Document:

exv10w2

Exhibit 10.2

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS OTHERWISE SET FORTH HEREIN,
NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR PURSUANT TO AN EXEMPTION
THEREFROM.

			
	 	 	 
	April 23, 2009

(Original Warrant Date: February 20, 2009)
	 	Warrant to Purchase

Shares of Common Stock

ENVIRONMENTAL TECTONICS CORPORATION

AMENDED AND RESTATED COMMON STOCK WARRANT

     THIS CERTIFIES THAT, for value received, H.F. Lenfest, or his registered assigns (each, a
“Holder”), is entitled to purchase from Environmental Tectonics Corporation, a Pennsylvania
corporation (the “Company”), at any time or from time to time during the Exercise Period (as
hereinafter defined), the number of fully paid and nonassessable shares of the Company’s common
stock, par value $0.05 per share (the “Common Stock”), set forth in Section 1 hereof, at the
exercise price set forth in Section 2 hereof, subject to adjustment as provided herein. This
Amended and Restated Common Stock Warrant (this “Warrant”) amends and restates in its entirety and
replaces the Common Stock Warrant issued to the Holder by the Company on February 20, 2009. This
Warrant has been issued pursuant to, and subject to the terms of, that certain Secured Promissory
Note, dated as of February 20, 2009, issued by the Company to the Holder (the “Note”). The term
“Warrant Shares”, as used herein, refers to the shares of Common Stock purchasable hereunder. The
term “Warrants” means this Warrant and any warrants issued as a result of the transfer, exchange or
replacement of such warrants. Capitalized terms not otherwise defined herein shall have the
meanings given to such terms in the Note.

     This Warrant is subject to the following terms, provisions and conditions:

     1. Number of Shares. During the Exercise Period, the Holder shall be entitled to
purchase 143,885 shares of Common Stock under this Warrant; provided, however, that if the
Shareholder Approval (as hereinafter defined) is not obtained by the Shareholder Approval Date (as
hereinafter defined), the Holder shall be entitled to purchase 719,424 shares of Common Stock under
this Warrant, unless the Company repays in full all principal, accrued interest and all other
amounts payable under the Note on or before the Shareholder Approval Date.

     2. Exercise Price. The exercise price of this Warrant (the “Exercise Price”) shall be
a price per share equal to $1.39; provided, however, that if the Shareholder Approval is not
obtained by the Shareholder Approval Date, the Exercise Price shall be $0.69 per share, unless the
Company repays in full all principal, accrued interest and all other amounts payable under the Note
on or before the Shareholder Approval Date.

 

 

     3. Period of Exercise. This Warrant is exercisable at any time or from time to time
beginning on the date of issuance (the “Issue Date”) and ending at 5:00 p.m., Philadelphia,
Pennsylvania time on the seventh (7th) anniversary of the Issue Date (the “Exercise
Period”).

     4. Manner of Exercise; Issuance of Certificates; Payment for Shares. Subject to the
provisions hereof, this Warrant may be exercised by the Holder hereof, in whole or in part, by the
surrender of this Warrant, together with a completed exercise agreement in the form attached hereto
(the “Exercise Agreement”), to the Company during normal business hours on any business day at the
Company’s principal executive offices (or such other office or agency of the Company as it may
designate by notice to the Holder hereof), and upon payment to the Company in cash, by certified or
official bank check or by wire transfer for the account of the Company of the Exercise Price for
the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be
deemed to be issued to the Holder hereof or such Holder’s designee, as the record owner of such
shares, as of the close of business on the date on which this Warrant shall have been surrendered,
the completed Exercise Agreement shall have been delivered and payment shall have been made for
such shares as set forth above. Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in the Exercise Agreement, shall be delivered to the Holder
hereof within fifteen (15) business days after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by the Holder hereof
and shall be registered in the name of such Holder or such other name as shall be designated by
such Holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has
expired, the Company shall, at its expense, as soon as practicable after the date of exercise,
deliver to the Holder a new Warrant representing the number of shares with respect to which this
Warrant shall not then have been exercised.

     5. Certain Agreements of the Company. The Company hereby covenants and agrees as
follows:

          (a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in accordance
with the terms of this Warrant, be validly issued, fully paid, and nonassessable and free from all
taxes, liens, and charges with respect to the issue thereof.

