Exhibit 10.3

FINANCING AND SECURITY AGREEMENT

Dated

October 31, 2006

By and Between

BRANCH BANKING AND TRUST COMPANY

And

TVI CORPORATION and Subsidiaries

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TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS    1 Section 1.1    Certain Defined Terms.    1 LIBOR Base
Rate    16 Section 1.2    Accounting Terms and Other Definitional Provisions.   
24 Section 1.3    Interpretive Provisions.    25 ARTICLE II THE CREDIT
FACILITIES    25 Section 2.1    The Revolving Credit Facility.    25 2.1.1   
Revolving Credit Facility.    25 2.1.2    Procedure for Making Advances Under
the Revolving Loan; Lender Protection Loans.    26 2.1.3    Computation of
Borrowing Base.    26 2.1.4    Revolving Credit Note.    27 2.1.5    Mandatory
Prepayments of Revolving Loan.    27 2.1.6    Optional Prepayments of Revolving
Loan.    28 2.1.7    The Operating Account.    28 2.1.8    Revolving Loan
Account.    28 2.1.9    Revolving Credit Unused Line Fee.    28 Section 2.2   
The Acquisition Line Facility.    28 2.2.1    Acquisition Line Commitment.    28
2.2.2    Procedure for Making Advances Under the Acquisition Line.    29 2.2.3
   Acquisition Line Notes.    29 2.2.4    Acquisition Line Term Payments.    29
2.2.5    Acquisition Line Maturity.    30 2.2.6    Mandatory Prepayments of
Acquisition Line.    30 2.2.7    Optional Prepayments of Acquisition Line.    30
Section 2.3    The Letter of Credit Facility.    30 2.3.1    Letters of Credit.
   30 2.3.2    Letter of Credit Fees.    31 2.3.3    Terms of Letters of Credit;
Post-Expiration Date Letters of Credit.    31 2.3.4    Procedures for Letters of
Credit.    32 2.3.5    Payments of Letters of Credit.    32 2.3.6    Change in
Law; Increased Cost.    33 2.3.7    General Letter of Credit Provisions.    34
Section 2.4    Interest and Certain Fee Provisions.    35 2.4.1    Applicable
Margin.    35 2.4.2    Inability to Determine LIBOR Base Rate.    37 2.4.3   
Indemnity.    37 2.4.4    Payment of Interest.    37 2.4.5    Origination Fee.
   37 2.4.6    Field Examination Fees.    37 2.4.7    Computation of Interest
and Fees.    37 2.4.8    Maximum Interest Rate.    38 2.4.9    Requirements of
Law.    38 Section 2.5    General Financing Provisions.    38 2.5.1   
Borrowers’ Representatives.    38 2.5.2    Use of Proceeds of the Loans.    40
2.5.3    Payments.    40 2.5.4    Liens; Setoff.    40 2.5.5    Guaranty.    41
2.5.6    Bank Products.    44

 

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2.5.7    USA Patriot Act Notice.    44 ARTICLE III THE COLLATERAL    44
Section 3.1    Debt and Obligations Secured.    44 Section 3.2    Grant of
Liens.    45 Section 3.3    Perfection Certificate.    45 Section 3.4   
Personal Property.    46 3.4.1    Investment Property, Chattel Paper, Promissory
Notes, etc.    46 3.4.2    Patents, Copyrights and Other Property Requiring
Additional Steps to Perfect.    46 Section 3.5    Record Searches.    46 Section
3.6    Real Property.    47 Section 3.7    Costs.    47 Section 3.8    Release.
   48 Section 3.9    Inconsistent Provisions.    48 ARTICLE IV REPRESENTATIONS
AND WARRANTIES    48 Section 4.1    Representations and Warranties.    48 4.1.1
   Subsidiaries.    48 4.1.2    Good Standing.    48 4.1.3    Power and
Authority.    49 4.1.4    Binding Agreements.    49 4.1.5    No Conflicts.    49
4.1.6    No Defaults, Violations.    49 4.1.7    Compliance with Laws.    49
4.1.8    Margin Stock.    50 4.1.9    Investment Company Act; Margin Securities.
   50   4.1.10    Litigation.    50   4.1.11    Financial Condition.    50
  4.1.12    Full Disclosure.    51   4.1.13    Indebtedness for Borrowed Money.
   51   4.1.14    Taxes.    51   4.1.15    ERISA.    51   4.1.16    Title to
Properties.    52   4.1.17    Patents, Trademarks, Etc.    52   4.1.18   
Employee Relations.    52   4.1.19    Presence of Hazardous Materials or
Hazardous Materials Contamination.    53   4.1.20    Perfection and Priority of
Collateral.    53   4.1.21    Places of Business and Location of Collateral.   
53   4.1.22    Business Information.    53   4.1.23    Equipment.    53   4.1.24
   Inventory.    53   4.1.25    Accounts.    54   4.1.26    Compliance with
Eligibility Standards.    54   4.1.27    Purchase Agreement Transaction.    54
  4.1.28    Solvency    54   4.1.29    OFAC Matters.    54 Section 4.2   
Survival; Updates of Representations and Warranties.    55 ARTICLE V CONDITIONS
PRECEDENT    55 Section 5.1    Conditions to the Initial Advance.    55 5.1.1   
Organizational Documents - Borrowers.    55 5.1.2    Opinion of Borrowers’
Counsel.    56 5.1.3    Consents, Licenses, Approvals, Etc.    56 5.1.4   
Notes.    56

 

