Document:

exv10w1

 

Exhibit 10.1

Safeguard Scientifics, Inc., a Pennsylvania corporation (the “Company”), hereby grants to the
grantee named below (“Grantee”) an option (this “Option”) to purchase the total number of shares
shown below of Common Stock of the Company (the “Shares”) at the exercise price per share set forth
below, as an inducement to accept employment with the Company pursuant to that certain employment
agreement between the Company and Grantee dated May 24, 2007 (the “Employment Agreement”), subject
to all of the terms and conditions on the subsequent pages of this Stock Option Grant Certificate.
Although the grant is not made pursuant to the 2004 Equity Compensation Plan (the “Plan”), except
as otherwise provided herein, the grant shall be subject to the rules of the Plan as if it were a
grant made pursuant to the Plan. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to them in the Plan. The terms and conditions set forth on
subsequent pages hereto and the terms and conditions of the Plan are incorporated herein by
reference. This Stock Option Grant Certificate shall constitute the “Agreement” for this Option as
such term is used in the Plan.

	 	 	 	 	 
	Grant Date:

	 	June 11, 2007	 	 
	 
	 	 	 	 
	Type of Option:

	 	Nonqualified Option
	 	  
	 
	 	 	 	 
	Shares Subject to Option:

	 	375,000 	 	 
	 
	 	 	 	 
	Exercise Price Per Share:

	 	$2.62 	 	 
	 
	 	 	 	 
	Term of Option:

	 	8 years 	 	 

Shares subject to issuance under this Option will vest 25% on the first anniversary of the Grant
Date and in 36 equal monthly installments thereafter; provided, however, if Grantee’s employment
terminates prior to the date this option would otherwise become fully vested as a result of (i)
death, (ii) permanent disability, (iii) retirement on or after his or her 65th birthday,
(iv) the occurrence of a Reorganization or Change of Control (as defined in the Plan), or (v)
termination of employment without cause by the Company or with good reason by Grantee, as set forth
in the Grantee’s Employment Agreement, this option will be deemed fully vested as of the date of
such termination.

The Company shall have the right, without the consent of Grantee, to amend the terms of this Stock
Option Grant Certificate to the extent necessary or appropriate, as determined by the Company in
its sole discretion, to conform to Section 409A of the Internal Revenue Code of 1986, as amended.

Grantee hereby acknowledges receipt of a copy of the Plan, represents that Grantee has read the
Plan and understands the terms and provisions of the Plan, and accepts this Option as if it were
granted pursuant to the Plan and subject to all the terms and conditions of the Plan and this Stock
Option Grant Certificate, except as otherwise provided herein. Grantee acknowledges that the grant
and exercise of this Option, and the sale of Shares obtained through the exercise of this Option,
may have tax implications that could result in adverse tax consequences to the Grantee and that
Grantee is not relying on the Company for any tax, financial or legal advice and will consult a tax
adviser prior to such exercise or disposition.

This Option is designated a nonqualified stock option. It is not an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

 

 

In witness whereof, this Stock Option Grant Certificate has been executed by the Company by a duly
authorized officer as of the date specified hereon.

Safeguard Scientifics, Inc.

/s/ Peter J. Boni

Peter J. Boni, President and Chief Executive Officer

	 	 	 
	/s/ Raymond J. Land
 

Raymond J. Land

	 	 

1. Option Expiration. The Option shall automatically terminate upon the happening of the
first of the following events:

     (a) the expiration of the 90-day period after the Grantee ceases to be employed by, or
providing services to, the Company, if the termination is for any reason other than involuntary
termination without Cause or voluntary termination with Good Reason, Disability, death, Cause, a
Change of Control Termination or retirement as provided herein;

     (b) the expiration of the three-year period after the Grantee ceases to be employed by, or
providing services to, the Company, on account of a Severance Termination or Change of Control
termination as set forth in the Employment Agreement;

     (c) the expiration of the one-year period after the Grantee ceases to be employed by, or
providing services to, the Company on account of the Grantee’s Disability;

     (d) the expiration of the one-year period after the Grantee ceases to be employed by, or
providing services to, the Company if the Grantee dies while employed by the Company or if the
Grantee dies within three months after the Grantee ceases to be so employed on account of a
termination described in subparagraph (a) above;

     (e) the date on which the Grantee ceases to be employed by, or providing services to, the
Company for Cause; or

     (f) the expiration of the one-year period after the Grantee’s employment or service terminates
as a result of retirement on or after the Grantee’s sixty-fifth birthday, or after such earlier
date as may be determined by the Committee, in its sole discretion, to be warranted given the
particular circumstances surrounding the earlier termination of the Grantee’s employment or
service.

     Notwithstanding the foregoing, in no event may the Option be exercised after the expiration of
the Term of Option specified on page 1. For purposes of this Option, the terms “Cause,” “Good
Reason,” “Disability” and “Change of Control Termination” shall have the meaning given to them in
the Employment Agreement. Other than as set forth in this Agreement, any portion of the Option that
is not vested at the time the Grantee ceases to be employed by, or providing service to, the
Company shall immediately terminate.