          (b) Reservation of Shares. During the Exercise Period, the Company shall at all times
have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a
sufficient number of shares of Common Stock to provide for the exercise in full of this Warrant.

          (c) Listing. The Company shall use its reasonable best efforts to secure the listing
of the Warrant Shares upon each securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of issuance upon exercise
of this Warrant) and shall use its reasonable best efforts to maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all Warrant Shares.

          (d) Certain Actions Prohibited. The Company will not, by amendment of its charter or
through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale
of securities, or any other voluntary action, directly or indirectly, by operation of

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law or otherwise, avoid or seek to avoid the observance or performance of any of the terms to
be observed or performed by it hereunder, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the Holder of this Warrant in order to protect the exercise privilege of
the Holder of this Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant.

          (e) Successors and Assigns. This Warrant will be binding upon any entity succeeding
to the Company or its assets.

     6. Antidilution Provisions. During the Exercise Period, the Exercise Price and the
number of Warrant Shares shall be subject to adjustment from time to time as provided in this
Section 6. In the event that any adjustment of the Exercise Price as required herein results in a
fraction of a cent, such Exercise Price shall be rounded off to the nearest cent.

          (a) Sale of Securities Below Current Exercise Price. Except as otherwise provided in
Sections 6(b) and 6(d), if at any time the Company shall issue or, pursuant to the provisions
hereof, be deemed to have issued (other than as set forth in Section 6(a)(vi) hereof) any shares of
Common Stock, Convertible Securities (as hereinafter defined), Rights (as hereinafter defined) or
Related Rights (as hereinafter defined) (collectively, “Securities”) without consideration or for a
consideration per share less than the Exercise Price in effect immediately prior to the issuance of
such Securities, then the Exercise Price in effect immediately prior to each such issuance shall
forthwith be reduced to a price determined in accordance with the following formula:

EP2 = EP1 * (A + B) ÷ (A + C).

     For purposes of the foregoing formula, the following definitions shall apply:

                    (a) “EP2” shall mean the Exercise Price for the Common Stock in effect immediately
after such issuance of Securities;

                    (b) “EP1” shall mean the Exercise Price of the Common Stock in effect immediately
prior to such issuance of Securities;

                    (c) “A” shall mean the number of shares of Common Stock actually outstanding immediately prior
to such issuance of Securities (excluding shares of Common Stock issuable on conversion or exercise
of preferred stock, convertible promissory notes, options, warrants and other options to purchase
or rights to subscribe for such convertible or exchangeable securities);

                    (d) “B” shall mean the number of additional shares of Common Stock that would have been issued
if such Securities had been issued at a price per share equal to EP1 (determined by
dividing the aggregate consideration received by the Company in respect of such issue by
EP1); and

                    (e) “C” shall mean the number of such Securities issued in such transaction.

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For the purpose of this Section 6(a), the following definitions, procedures and exceptions shall be
applicable:

          (i) Rights. In the case of the issuance of options, warrants or other rights
to purchase or otherwise acquire shares of Common Stock, whether or not at the time
exercisable (collectively, “Rights”), the total number of shares of Common Stock issuable
upon exercise of such Rights shall be deemed to have been issued at the time such Rights are
issued, for a consideration equal to the sum of the consideration, if any, received by the
Company upon the issuance of such Rights and the minimum purchase or exercise price payable
upon the exercise of such Rights for the Common Stock to be issued upon the exercise
thereof; and the consideration per share shall be determined by dividing (i) the aggregate
consideration so received by and payable to the Company, by (ii) the number of shares of
Common Stock issuable upon exercise of such Rights.

          (ii) Convertible Securities and Related Rights. In the case of the issuance of
any class or series of stock or any bonds, debentures, notes or other securities or
obligations convertible into or exchangeable for Common Stock, whether or not then
convertible or exchangeable (collectively, “Convertible Securities”), or options, warrants
or other rights to purchase or otherwise acquire Convertible Securities (collectively,
“Related Rights”), the total number of shares of Common Stock issuable upon the conversion
or exchange of such Convertible Securities or exercise of such Related Rights shall be
deemed to have been issued at the time such Convertible Securities or Related Rights are
issued, for a consideration equal to the sum of (A) the consideration, if any, received by
the Company upon issuance of such Convertible Securities or Related Rights (excluding any
cash received on account of accrued interest or dividends) and (B)(1) in the case of
Convertible Securities, the minimum additional consideration, if any, to be received by the
Company upon the conversion or exchange of such Convertible Securities or (2) in the case of
Related Rights, the sum of (x) the minimum purchase or exercise price payable upon the
exercise of such Related Rights for Convertible Securities and (y) the minimum additional
consideration, if any, to be received by the Company upon the conversion or exchange of the
Convertible Securities issued upon the exercise of such Related Rights; and the
consideration per share shall be determined by dividing (i) the aggregate consideration so
received by and payable to the Company, by (ii) the number of shares of Common Stock
issuable upon conversion or exchange of such Convertible Securities or exercise of such
Related Rights.