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5.1.5    Financing Documents and Collateral.    56 5.1.6    Other Financing
Documents.    56 5.1.7    Other Documents, Etc.    56 5.1.8    Payment of Fees.
   56 5.1.9    Perfection Certificate.    57   5.1.10    Recordings and Filings.
   57   5.1.11    Insurance Certificate.    57   5.1.12    Landlord’s Waivers.
   57   5.1.13    Bailee Acknowledgements.    57   5.1.14    Field Examination.
   57   5.1.15    Other Documents.    57   5.1.16    Purchase Agreement
Transaction.    58 Section 5.2    Conditions to all Extensions of Credit.    58
5.2.1    Compliance.    58 5.2.2    Borrowing Base.    58 5.2.3    Default.   
59 5.2.4    Representations and Warranties.    59 5.2.5    Adverse Change.    59
5.2.6    Legal Matters.    59 ARTICLE VI COVENANTS OF THE BORROWERS    59
Section 6.1    Affirmative Covenants.    59 6.1.1    Financial Statements.    59
6.1.2    Collateral Reporting .    60 6.1.3    Reports to SEC and to
Stockholders.    62 6.1.4    Recordkeeping, Rights of Inspection, Field
Examination, Etc.    62 6.1.5    Entity Existence.    62 6.1.6    Compliance
with Laws.    63 6.1.7    Preservation of Properties.    63 6.1.8    Lines of
Business.    63 6.1.9    Insurance.    63   6.1.10    Taxes.    64   6.1.11   
ERISA.    64   6.1.12    Notification of Events of Default and Adverse
Developments.    64   6.1.13    Hazardous Materials; Contamination.    65
  6.1.14    Financial Covenants.    66   6.1.15    Principal Depository    66
  6.1.16    Collection of Receivables.    66   6.1.17    Assignments of
Receivables.    67   6.1.18    Government Accounts.    67   6.1.19    Notice of
Commercial Tort Claims.    68   6.1.20    Inventory.    68   6.1.21    Insurance
With Respect to Equipment and Inventory.    68   6.1.22    Maintenance of the
Collateral.    69   6.1.23    Equipment.    69   6.1.24    Further Assurances;
Defense of Title.    69   6.1.25    Business Information.    70   6.1.26   
Subsequent Opinion of Counsel as to Recording Requirements.    70   6.1.27   
Use of Premises and Equipment.    70   6.1.28    Protection of Collateral.    70
  6.1.29    Appraisals.    71   6.1.30    Management.    71 Section 6.2   
Negative Covenants.    71 6.2.1    Capital Structure, Merger, Acquisition or
Sale of Assets.    71 6.2.2    Subsidiaries.    71 6.2.3    Purchase or
Redemption of Securities, Dividend Restrictions.    72

 

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6.2.4    Indebtedness.    72 6.2.5    Investments, Loans and Other Transactions.
   72 6.2.6    Stock of Subsidiaries.    73 6.2.7    Liens.    73 6.2.8   
Transactions with Affiliates.    73 6.2.9    Other Businesses.    74   6.2.10   
ERISA Compliance.    74   6.2.11    Prohibition on Hazardous Materials.    74
  6.2.12    Amendments.    74   6.2.13    Method of Accounting; Fiscal Year.   
74   6.2.14    Compensation.    74   6.2.15    Transfer of Collateral.    75
  6.2.16    Sale and Leaseback.    75   6.2.17    Disposition of Collateral.   
75 ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES    75 Section 7.1    Events of
Default.    75 7.1.1    Failure to Pay.    75 7.1.2    Breach of Representations
and Warranties.    75 7.1.3    Failure to Comply with Covenants.    75 7.1.4   
Default Under Other Financing Documents or Obligations.    76 7.1.5    Receiver;
Bankruptcy.    76 7.1.6    Involuntary Bankruptcy, etc.    77 7.1.7    Judgment.
   77 7.1.8    Execution; Attachment.    77 7.1.9    Default Under Other
Borrowings.    77   7.1.10    Challenge to Agreements.    77   7.1.11   
Material Adverse Effect.    78   7.1.12    Change of Control.    78   7.1.13   
Liquidation, Termination, Dissolution, etc.    78 Section 7.2    Remedies.    78
7.2.1    Acceleration.    78 7.2.2    Further Advances.    78 7.2.3    Uniform
Commercial Code.    78 7.2.4    Collateral Account; Lockbox.    79 7.2.5   
Specific Rights With Regard to Collateral.    80 7.2.6    Application of
Proceeds.    81 7.2.7    Performance by Lender.    81 7.2.8    Other Remedies.
   82 ARTICLE VIII MISCELLANEOUS    82 Section 8.1    Notices.    82 Section 8.2
   Amendments; Waivers.    83 8.2.1    In General.    83 Section 8.3   
Cumulative Remedies.    84 Section 8.4    Severability.    85 Section 8.5   
Assignments by Lender.    85 Section 8.6    Successors and Assigns.    85
Section 8.7    Continuing Agreements.    86 Section 8.8    Enforcement Costs.   
86 Section 8.9    Applicable Law; Jurisdiction.    86 8.9.1    Applicable Law.
   86 8.9.2    Submission to Jurisdiction.    86 8.9.3    Appointment of Agent
for Service of Process.    87

 

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8.9.4    Service of Process.    87 Section 8.10    Duplicate Originals and
Counterparts.    87 Section 8.11    No Agency.    87 Section 8.12    Date of
Payment.    88 Section 8.13    Entire Agreement.    88 Section 8.14    Waiver of
Trial by Jury.    88 Section 8.15    Liability of the Lender.    88 Section 8.16
   Indemnification.    89

 

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FINANCING AND SECURITY AGREEMENT

THIS FINANCING AND SECURITY AGREEMENT (this “Agreement”) is made as of
October 31, 2006, by and among TVI CORPORATION, a Maryland corporation (“TVI”),
CAPA MANUFACTURING CORP., a Maryland corporation (“Capa”), SAFETY TECH
INTERNATIONAL, INC., a Maryland corporation (“Safety Tech”), and TVI
HOLDINGS ONE, INC., a Maryland corporation (“Signature TVI”) jointly and
severally (each of TVI, Capa, Safety Tech, and Signature TVI, a “Borrower”; TVI,
Capa, Safety Tech, and Signature TVI, collectively, the “Borrowers”); and BRANCH
BANKING AND TRUST COMPANY, a North Carolina banking corporation (the “Lender”).

