease (a) complying
with entitlement orders or other directions concerning the Collateral originated
by the Pledgor, and (b) if directed by the Secured Party, distributing interest
and dividends on the Collateral to the Pledgor.
     5. Custodian Agreement. The Custodian shall simultaneously send to the
Secured Party copies of all notices given and statements and, if requested,
confirmations rendered pursuant to the Custodian Agreement and shall notify the
Secured Party of the termination of the Custodian Agreement. Notwithstanding
anything contained in the Custodian Agreement, so long as the Pledge Agreement
remains in effect, neither the Pledgor nor the Custodian shall terminate the
Custodian Agreement without thirty (30) days’ prior written notice to the other
party and the Secured Party. In the event of any conflict between the provisions
of this Agreement and the Custodian Agreement, the provisions hereof shall
control. Regardless of any provision in the Custodian Agreement, the State where
the Secured Party’s office indicated above is located shall be deemed to be the
Custodian’s jurisdiction for the purposes of this Agreement and the perfection
and priority of the Secured Party’s security interest in the Collateral. In the
event the Custodian no longer serves as custodian for the Collateral, the
Collateral shall be transferred (i) to a successor custodian satisfactory to the
Secured Party, provided that prior to such transfer, such successor custodian
executes an agreement that is in all material respects the same as this
Agreement, or (ii) if no satisfactory successor has been designated, then as
directed by the Secured Party.
     6. Indemnity.
          (a) The Pledgor shall indemnify and hold the Custodian harmless from
any and all losses, claims, damages, liabilities, expenses and fees, including
reasonable attorneys’ fees, resulting from the execution of or performance under
this Agreement and the delivery by the Custodian of all or any part of the
Collateral to the Secured Party pursuant to this Agreement, unless such losses,
claims, damages, liabilities, expenses or fees are primarily attributable to the
Custodian’s gross negligence or willful misconduct. This indemnification shall
survive the termination of this Agreement.
          (b) The Secured Party shall indemnify and hold the Custodian harmless
from and against any and all losses, claims, damages, liabilities, expenses and
fees (including reasonable attorneys’ fees) arising out of the Custodian’s
compliance with any instructions from the Secured Party with respect to the
Collateral unless such losses, claims, damages, liabilities, expenses or fees
are primarily attributable to the Custodian’s gross negligence or willful
misconduct. This indemnification shall survive the termination of this
Agreement.
     7. Protection of Custodian. Except as required by Paragraph 3 hereof, the
Custodian shall have no duty to require any cash or securities to be delivered
to it or to determine that the amount and form of assets constituting Collateral
comply with any applicable requirements. The Custodian may hold the securities
in bearer, nominee, federal reserve book entry, or other form and in any
securities depository or UCC clearing corporation, with or without indicating
that the securities are subject to a security interest; provided, however, that
all Collateral shall be identified on the Custodian’s books and records as
subject to the Secured Party’s security interests and shall be in a form that
permits transfer to the Secured Party without additional authorization or
consent of the Pledgor. The Custodian may rely and shall be protected in acting
upon any notice, instruction, or other communication which it reasonably
believes to be genuine and authorized. As between the Pledgor and the Custodian,
the terms of the Custodian Agreement shall apply with respect to any losses or
liabilities or fees, costs or expenses of such parties arising out of matters
covered by this Agreement. The Pledgor agrees that the Custodian will not be
liable to the Pledgor for complying with entitlement orders originated by the
Secured Party, unless the