          (iii) Changes. On any change in the number of shares of Common Stock issuable
upon the exercise of Rights or Related Rights or upon the conversion or exchange of
Convertible Securities or on any change in the minimum purchase or exercise price of Rights,
Related Rights or Convertible Securities, including, but not limited to, a change resulting
from the anti-dilution provisions of such Rights, Related Rights or Convertible Securities,
the Exercise Price to the extent in any way affected by such Rights, Related Rights or
Convertible Securities shall forthwith be readjusted to be thereafter the Exercise Price
that would have been obtained had the adjustment which was made upon the issuance of such
Rights, Related Rights or Convertible Securities been made after giving effect to such
change. No further adjustment shall be made in respect of such change upon the actual
issuance of Common Stock or any payment of

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consideration upon the exercise of such Rights or Related Rights or the conversion or
exchange of such Convertible Securities.

          (iv) Expiration or Cancellation. On the expiration or cancellation of any such
Rights, Related Rights or Convertible Securities, if the Exercise Price shall have been
adjusted upon the issuance thereof, the Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been obtained had the adjustment made upon the issuance of such
Rights, Related Rights or Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock actually issued upon the exercise of such Rights
or Related Rights or the conversion or exchange of such Convertible Securities.

          (v) Cash. In the case of the issuance of such Securities for cash, the amount
of consideration received by the Company shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other expenses paid or
incurred by the Company for any underwriting or otherwise in connection with the issuance
and sale thereof. In the case of the issuance of such Securities for consideration other
than cash, the amount of consideration received by the Company shall be determined in good
faith by the Company’s Board of Directors.

          (vi) Exceptions to Adjustment of Exercise Price. No adjustment to the Exercise
Price will be made (i) upon the exercise of any warrants, options or convertible securities
issued and outstanding on the Issue Date in accordance with the terms of such securities as
of such date; (ii) upon exercise of any stock or options which may hereafter be exercised
under any employee benefit plan of the Company now existing or to be implemented in the
future, so long as the issuance of such stock or options is approved by a majority of the
non-employee members of the Board of Directors of the Company or a majority of the members
of a committee of non-employee directors established for such purpose; (iii) upon exercise
of the Warrant; (iv) upon the issuance of securities in connection with any strategic
transaction that is approved by the Board of Directors of the Company, including the Holder
if then a director; or (v) upon the issuance of securities in connection with any financing
transaction with the Holder or any of his affiliates.

          (b) Subdivision or Combination of Common Stock. If the Company at any time subdivides
(by any stock split, stock dividend, recapitalization, reorganization, reclassification or
otherwise) the shares of Common Stock acquirable hereunder into a greater number of shares, then,
after the date of record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any time combines (by
reverse stock split, recapitalization, reorganization, reclassification or otherwise) the shares of
Common Stock acquirable hereunder into a smaller number of shares, then, after the date of record
for effecting such combination, the Exercise Price in effect immediately prior to such combination
will be proportionately increased.

          (c) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price
pursuant to the provisions of this Section 6, the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted by multiplying a number equal to

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the Exercise Price in effect immediately prior to such adjustment by the number of shares of
Common Stock issuable upon exercise of this Warrant immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.