RECITALS

A. The Borrowers have applied to the Lender for credit facilities consisting of
(i) a revolving credit facility in the maximum principal amount of $25,000,000
and (ii) an acquisition line of credit in the maximum principal amount of
$10,000,000 to be used by the Borrowers for the Permitted Uses described in this
Agreement.

B. The Lender is willing to make those credit facilities available jointly and
severally to the Borrowers upon the terms and subject to the conditions set
forth in this Agreement.

AGREEMENTS

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereby
agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Certain Defined Terms.

As used in this Agreement, the terms defined in the Preamble and Recitals hereto
shall have the respective meanings specified therein, and the following terms
shall have the following meanings:

“Account” individually and “Accounts” collectively mean all presently existing
or hereafter acquired or created accounts, accounts receivable, health-care
insurance receivables, receivables arising out of the use of a credit or charge
card or information contained on or for use with the card, contract rights,
notes, drafts, instruments, acceptances, chattel paper, leases and writings
evidencing a monetary obligation or a security interest in, or a lease of,
goods, all rights to payment of a monetary obligation or other consideration
under present or future contracts (including, without limitation, all rights
(whether or not earned by performance) to receive payments under presently
existing or hereafter acquired or created letters of credit), or by virtue of
property that has been sold, leased, licensed, assigned, or otherwise disposed
of, services rendered or to be rendered, loans and advances made or other
considerations given, by or set

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forth in or arising out of any present or future chattel paper, note, draft,
lease, acceptance, writing, bond, insurance policy (including, without
limitation, the right to receive refunds of unearned insurance premiums),
instrument, document or general intangible, and all extensions and renewals of
any thereof, all rights under or arising out of present or future contracts,
agreements or general interest in goods that gave rise to any or all of the
foregoing, including all commercial tort claims, other claims or causes of
action now existing or hereafter arising in connection with or under any
agreement or document or by operation of law or otherwise, all collateral
security of any kind (including, without limitation, real property mortgages and
deeds of trust), Supporting Obligations, letter-of-credit rights and letters of
credit given by any Person with respect to any of the foregoing, all books and
records in whatever media (paper, electronic or otherwise) recorded or stored,
with respect to any or all of the foregoing and all equipment and general
intangibles necessary or beneficial to retain, access and/or process the
information contained in those books and records, and all proceeds (cash
proceeds and non-cash proceeds) of the foregoing.

“Account Debtor” means any Person who is obligated on a Receivable and “Account
Debtors” mean all Persons who are obligated on the Receivables.

“ACH Transactions” means any cash management or related services including the
automatic clearing house transfer of funds by the Lender for the account of the
Borrowers, or any of them, pursuant to agreement or overdrafts.

“Acquisition Line” has the meaning described in Section 2.2.1 (Acquisition Line
Facility).

“Acquisition Line Advance” means an Advance under the Acquisition Line for the
purchase of Acquisition Line Assets.

“Acquisition Line Assets” means assets that a Borrower acquires pursuant to a
Permitted Acquisition.

“Acquisition Line Commitment” has the meanings described in Section 2.2.1
(Acquisition Line Facility).

“Acquisition Line Commitment Period” means the period of time from the Closing
Date to August 31, 2011.

“Acquisition Line Committed Amount” means Ten Million Dollars ($10,000,000).

“Acquisition Line Expiration Date” means August 31, 2011.

“Acquisition Line Facility” means the facility established by the Lender
pursuant to Section 2.2 (The Acquisition Line Facility).

“Acquisition Line Formula Value” means the amount determined by applying the
Borrowing Base to those Acquisition Line Assets that will become Eligible
Receivables, Eligible Inventory and Eligible Equipment immediately upon the
closing of the related Permitted Acquisition.

 

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“Acquisition Line Note” and “Acquisition Line Notes” have the meaning described
in Section 2.2.3 (Acquisition Line Notes).

“Acquisition Line Notice” has the meaning described in Section 2.2.2 (Procedure
for Making Advances Under the Acquisition Line).

“Acquisition Line Optional Prepayment” and “Acquisition Line Optional
Prepayments” have the meanings described in Section 2.2.7 (Optional Prepayment
of Acquisition Line).

“Acquisition Line Revolving Note” has the meaning described in Section 2.2.3
(Acquisition Line Notes).

“Acquisition Line Term Advance” means the portion of an Acquisition Line Advance
that that exceeds the Acquisition Line Formula Value of the Acquisition Line
Assets that are the subject of the Acquisition Line Advance; and “Acquisition
Line Term Advances” means the collective reference to each Acquisition Line Term
Advance.

“Acquisition Line Term Note” and “Acquisition Line Term Notes” have the meaning
described in Section 2.2.3 (Acquisition Line Notes).

“Acquisition Line Term Payment” and “Acquisition Line Term Payments” have the
meaning described in Section 2.2.4 (Acquisition Line Term Payments).

“Advances” means the collective reference to each advance under the Revolving
Loan including, without limitation, those under Section 2.1.1 (Revolving Credit
Facility).