     In the event a Grantee ceases to be employed by, or providing service to, the Company for
Cause, the Grantee shall automatically forfeit all shares underlying any exercised portion of an
Option for which the Company has not yet delivered the share certificates upon refund by the
Company of the exercise price paid by the Grantee for such shares.

 

 

2. Exercise Procedures.

     (a) Subject to the provisions of this Stock Option Grant Certificate and the Plan, the Grantee
may exercise part or all of the vested Option by giving the Company written notice of intent to
exercise in the manner provided in Paragraph 11 below, specifying the number of Shares as to which
the Option is to be exercised. On the delivery date, the Grantee shall pay the exercise price (i)
in cash, (ii) by delivering Shares of the Company (duly endorsed for transfer or accompanied by
stock powers signed in blank) which shall be valued at their fair market value on the date of
delivery, or (iii) by such other method as the Committee may approve, including payment through a
broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board. The
Committee may impose from time to time such limitations as it deems appropriate on the use of
Shares of the Company to exercise the Option.

     (b) The obligation of the Company to deliver Shares upon exercise of the Option shall be
subject to all applicable laws, rules, and regulations and such approvals by governmental agencies
as may be deemed appropriate by the Committee, including such actions as Company counsel shall deem
necessary or appropriate to comply with relevant securities laws and regulations. The Company may
require that the Grantee (or other person exercising the Option after the Grantee’s death)
represent that the Grantee is purchasing Shares for the Grantee’s own account and not with a view
to or for sale in connection with any distribution of the Shares, or such other representation as
the Board deems appropriate. All obligations of the Company under this Stock Option Grant
Certificate shall be subject to the rights of the Company as set forth in the Plan as if the grant
had been issued pursuant to the Plan, to withhold amounts required to be withheld for any taxes, if
applicable. Subject to Committee approval, the Grantee may elect to satisfy any income tax
withholding obligation of the Company with respect to the Option by having Shares withheld up to an
amount that does not exceed the minimum marginal tax rate for federal (including FICA), state and
local tax liabilities.

3. Change of Control. The provisions of the Employment Agreement and this Stock Option
Grant Certificate relating to Change of Control and Change of Control Termination shall override
any provisions of the Plan relating to Change of Control.

4. Restrictions on Exercise. Only the Grantee may exercise the Option during the Grantee’s
lifetime. After the Grantee’s death, the Option shall be exercisable (subject to the limitations
specified in the Plan) solely by the legal representatives of the Grantee, or by the person who
acquires the right to exercise the Option by will or by the laws of descent and distribution, to
the extent that the Option is exercisable pursuant to this Stock Option Grant Certificate.
Notwithstanding the foregoing, the Committee may provide, at or after grant, that a Grantee may
transfer nonqualified stock options pursuant to a domestic relations order or to family members or
other persons or entities on such terms as the Committee may determine.

5. Grant Subject to Plan Provisions; Entire Agreement. This grant is made separate from
the Plan, as an inducement to Grantee to accept employment pursuant to the Employment Agreement.
Notwithstanding the preceding sentence, except to the extent otherwise stated in this Stock Option
Grant Certificate or to the extent the context otherwise requires, this grant shall be interpreted
as if it had been granted pursuant to the Plan. The grant and exercise of the Option shall be
subject to the provisions of the Plan and to interpretations, regulations and determinations
concerning the Plan established from time to time by the Committee in accordance with the
provisions of the Plan, including, but not limited to, provisions pertaining to (i) rights and
obligations with respect to withholding taxes, (ii) the registration, qualification or listing of
the Shares, (iii) capital or other changes of the Company, and (iv) other requirements of
applicable law, all as if the grant had been made pursuant to the Plan. The Committee shall have
the authority to interpret and construe the Option as if it had been granted pursuant to the terms
of the Plan, and its decisions shall be conclusive as to any questions arising hereunder. This
Stock Option Grant Certificate represents the entire agreement between the parties with respect to
the grant of the Option and may only be modified or amended in a writing signed by both parties.

6. No Employment Rights. The grant of the Option shall not confer upon the Grantee any
right to be retained by or in the employ of the Company and shall not interfere in any way with the
right of the Company to terminate the Grantee’s employment or service at any time pursuant to the
Employment Agreement. No policies, procedures or statements of any nature by or on behalf of the Company (whether written or oral, and whether or
not contained in

 

 

any formal employee manual or handbook) shall be construed to modify this Stock
Option Grant Certificate or to create express or implied obligations to the Grantee of any nature.

7. No Stockholder Rights. Neither the Grantee, nor any person entitled to exercise the
Grantee’s rights in the event of the Grantee’s death, shall have any of the rights and privileges
of a stockholder with respect to the Shares subject to the Option until certificates for Shares
have been issued upon the exercise of the Option.