          (d) Consolidation, Merger or Sale. In case of any consolidation of the Company with,
or merger of the Company into any other company, or in case of any sale or conveyance of all or
substantially all of the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the Holder of this Warrant will have the right
to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock
immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities or assets as the Holder of the Warrant would have received had the Warrant been
exercised immediately prior to such consolidation, merger or sale or conveyance. In any such case,
the Company will make appropriate provision to insure that the provisions of this Section 6 hereof
will thereafter be applicable as nearly as may be in relation to any shares of stock or securities
thereafter deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor
or acquiring entity (if other than the Company) and, if an entity different from the successor or
acquiring entity, the entity whose capital stock or assets the holders of the Common Stock of the
Company are entitled to receive as a result of such consolidation, merger or sale or conveyance
assumes by written instrument the obligations of the Company under this Warrant (including under
this Section 6) and the obligations to deliver to the Holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to
acquire. This Section 6(d) shall apply to any successive consolidations, mergers, sales or
conveyances.

          (e) Distribution of Assets. In case the Company shall declare or make any
distribution of its assets (including cash) to holders of Common Stock as a partial liquidating
dividend, by way of return of capital or otherwise, then, after the date of record for determining
stockholders entitled to such distribution, but prior to the date of distribution, the Holder of
this Warrant shall be entitled upon exercise of this Warrant for the purchase of any or all of the
shares of Common Stock subject hereto, to receive the amount of such assets which would have been
payable to the Holder had such Holder been the holder of such shares of Common Stock on the record
date for the determination of stockholders entitled to such distribution.

          (f) Notice of Adjustment. Upon the occurrence of any event which requires any
adjustment of the Exercise Price, then, and in each such case, the Company shall give notice
thereof to the Holder of this Warrant, which notice shall state the Exercise Price resulting from
such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such
price upon exercise, setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based. Such calculation shall be certified by the chief financial
officer of the Company.

          (g) Minimum Adjustment of Exercise Price. No adjustment of the Exercise Price shall
be made in an amount of less than 1% of the Exercise Price in effect at the time such adjustment is
otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which,

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together with any adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.

          (h) No Fractional Shares. No fractional shares of Common Stock are to be issued upon
the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any
fractional share which would otherwise be issuable in an amount equal to the same fraction of the
Market Price of a share of Common Stock on the date of such exercise.

          (i) Other Notices. In case at any time:

          (i) the Company shall declare any dividend upon the Common Stock payable in shares of
stock of any class or make any other distribution (including dividends or distributions
payable in cash out of retained earnings) to the holders of the Common Stock;

          (ii) there shall be any capital reorganization of the Company, or reclassification of
the Common Stock, or consolidation or merger of the Company with or into, or sale of all,
substantially all or a material portion of its assets to, another Company or entity; or

          (iii) there shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Company;

then, in each such case, the Company shall give to the Holder of this Warrant (a) notice of the
date on which the books of the Company shall close or a record shall be taken for determining the
holders of Common Stock entitled to receive any such dividend or distribution or for determining
the holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in
the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a reasonable approximation
thereof by the Company) when the same shall take place. Such notice shall also specify the date on
which the holders of Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given at least ten (10)
business days prior to the record date or the date on which the Company’s books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not affect the
validity of the proceedings referred to in clauses (i), (ii) and (iii) above; provided that if
notice is not given in accordance with this Section 6(i), the Company will use its best efforts to
insure that the Holder of this Warrant shall nevertheless receive the same rights and benefits
received by other holders of securities of the Company from the proceedings referred to in clauses
(i), (ii) and (iii) above, unless the Holder of this Warrant chooses not to receive such rights and
benefits.

          (j) Certain Events. If any event occurs of the type contemplated by the adjustment
provisions of this Section 6 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 6(i) hereof, and the Company’s Board of Directors
will make an appropriate adjustment in the Exercise Price and the number of

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shares of Common Stock acquirable upon exercise of this Warrant so that the rights of the
Holder shall be neither enhanced nor diminished by such event.

          (k) Certain Definitions.

          (i) “Shareholder Approval” means such time as the Company obtains the affirmative vote
of the shareholders of the Company for a new financing transaction with the Holder and the
restoration in full of the Holder’s voting rights on his preferred stock and common stock in
the Company.

          (ii) “Shareholder Approval Date” means July 2, 2009; provided, however, that if the SEC
provides any comments to the proxy statement that the Company is filing in connection with
the Shareholder Approval, the Shareholder Approval Date shall mean forty-five (45) days
after the SEC comments are received but in no event shall such date be later than August 13,
2009.

     7. Issue Tax. The issuance of certificates for Warrant Shares upon the exercise of
this Warrant shall be made without charge to the Holder of this Warrant or such shares for any
issuance tax or other costs in respect thereof.