“Affiliate” means, with respect to any designated Person, any other Person,
(a) directly or indirectly controlling, directly or indirectly controlled by, or
under direct or indirect common control with the Person designated, (b) directly
or indirectly owning or holding ten percent (10%) or more of any equity interest
in such designated Person, or (c) ten percent (10%) or more of whose stock or
other equity interest is directly or indirectly owned or held by such designated
Person. For purposes of this definition, the term “control” (including with
correlative meanings, the terms “controlling”, “controlled by” and “under common
control with”) means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities or other equity interests or by
contract or otherwise.

“Agreement” means this Financing and Security Agreement, as amended, restated,
supplemented or otherwise modified in writing in accordance with the provisions
of Section 8.2 (Amendments; Waivers).

“Applicable Margin” means, as applicable, the rate per annum added to the LIBOR
Base Rate, or the rate per annum applied to determine the Revolving Credit
Unused Line Fee and the Letter of Credit Fees, as set forth in Section 2.4.1
(Applicable Margin).

“Assignee” means any Person to which the Lender assigns all or any portion of
its interests under this Agreement, any Commitment, and any Loan, in accordance
with the provisions of Section 8.5 (Assignments by Lender), together with any
and all successors and assigns of such Person; “Assignees” means the collective
reference to all Assignees.

 

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“Assignment of Patents” means that certain collateral assignment of patents
dated the date hereof from the TVI to the Lender, as amended, restated,
supplemented or otherwise modified in writing at any time and from time to time.

“Assignment of Trademarks” means that certain collateral assignment of
trademarks dated the date hereof from the TVI to the Lender, as amended,
restated, supplemented or otherwise modified in writing at any time and from
time to time.

“Availability” means at any time (a) the lesser of the Revolving Credit
Committed Amount or the Borrowing Base (after giving effect to provisions for
Reserves and other adjustments permitted by this Agreement) minus (b) the
Revolver Usage.

‘“Bank Products” means any service or facility extended to the Borrowers by the
Lender or any Affiliate of the Lender including, without limitation: (a) credit
cards, (b) credit card processing services, (c) debit cards, (d) purchase cards,
(e) ACH Transactions, (f) cash management, including controlled disbursement,
accounts or services, (g) demand and other deposit accounts, and (h) Hedge
Agreements.

“Bankruptcy Code” means the United States Bankruptcy Code, as amended from time
to time, and any successor Laws.

“Borrower” means each Person defined as a “Borrower” in the preamble of this
Agreement and each Additional Borrower; “Borrowers” means the collective
reference to all Persons defined as “Borrowers” in the preamble to this
Agreement and all Additional Borrowers.

“Borrowing Base” has the meaning described in Section 2.1.3 (Computation of
Borrowing Base).

“Borrowing Base Deficiency” has the meaning described in Section 2.1.3(c).

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in the State are authorized or required to close.

“Capital Adequacy Regulation” means any guideline, request or directive of any
central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.

“Capital Expenditure” means an expenditure (whether payable in cash or other
property or accrued as a liability) for Fixed or Capital Assets, including,
without limitation, the entering into of a Capital Lease.

“Capital Lease” means with respect to any Person any lease of real or personal
property, for which the related Lease Obligations have been or should be, in
accordance with GAAP consistently applied, capitalized on the balance sheet of
that Person.

“Cash Equivalents” means (a) securities with maturities of one year or less from
the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof, (b) certificates of deposit with
maturities of one (1) year or less from the date of

 

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acquisition of, or money market accounts maintained with, the Lender, any
Affiliate of the Lender, or any other domestic commercial bank having capital
and surplus in excess of One Hundred Million Dollars ($100,000,000.00) or such
other domestic financial institutions or domestic brokerage houses to the extent
disclosed to, and approved by, the Lender and (c) commercial paper of a domestic
issuer rated at least either A-1 by Standard & Poor’s Corporation (or its
successor) or P-1 by Moody’s Investors Service, Inc. (or its successor) with
maturities of six (6) months or less from the date of acquisition.

“Change of Control” (a) with respect to each Borrower other than TVI, means a
change such that such Borrower is no longer a Wholly-Owned Subsidiary of TVI,
and (b) with respect to TVI, the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
“person” (as such term is used in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act), becomes the “beneficial owner” (as such term is defined in Rule 13d-3 and
Rule 13d-5 under the Securities Exchange Act of 1934), directly or indirectly,
of more than 20% of the voting stock of TVI.

“Chattel Paper” means a record or records (including, without limitation,
electronic chattel paper) that evidence both a monetary obligation and a
security interest in specific goods, a security interest in specific goods and
software used in the goods, or a lease of specific goods; all Supporting
Obligations with respect thereto; any returned, rejected or repossessed goods
and software covered by any such record or records and all proceeds (in any form
including, without limitation, accounts, contract rights, documents, chattel
paper, instruments and general intangibles) of such returned, rejected or
repossessed goods; and all proceeds (cash proceeds and noncash proceeds) of the
foregoing.

“Closing Date” means October 31, 2006.

“Collateral” means all property of each and every Borrower subject from time to
time to the Liens of this Agreement, any of the Security Documents and/or any of
the other Financing Documents, together with any and all cash and non-cash
proceeds and products thereof.

“Collateral Account” has the meaning described in Section 2.1.7 (Collateral
Account; Lockbox).

“Commitment” means the collective reference to the Revolving Credit Commitment
and the Acquisition Line Commitment.

“Committed Amount” means the Lender’s Revolving Loan Committed Amount or the
Acquisition Line Committed Amount, as the case may be, and “Committed Amounts”
means collectively the Revolving Loan Committed Amount and the Acquisition Line
Committed Amount of the Lender.

“Compliance Certificate” means a periodic Compliance Certificate described in
Section 6.1.1 (Financial Statements).