8. No Disclosure. The Grantee acknowledges that the Company has no duty to disclose to the
Grantee any material information regarding the business of the Company or affecting the value of
the Shares before or at the time of a termination of the Grantee’s employment, including without
limitation any plans regarding a public offering or merger involving the Company.

9. Assignment and Transfers. The rights and interests of the Grantee under this Stock
Option Grant Certificate may not be sold, assigned, encumbered or otherwise transferred except, in
the event of the death of the Grantee, by will or by the laws of descent and distribution. In the
event of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or otherwise dispose
of the Option or any right hereunder, except as provided for in this Stock Option Grant
Certificate, or in the event of the levy or any attachment, execution or similar process upon the
rights or interests hereby conferred, the Company may terminate the Option by notice to the
Grantee, and the Option and all rights hereunder shall thereupon become null and void. The rights
and protections of the Company hereunder shall extend to any successors or assigns of the Company
and to the Company’s parents, subsidiaries, and affiliates. This Stock Option Grant Certificate
may be assigned by the Company without the Grantee’s consent.

10. Applicable Law. The validity, construction, interpretation and effect of this
instrument shall be governed by and determined in accordance with the laws of the Commonwealth of
Pennsylvania.

11. Notice. Any notice to the Company provided for in this instrument shall be addressed
to the Company in care of the General Counsel at the Company’s headquarters and any notice to the
Grantee shall be addressed to such Grantee at the current address shown on the payroll of the
Company, or to such other address as the Grantee may designate to the Company in writing. Any
notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope
addressed as stated above, registered and deposited, postage prepaid, in a post office regularly
maintained by the United States Postal Service.exv10w1

 

Exhibit 10.1

July 31, 2007

Environmental Tectonics Corporation

125 James Way

Southampton, PA 18966

Attention: Duane Deaner

Re:      $15,000,000 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 November 16, 2006 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 $15,000,000 (the “Line of Credit” or the “Loan”).
The “Expiration Date” means June 30, 2009, 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, 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 multiplied by (x) 1.00% per annum in the case of Existing Letters of Credit and (y) .90% per
annum in the case of Letters of Credit issued after the date hereof, 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,

 

 

Environmental Tectonics Corporation

July 31, 2007

Page 2

provided that in no event shall such fees for any Letter 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 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, a 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”).

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.

     (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.

 

 

Environmental Tectonics Corporation

July 31, 2007

Page 3

     (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.

     (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,

 

 

Environmental Tectonics Corporation

July 31, 2007

Page 4

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, an amended and restated
subordination and intercreditor agreement from the Guarantor in form and content satisfactory to
the Bank 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 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,

 

 

Environmental Tectonics Corporation

July 31, 2007

Page 5

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:
	 	 	 	/s/	 	 	 	 
	 

	 	 	 	 

	 	 
	 	 

	 	 
	 

	 	Title:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

 

 

Environmental Tectonics Corporation

July 31, 2007

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 31st day of July, 2007.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	ENVIRONMENTAL TECTONICS CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	/s/	 	 	 	 
	 

	 	 

	 	 
	 	 

(SEAL)
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	Print Name:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 	 	 
	 	 	 
	 	 

 

 

EXHIBIT A

TO LETTER AGREEMENT

DATED JULY 31, 2007

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 covenant 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) With each delivery of Financial Statements pursuant to clause (a) above, 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 minimum Consolidated
Tangible Net Worth of $9,000,000.

     “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.

A-1

 

     “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;

          (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 liens or security interests to secure existing or 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
	 
	 	258078	 	 	500,000.00	 	 	 	11-30-07	 
	 
	 
	 	260691	 	 	21,341.75	 	 	 	6-30-07	 
	 
	 
	 	18101978	 	 	195,000.00	 	 	 	3-26-08	 
	 
	 
	 	18101979	 	 	585,000.00	 	 	 	3-26-08	 
	 
	 
	 	18103494	 	 	15,131.00	 	 	 	6-30-08	 
	 
	 
	 	258206	 	 	325,439.22	 	 	 	3-28-08	 
	 
	 
	 	259738	 	 	43,190.00	 	 	 	6-30-08	 
	 
	 
	 	262405	 	 	37,991.70	 	 	 	11-9-07	 
	 
	 	263283	 	 	161,000.00	 	 	 	1-31-08	 
	 
	 
	 	18102384	 	 	710,526.32	 	 	 	12-31-07	 
	 
	 
	 	18104125	 	 	16,044.60	 	 	 	12-30-07	 
	 
	 
	 	18104493	 	 	614,579.00	 	 	 	6-30-08	 
	 
	 
	 	18104578	 	 	21,176.10	 	 	 	3-30-08	 
	 
	 
	 	18104640	 	 	1,256,743.00	 	 	 	6-30-08	 
	 
	 
	 	18105243	 	 	250,200.00	 	 	 	2-29-08

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00127-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00127-of-00352.parquet"}]]