     8. No Rights or Liabilities as a Shareholder. This Warrant shall not entitle the
Holder hereof to any voting rights, rights to dividends, or other rights as a shareholder of the
Company. No provision of this Warrant, in the absence of affirmative action by the Holder hereof
to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the
Holder hereof, shall give rise to any liability of such Holder for the Exercise Price or as a
shareholder of the Company, whether such liability is asserted by the Company or by creditors of
the Company.

     9. Transfer, Exchange and Replacement of Warrant.

          (a) Restriction on Transfer. This Warrant and the rights granted to the Holder hereof
are transferable, in whole or in part, upon surrender of this Warrant, together with a properly
executed assignment in the form attached hereto, at the office or agency of the Company referred to
in Section 9(e) below; provided, however, that any transfer or assignment shall be subject to the
conditions set forth in Section 9(f). Notwithstanding the foregoing, this Warrant, the shares of
Common Stock issuable upon exercise hereof, and the rights granted hereunder may not be transferred
to a competitor of the Company or any Subsidiary or affiliate of the Company.

          (b) Warrant Exchangeable for Different Denominations. This Warrant is exchangeable,
upon the surrender hereof by the Holder hereof at the office or agency of the Company referred to
in Section 9(e) below, for new Warrants of like tenor representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be designated by the
Holder hereof at the time of such surrender.

          (c) Replacement of Warrant. Upon receipt of evidence of the loss, theft, destruction,
or mutilation of this Warrant and, in the case of any such loss, theft, or destruction,

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upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the
Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant,
the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like
tenor.

     (d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant in
connection with any transfer, exchange or replacement as provided in this Section 9, this Warrant
shall be promptly canceled by the Company. The Company shall pay all taxes (other than securities
transfer taxes) and all other expenses (other than legal expenses, if any, incurred by the Holder
or transferees) and charges payable in connection with the preparation, execution, and delivery of
Warrants pursuant to this Section 9.

     (e) Register. The Company shall maintain, at its principal executive offices (or such
other office or agency of the Company as it may designate by notice to the Holder hereof), a
register for this Warrant, in which the Company shall record the name and address of the person in
whose name this Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.

     (f) Exercise or Transfer Without Registration. If, at the time of the surrender of
this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant
(or, in the case of any exercise, the Warrant Shares issuable hereunder), shall not be registered
under the Securities Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, that the Holder or
transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel
to the effect that such exercise, transfer, or exchange may be made without registration under the
Securities Act and under applicable state securities or blue sky laws; provided however, that no
legal opinion shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act unless in the opinion of counsel to the Company, such transfer does not comply with
the provisions of Rule 144. Notwithstanding the foregoing, the initial Holder of this Warrant, by
taking and holding the same, represents to the Company that such Holder is acquiring this Warrant
for investment and not with a present view to the distribution thereof.

     10. Notices. Any notice which is required or provided to be given under this Warrant
shall be deemed to have been sufficiently given and received for all purposes when delivered by
hand, telecopy (if a copy of such confirmed telecopy transmission shall be contemporaneously sent
by first class mail), or nationally recognized overnight courier, or five days after being sent by
certified or registered mail, postage and charges prepaid, return receipt requested, to the
following addresses:

     If to the Company:

Environmental Tectonics Corporation

125 James Way

Southampton, PA 18966

Attention: Chief Financial Officer

Facsimile: (215) 357-4000

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     With a copy to:

Klehr, Harrison, Harvey, Branzburg & Ellers LLP

260 S. Broad Street

Philadelphia, PA 19102

Attention: William Matthews, Esquire

Facsimile: (215) 568-6603

     If to a Holder hereof, at the address shown for such Holder on the books of the Company; or,
with respect to any party hereto, at any other address designated in writing by such party in
accordance with the provisions of this Section 10.

     11. Governing Law; Jurisdiction. This Warrant shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable to agreements made and to
be performed in the Commonwealth of Pennsylvania (without regard to principles of conflict of
laws). The Company and the Holder hereof consent to the jurisdiction of the United States federal
courts and the state courts located in the Commonwealth of Pennsylvania with respect to any suit or
proceeding based on or arising under this Warrant or the transactions contemplated hereby and agree
that all claims in respect of such suit or proceeding may be determined in such courts. The
Company and the Holder hereof waive the defense of an inconvenient forum to the maintenance of such
suit or proceeding and agree that service of process upon a party mailed by first class mail shall
be deemed in every respect effective service of process upon the party in any such suit or
proceeding. Nothing herein shall affect either party’s right to serve process in any other manner
permitted by law.