“Copyrights” means and includes, in each case whether now existing or hereafter
arising, all of each Borrower’s rights, title and interest in and to (a) all
copyrights, rights and interests in copyrights, works protectable by copyright,
copyright registrations, copyright applications, and all renewals of any of the
foregoing, (b) all income, royalties, damages and payments now or

 

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hereafter due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past, current or future infringements of any
of the foregoing, (c) the right to sue for past, present and future
infringements of any of the foregoing, and (d) all rights corresponding to any
of the foregoing throughout the world.

“Credit Facility” means the Revolving Credit Facility, the Letter of Credit
Facility or the Acquisition Line Facility, as the case may be, and “Credit
Facilities” means collectively the Revolving Credit Facility, the Letter of
Credit Facility and the Acquisition Line Facility and any and all other credit
facilities now or hereafter extended under or secured by this Agreement.

“Debt Service” has the meaning set forth in Section 6.1.14(a).

“Default” means an event that, with the giving of notice or lapse of time, or
both, would constitute an Event of Default under the provisions of this
Agreement.

“Disclosure Schedule” means the Disclosure Schedule that is attached to and made
a part of this Agreement as EXHIBIT E.

“Documents” means all documents of title or receipts, whether now existing or
hereafter acquired or created, and all proceeds (cash proceeds and noncash
proceeds) of the foregoing.

“EBITDA” has the meaning set forth in Section 6.1.14(a).

“EBITDAR” has the meaning set forth in Section 6.1.14(a).

“Eligible Fixed Assets” means the collective reference to all Equipment of each
Borrower, valued at the lower of the net purchase cost (excluding the costs of
delivery, installation, taxes, and other “soft” costs) or market value
excluding, however, any such Equipment that consists of:

(a) any goods located outside of the United States;

(b) any goods located outside of a state in that the Lender has properly and
unavoidably perfected the Liens of the Lender under this Agreement by the filing
of a financing statement, free and clear of all other Liens;

(c) any goods not in the actual possession of a Borrower;

(d) any goods not in good repair, reasonable wear and tear excepted; and

(e) any goods that the Lender in the good faith exercise of its sole and
absolute discretion has deemed to be ineligible because the Lender otherwise
considers the collateral value to the Lender to be impaired or its ability to
realize such value to be insecure.

 

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In the event of any dispute under the foregoing criteria, as to whether
Equipment is, or has ceased to be, Eligible Equipment, the decision of the
Lender in the good faith exercise of its sole and absolute discretion shall
control.

“Eligible Inventory” means the collective reference to all Inventory of each
Borrower consisting of goods held for sale in the ordinary course of business,
valued at the lowest of the net purchase cost or net manufacturing cost, the
lowest bulk market price, such Borrower’s lowest bulk selling price, minus
estimated expenses for completion and disposal, and minus an allowance for
normal profit margin for bulk sales, any ceiling prices that may be established
by any Law of any Governmental Authority or prevailing market value, excluding,
however, any such Inventory that consists of:

(a) any goods located outside of the United States;

(b) any goods located outside of a state in that the Lender has properly and
unavoidably perfected the Liens of the Lender under this Agreement by the filing
of a financing statement, free and clear of all other Liens;

(c) any goods not in the actual possession of a Borrower (except goods in the
possession of potential customers in reasonable quantities for demonstration
purposes and goods to the extent provided in subsection (d) below) and any goods
in transit;

(d) any goods in the possession of a bailee, warehouseman, consignee or similar
third party, except to the extent that such bailee, warehouseman, consignee or
similar third party has entered into an agreement with the Lender in which such
bailee, warehouseman, consignee or similar third party consents and agrees to
the Lender’s Lien on such goods and to such other terms and conditions as may be
required by the Lender;

(e) any goods located on premises leased or rented to a Borrower or otherwise
not owned by a Borrower, unless the Lender has received a waiver and consent
from the lessor, landlord and/or owner, in form and substance satisfactory to
the Lender and from any mortgagee of such lessor, landlord or owner to the
extent required by the Lender;

(f) any goods the sale or other disposition of which has given rise to a
Receivable;

(g) any goods that fail to meet all standards and requirements imposed by any
Governmental Authority over such goods or its production, storage, use or sale;

(h) work-in-process, supplies, displays, packaging and promotional materials;

(i) any goods as to which the Lender determines in the exercise of its sole and
absolute discretion at any time and in good faith is not in good condition or is
defective, unmerchantable, post-seasonal, slow moving or obsolete; and

 

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(j) any goods that the Lender in the good faith exercise of its sole and
absolute discretion has deemed to be ineligible because the Lender otherwise
considers the collateral value to the Lender to be impaired or its ability to
realize such value to be insecure.

In the event of any dispute under the foregoing criteria, as to whether
Inventory is, or has ceased to be, Eligible Inventory, the decision of the
Lender in the good faith exercise of its sole and absolute discretion shall
control.

“Eligible Receivable” and “Eligible Receivables” mean, at any time of
determination thereof, the unpaid portion of each account (net of any returns,
discounts, claims, credits, charges, accrued rebates or other allowances,
offsets, deductions, counterclaims, disputes or other defenses and reduced by
the aggregate amount of all reserves, limits and deductions provided for in this
definition and elsewhere in this Agreement) receivable in United States Dollars
by a Borrower, provided each account conforms and continues to conform to the
following criteria to the satisfaction of the Lender:

(a) the account arose in the ordinary course of a Borrower’s business from a
bona fide outright sale of Inventory by such Borrower or from services performed
by such Borrower;

(b) the account is a valid, legally enforceable obligation of the Account Debtor
and requires no further act on the part of any Person under any circumstances to
make the account payable by the Account Debtor;

(c) the account is based upon an enforceable order or contract, written or oral,
for Inventory shipped or for services performed, and the same were shipped or
performed in accordance with such order or contract;