2

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Custodian (i) takes the action after it is served with an injunction or other
legal process enjoining it from doing so issued by a court of competent
jurisdiction and has had a reasonable opportunity to act on the injunction or
other legal process, or (ii) acts in collusion with the Secured Party in
violating the Pledgor’s rights. The Custodian shall have no liability to any
party for any incidental, punitive or consequential damages resulting from any
breach by the Custodian of its obligations hereunder.
     The Custodian will be excused from failing to act or delay in acting, and
no such failure or delay shall constitute a breach of this Agreement or
otherwise give rise to any liability of the Custodian, if (i) such failure or
delay is caused by circumstances beyond the Custodian’s reasonable control,
including but not limited to legal constraint, emergency conditions, action or
inaction of governmental, civil or military authority, fire, strike, lockout or
other labor dispute, war, riot, theft, flood, earthquake or other natural
disaster, breakdown of public or private or common carrier communications or
transmission facilities or equipment failure, or (ii) such failure or delay
resulted from the Custodian’s reasonable belief that the action would have
violated any guideline, rule or regulation of any governmental authority.
     8. Termination/Release of Collateral. This Agreement shall terminate
automatically upon receipt by the Custodian of written notice executed by two
officers of the Secured Party holding titles of Vice President or higher that
(a) all of the obligations secured by Collateral have been satisfied, or (b) all
of the Collateral may be released, whichever is sooner, and the Custodian shall
thereafter be relieved of all duties and obligations hereunder. In addition, any
notice from the Secured Party relating to release of all or any portion of the
Collateral not permitted by this Agreement without the consent of the Secured
Party shall be effective only if executed by two officers of the Secured Party
holding titles of Vice President or higher.
     9. Waiver and Subordination of Rights. The Custodian hereby waives its
right to setoff any obligations of the Pledgor to the Custodian against any or
all cash, securities, financial assets and other investment property held by the
Custodian as Collateral, and hereby subordinates in favor of the Secured Party
any and all liens, encumbrances, claims or security interests which the
Custodian may have against the Collateral, either now or in the future, except
that the Custodian will retain its prior lien on the property held as Collateral
only to secure payment for property purchased for Collateral and normal
commissions and fees relating to the property held as Collateral. The Custodian
will not agree with any third party that the Custodian will comply (and the
Custodian will not comply) with any entitlement orders, instructions or
directions of any kind concerning the Collateral originated by such third party
without the Secured Party’s prior written consent. Except for the claims and
interests of the Secured Party and the Pledgor in the Collateral, the Custodian
does not know of any claim to or interest in the Collateral. The Custodian will
use reasonable efforts to promptly notify the Secured Party and the Pledgor if
any other person claims that it has a property interest in any of the
Collateral.
     10. Expenses. The Pledgor shall pay all fees, costs and expenses (including
reasonable fees and expenses of internal or external counsel) of enforcing any
of the Secured Party’s rights and remedies upon any breach (by the Custodian or
the Pledgor) of any of the provisions of this Agreement.
     11. Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder (“Notices”) must be in writing
and will be effective upon receipt. Notices may be given in any manner to which
the parties may separately agree, including electronic mail. Without limiting
the foregoing, first-class mail, facsimile transmission and commercial courier
service are hereby agreed to as acceptable methods for giving Notices.
Regardless of the manner in which provided, Notices may be sent to a party’s
address as set forth below, or to such other address as any party may give to
the others for such purpose in accordance with this section.

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     12. Changes in Writing. No modification, amendment or waiver of, or consent
to any departure by any party from, any provision of this Agreement will be
effective unless made in a writing signed by the parties hereto, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on the Pledgor in any case will
entitle the Pledgor to any other or further notice or demand in the same,
similar or other circumstance.
     13. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
     14. Counterparts. This Agreement may be signed in any number of counterpart
copies and by the parties hereto on separate counterparts, but all such copies
shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile transmission
shall be effective as delivery of a manually executed counterpart. Any party so
executing this Agreement by facsimile transmission shall promptly deliver a
manually executed counterpart, provided that any failure to do so shall not
affect the validity of the counterpart executed by facsimile transmission.
     15. Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns; provided, however, that the Pledgor may
not assign this Agreement in whole or in part without the Secured Party’s prior
written consent and the Secured Party at any time may assign this Agreement in
whole or in part.
     16. Governing Law and Jurisdiction. This Agreement has been delivered to
and accepted by the Secured Party and will be deemed to be made in the State
where the Secured Party’s office indicated above is located. This Agreement will
be interpreted and the rights and liabilities of the parties hereto determined
in accordance with the laws of the State where the Secured Party’s office
indicated above is located, excluding its conflict of laws rules. Each of the
parties hereby irrevocably consents to the exclusive jurisdiction and venue of
any state or federal court located within the county where the Secured Party’s
office indicated above is located.

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     17. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY
AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM
OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION
WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS.
EACH PARTY HERETO ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND
VOLUNTARY.
     WITNESS the due execution hereof as a document under seal, as of the date
first written above.

                             
 
                            Pledgor’s Address for Notices:       PLEDGOR:    
 
                            300 Barr Harbor Drive, Suite 460
Conshohocken, PA 19428

     
 
H.F. Lenfest     Attention: H.F. Lenfest
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                            Secured Party’s Address for Notices:       SECURED
PARTY:

PNC ABNK, NTIONAL ASSOCIATION    
 
                            1000 Westlakes Drive, Suite 200
Berwyn, PA 19132       By:                                   Attention: John
DiNapoli
Facsimile Number 610-725-5799           Print Name:
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                            Custodian’s Address for Notices:       CUSTODIAN:  
 
 
                                                  By:                          
        Attention:
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