     12. Miscellaneous.

          (a) Amendments. This Warrant and any provision hereof may only be amended by an
instrument in writing signed by the Company and the Holder.

          (b) Descriptive Headings. The descriptive headings of the several paragraphs of this
Warrant are inserted for purposes of reference only, and shall not affect the meaning or
construction of any of the provisions hereof.

[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized
officer.

	 	 	 	 	 
	 	ENVIRONMENTAL TECTONICS CORPORATION

 	 
	 	By:  	/s/ Duane D. Deanes	 
	 	 	Name:  	Duane D. Deanes	 
	 	 	Title:  	CFO	 
	 

ACKNOWLEDGED:
 

	/s/ H. F. Lenfest	 	 
	 

	 	 
	H.F. Lenfest

	 	 

 

 

FORM OF EXERCISE AGREEMENT

Dated: ___________ __, 20__

	To: 	 	 [Company]

[Address]

     The undersigned, pursuant to the provisions set forth in the Warrant attached hereto, hereby
agrees to purchase ____________ shares of Common Stock covered by such Warrant, and makes payment
herewith in full therefor at the price per share provided by such Warrant in cash, by wire transfer
or by certified or official bank check in the amount of $____________. Please issue a certificate
or certificates for such shares of Common Stock in the name of and pay any cash for any fractional
share to:

	 	 	 	 	 
	 	 	 
	 	Name: 	
 	 
	 	 	 	 

	 	 	 	 	 
	 	Signature:   	
 	 
	 	Address: 	
 	 
	 	 	
 	 

	 	Note:	 	The above signature should correspond exactly
with the name on the face of the within Warrant.

and, if said number of shares of Common Stock shall not be all the shares purchasable under the
within Warrant, a new Warrant is to be issued in the name of said undersigned covering the balance
of the shares purchasable thereunder less any fraction of a share paid in cash.

 

 

FORM OF ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers all the rights of the
undersigned under the within Warrant, with respect to the number of shares of Common Stock covered
thereby set forth hereinbelow, to:

	 	 	 	 	 
	Name of Assignee	 	Address	 	No. of Shares
	 	 	 	 	 

, and hereby irrevocably constitutes and appoints _____________________________________________ as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named Company, with full power of substitution in the premises.

Dated: ________________ ___, 20 ___

In the presence of:

__________________

	 	 	 	 	 
	 	Name:   	
 	 
	 	 	                    	 
	 	Signature:   	
 	 
	 	
Title of Signing Officer or Agent (if any):

	 
	 	 	                    	 
	 	Address: 	
 	 
	 	 	                    	 

	 	Note:	 	The above signature should correspond exactly
with the name on the face of the within Warrant.exv10w3

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.

 

 

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	 

 

 

	 	 	 
	Amended and Restated Committed

Line Of Credit Note

	 	

			
	 	 	 
	$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.

 

 

“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

2

 

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.

3

 

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

4

 

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,

5

 

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.

6

 

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

 

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

 

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:  

 

 

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:  

 

 

_______________ ___, 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

 

 

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.

 

 

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

 

 

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: 	 	 
	 	 	 	 

 

 

	 	 	 	 	 

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: 	 	 

 

 

	 	 	 	 	 

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

 

     “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

 

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	 

 

 

Amended and Restated Guaranty Agreement

     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.

 

 

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: 	 	 	 
	 	 	 	 
	 

 

			
	Pledge Agreement

(Stocks, Bonds and Commercial Paper)
	 	

     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.

 

 

          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

2

 

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

 

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

 

     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

 

     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)

 

 

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.

 

 

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

 

 

			
	 	 	 
	Notification and Control Agreement

(Trust, Custody or Brokerage Accounts)
	 	

     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

 

 

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

 

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.

3

 

     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.

4

 

     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

Facsimile Number                      	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	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:

Title:	 	 

 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	Custodian’s Address for Notices:	 	 	 	CUSTODIAN:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Attention:

Facsimile Number	 	 
 
	 	 	 	 	 	Print Name:

Title	 	 

 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 

5

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