(d) if the account arises from the sale of Inventory, the Inventory the sale of
which gave rise to the account has been shipped or delivered to the Account
Debtor on an absolute sale basis and not on a bill and hold sale basis, a
consignment sale basis, a guaranteed sale basis, a sale or return basis, or on
the basis of any other similar understanding;

(e) if the account arises from the performance of services, such services have
been fully rendered and do not relate to any warranty claim or obligation;

(f) the account is evidenced by an invoice or other documentation in form
acceptable to the Lender, dated no later than the date of shipment or
performance and containing only terms normally offered by the respective
Borrower;

(g) the amount shown on the books of a Borrower and on any invoice, certificate,
schedule or statement delivered to the Lender is owing to such Borrower and no
partial payment has been received unless reflected with that delivery;

 

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(h) the account is not outstanding more than ninety (90) days from the date of
the invoice therefor or past due more than sixty (60) days after its due date,
which shall not be later than thirty (30) days after the invoice date;

(i) the account is not owing by any Account Debtor for which the Lender has
deemed fifty percent (50%) or more of such Account Debtor’s other accounts (or
any portion thereof) due to a Borrower, individually, or all of the Borrowers
collectively, are more than ninety (90) days past due;

(j) the account is not owing by an Account Debtor or a group of affiliated
Account Debtors to any Borrower whose then existing accounts owing to that
Borrower individually exceed in aggregate face amount fifteen percent (15%) of
that Borrower’s total Eligible Receivables and is not owing by an Account Debtor
or a group of affiliated Account Debtors whose then existing accounts to any and
all of the Borrowers collectively exceed in aggregate face amount fifteen
percent (15%) of the total Eligible Receivables of all Borrowers;

(k) the Account Debtor has not returned, rejected or refused to retain, or
otherwise notified a Borrower of any material dispute concerning, or claimed
nonconformity of, any of the Inventory or services from the sale or furnishing
of which the account arose;

(l) the account is not subject to any present or contingent (and no facts exist
that are the basis for any future) offset, claim, deduction or counterclaim,
dispute or defense in law or equity on the part of such Account Debtor, or any
claim for credits, allowances, or adjustments by the Account Debtor because of
returned, inferior, or damaged Inventory or unsatisfactory services, or for any
other reason including, without limitation, those arising on account of a breach
of any express or implied representation or warranty;

(m) the Account Debtor is not a Subsidiary or Affiliate of any Borrower or an
employee, officer, director or shareholder of any Borrower or any Subsidiary or
Affiliate of any Borrower;

(n) the Account Debtor is not incorporated or primarily conducting business or
otherwise located in any jurisdiction outside of the United States of America or
Canada, unless the Account Debtor’s obligations with respect to such account are
insured or secured by a letter of credit or banker’s acceptance having terms and
from such insurers, issuers, accepting banks and confirmation banks as are
acceptable to the Lender in its sole and absolute discretion (which insurance,
letter of credit, or banker’s acceptance is subject to the perfected Lien of the
Lender);

 

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(o) as to which none of the following events has occurred with respect to the
Account Debtor on such Account: death or judicial declaration of incompetency of
an Account Debtor who is an individual; the filing by or against the Account
Debtor of a request or petition for liquidation, reorganization, arrangement,
adjustment of debts, adjudication as a bankrupt, winding-up, or other relief
under the bankruptcy, insolvency, or similar laws of the United States, any
state or territory thereof, or any foreign jurisdiction, now or hereafter in
effect; the making of any general assignment by the Account Debtor for the
benefit of creditors; the appointment of a receiver or trustee for the Account
Debtor or for any of the assets of the Account Debtor, including, without
limitation, the appointment of or taking possession by a “custodian,” as defined
in the Bankruptcy Code; the institution by or against the Account Debtor of any
other type of insolvency proceeding (under the bankruptcy laws of the United
States or otherwise) or of any formal or informal proceeding for the dissolution
or liquidation of, settlement of claims against, or winding up of affairs of,
the Account Debtor; the sale, assignment, or transfer of all or any material
part of the assets of the Account Debtor; the nonpayment generally by the
Account Debtor of its debts as they become due; or the cessation of the business
of the Account Debtor as a going concern;

(p) the Account Debtor is not a Governmental Authority, except to the extent the
applicable Borrower is in compliance with Section 6.1.18 (Government Accounts);

(q) no Borrower is indebted in any manner to the Account Debtor (as creditor,
lessor, supplier or otherwise), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by a Borrower in the
ordinary course of its business;

(r) the account does not arise from services under or related to any warranty
obligation of a Borrower or out of service charges, finance charges or other
fees for the time value of money;

(s) the account is not evidenced by chattel paper or an instrument of any kind
and is not secured by any letter of credit;

(t) the title of the respective Borrower to the account is absolute and is not
subject to any prior assignment, claim, Lien, or security interest, except
Permitted Liens;

(u) no bond or other undertaking by a guarantor or surety has been or is
required to be obtained, supporting the performance of any Borrower or any other
obligor in respect of any of such Borrower’s agreements with the Account Debtor;

(v) no bond or other undertaking by a guarantor or surety has been or is
required to be obtained, supporting the account and any of the Account Debtor’s
obligations in respect of the account;

 

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(w) each Borrower has the full and unqualified right and power to assign and
grant a security interest in, and Lien on, the account to the Lender as security
and collateral for the payment of the Obligations;

(x) the account does not arise out of a contract with, or order from, an Account
Debtor that, by its terms, forbids or makes void or unenforceable the assignment
or grant of a security interest by the Borrowers to the Lender, for the benefit
of the Lender, of the account arising from such contract or order;

(y) the account is subject to a Lien in favor of the Lender, which Lien is
perfected as to the account by the filing of financing statements and which Lien
upon such filing constitutes a first priority security interest and Lien;

(z) the Inventory giving rise to the account was not, at the time of the sale
thereof, subject to any Lien, except those in favor of the Lender;

(aa) no part of the account represents a progress billing or a retainage, except
to the extent the Lender given its prior consent from time to time with respect
to an account of Signature TVI;

(bb) the Lender in the good faith exercise of its sole and absolute discretion
has not deemed the account ineligible because of uncertainty as to the
creditworthiness of the Account Debtor or because the Lender otherwise considers
the collateral value of such account to the Lender to be impaired or its ability
to realize such value to be insecure; and

(cc) if the Account Debtor is located in a state requiring the filing of a
Notice of Business Activities Report or similar report in order to permit any
Borrower to seek judicial enforcement in such state of payment of such Account,
that Borrower has qualified to do business in such state or has filed a Notice
of Business Activities Report or equivalent report for the then current year.

In the event of any dispute, under the foregoing criteria, as to whether an
account is, or has ceased to be, an Eligible Receivable, the decision of the
Lender in the good faith exercise of its sole and absolute discretion shall
control.

“Enforcement Costs” means all expenses, charges, costs and fees whatsoever
(including, without limitation, reasonable outside and allocated in-house
counsel attorney’s fees and expenses) of any nature whatsoever paid or incurred
by or on behalf of the Lender (whether arising before or after the commencement
of any proceedings under the United States Bankruptcy Code or other applicable
laws related to insolvency or otherwise and whether or now allowed or allowable
as a claim in any such proceeding) in connection with (a) any or all of the
Obligations, this Agreement and/or any of the other Financing Documents, (b) the
creation, perfection, collection, maintenance, preservation, defense,
protection, realization upon, disposition, sale or enforcement of all or any
part of the Collateral, this Agreement or any of the

 

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other Financing Documents, including, without limitation, those costs and
expenses more specifically enumerated in Section 3.7 (Costs) and/or Section 8.8
(Enforcement Costs), and further including, without limitation, amounts paid to
lessors, processors, bailees, warehousemen, sureties, judgment creditors and
others in possession of or with a Lien against or claimed against the
Collateral, and (c) the monitoring, administration, processing and/or servicing
of any or all of the Obligations, the Financing Documents, and/or the
Collateral.

“Equipment” means all equipment, machinery, computers, chattels, tools, parts,
machine tools, furniture, furnishings, fixtures and goods (other than inventory)
of every nature (including, without limitation, embedded software), presently
existing or hereafter acquired or created and wherever located, whether or not
the same shall be deemed to be affixed to real property, and all of such types
of property leased by any of the Borrowers and all of the Borrowers’ rights and
interests with respect thereto under such leases (including, without limitation,
options to purchase), together with all accessions, additions, fittings,
accessories, special tools, and improvements thereto and substitutions therefor
and all parts and equipment that may be attached to or that are necessary or
beneficial for the operation, use and/or disposition of such personal property,
all licenses, warranties, franchises and General Intangibles related thereto or
necessary or beneficial for the operation, use and/or disposition of the same,
together with all Accounts, Chattel Paper, Instruments and other consideration
received by any Borrower on account of the sale, lease or other disposition of
all or any part of the foregoing, and together with all rights under or arising
out of present or future Documents and contracts relating to the foregoing and
all proceeds (cash proceeds and noncash proceeds) of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

“ERISA Affiliate” means any Person that is a member of the Borrower’s controlled
group, or under common control with the Borrower, within the meaning of
Section 414 of the Internal Revenue Code.

“Event of Default” has the meaning described in ARTICLE VII (Default and Rights
and Remedies).

“Excess Cash Flow” means for any annual period of determination, an amount equal
to EBITDA less Debt Service, less cash income Taxes paid, less unfinanced
Capital Expenditures as shown on the annual financial statements for such annual
period, furnished to the Lender in accordance with Section 6.1.1 (Financial
Statements); or in the event that the Borrowers fail to deliver such financial
statements to the Lender as and when required, or the Lender determines in the
exercise of its good faith and reasonable discretion, that such financial
statements do not accurately reflect the Borrowers’ consolidated financial
position for the period covered, the Lender shall estimate, in its sole and
absolute discretion, the amount of Excess Cash Flow for such period.

“Facilities” means the collective reference to the Loan, Letters of Credit,
interest rate protection, foreign exchange risk, cash management, and other
credit facilities now or hereafter provided to any one or more of the Borrowers
by the Lender under this Agreement.

 

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“Fees” means the collective reference to each fee payable to the Lender under
the terms of this Agreement or under the terms of any of the other Financing
Documents, including, without limitation, the Revolving Credit Unused Line Fees,
Letter of Credit Fees, the Origination Fee, and the Field Examination Fees.

“Field Examination Fee” and “Field Examination Fees” have the meanings described
in Section 2.4.6 (Field Examination Fees).

“Financing Documents” means at any time collectively this Agreement, the Notes,
the Security Documents, the Letter of Credit Documents, any Hedge Agreement,
agreements with respect to Bank Products, and any other instrument, agreement or
document previously, simultaneously or hereafter executed and delivered by any
Borrower, any guarantor and/or any other Person, singly or jointly with another
Person or Persons, evidencing, securing, guarantying or in connection with this
Agreement, any Note, any of the Security Documents, any of the Facilities,
and/or any of the Obligations.

“Fiscal Year” means as to the Borrowers a fiscal year ending December 31.

“Fixed or Capital Assets” of a Person at any date means all assets that would,
in accordance with GAAP consistently applied, be classified on the balance sheet
of such Person as property, plant or equipment at such date.

“Funded Debt” has the meaning set forth in Section 6.1.14(a).

“GAAP” means generally accepted accounting principles in the United States of
America in effect from time to time.

“General Intangibles” means all general intangibles of every nature, whether
presently existing or hereafter acquired or created, and without implying any
limitation of the foregoing, further means all books and records, commercial
tort claims, other claims (including without limitation all claims for income
tax and other refunds), payment intangibles, Supporting Obligations, choses in
action, causes of action in tort or equity, contract rights, judgments, customer
lists, software, Patents, Trademarks, licensing agreements, rights in
intellectual property, goodwill (including goodwill of any Borrower’s business
symbolized by and associated with any and all trademarks, trademark licenses,
Copyrights and/or service marks), royalty payments, licenses, letter-of-credit
rights, letters of credit, contractual rights, the right to receive refunds of
unearned insurance premiums, rights as lessee under any lease of real or
personal property, literary rights, Copyrights, service names, service marks,
logos, trade secrets, amounts received as an award in or settlement of a suit in
damages, deposit accounts, interests in joint ventures, general or limited
partnerships, or limited liability companies or partnerships, rights in
applications for any of the foregoing, books and records in whatever media
(paper, electronic or otherwise) recorded or stored with respect to any or all
of the foregoing, all Supporting Obligations with respect to any of the
foregoing, and all equipment and general intangibles necessary or beneficial to
retain, access and/or process the information contained in those books and
records, and all proceeds (cash proceeds and noncash proceeds) of the foregoing.

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

 

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“Hazardous Materials” means (a) any “hazardous waste” as defined by the Resource
Conservation and Recovery Act of 1976, as amended from time to time, and
regulations promulgated thereunder; (b) any “hazardous substance” as defined by
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, and regulations promulgated thereunder;
(c) any substance the presence of which on any property now or hereafter owned,
acquired or operated by any of the Borrowers is prohibited by any Law similar to
those set forth in this definition; and (d) any other substance that by Law
requires special handling in its collection, storage, treatment or disposal.

“Hazardous Materials Contamination” means the contamination (whether presently
existing or occurring after the date of this Agreement) by Hazardous Materials
of any property owned, operated or controlled by any of the Borrowers or for
which any of the Borrowers has responsibility, including, without limitation,
improvements, facilities, soil, ground water, air or other elements on, or of,
any property now or hereafter owned, acquired or operated by any of the
Borrowers, and any other contamination by Hazardous Materials for which any of
the Borrowers is, or is claimed to be, responsible.

“Hedge Agreement” means any and all transactions, agreements or documents now
existing or hereafter entered into, that provide for an interest rate, credit,
commodity or equity swap, cap, floor, collar, forward foreign exchange
transaction, currency swap, cross currency rate swap, currency option, or any
combination of, or option with respect to, these or similar transactions, for
the purpose of hedging exposure to fluctuations in interest or exchange rates,
loan, credit exchange, security or currency valuations or commodity prices.

“Hedge Reserve” means any and all Reserves that the Lender from time to time
establishes, in its sole discretion, with respect to Hedge Transactions.

“Hedge Transactions” means the collective reference to transactions contemplated
by one or more Hedge Agreements.

“Indebtedness for Borrowed Money” of a Person means at any time the sum at such
time of (a) indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, (b) any obligations of such Person in
respect of letters of credit, ‘banker’s or other acceptances or similar
obligations issued or created for the account of such Person, (c) Lease
Obligations of such Person with respect to Capital Leases, (d) all liabilities
secured by any Lien on any property owned by such Person, to the extent attached
to such ‘Person’s interest in such property, even though such Person has not
assumed or become personally liable for the payment thereof, (e) obligations of
third parties that are being guarantied or indemnified against by such Person or
that are secured by the property of such Person; (f) any obligation of such
Person under or with respect to an employee stock ownership plan or other
employee benefit plan; (g) any obligation of such Person or an ERISA Affiliate
to a Multi-employer Plan; and (h) any obligations, liabilities or indebtedness,
contingent or otherwise, under or in connection with, any Hedge Transactions;
but excluding trade and other accounts payable in the ordinary course of
business in accordance with customary trade terms and that are not overdue (as
determined in accordance with customary trade practices) or that are being
disputed in good faith by such Person and for which adequate reserves are being
provided on the books of such Person in accordance with GAAP.

 

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“Indemnified Parties” has the meaning set forth in Section 8.16
(Indemnification).

“Instrument” means a negotiable instrument or any other writing that evidences a
right to payment of a monetary obligation and is not itself a security agreement
or lease and is of a type that in the ordinary course of business is transferred
by delivery with any necessary endorsement or assignment, and all Supporting
Obligations with respect to any of the foregoing and all proceeds (cash proceeds
and non cash proceeds) with respect to any of the foregoing.

“Interest Period” means as to any LIBOR Loan, (a) the period commencing on and
the date hereof to and including the last day of November, 2006 and
(b) thereafter, the period commencing on the first day each successive calendar
month through and including the last day of that calendar month.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from
time to time, and the Income Tax Regulations issued and proposed to be issued
thereunder.

“Inventory” means all inventory of each Borrower and all right, title and
interest of each Borrower in and to all of its now owned and hereafter acquired
goods and other personal property (including, without limitation, embedded
software) furnished under any contract of service or intended for sale or lease,
including, without limitation, all raw materials, work-in-process, finished
goods and materials and supplies of any kind, nature or description which are
used or consumed in any Borrower’s business or are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of such goods and other personal property, and all licenses,
warranties, franchises, General Intangibles, personal property and all documents
of title or documents relating to the same, together with all Accounts, Chattel
Paper, Instruments and other consideration received by any Borrower on account
of the sale, lease or other disposition of all or any part of the foregoing, and
together with all rights under or arising out of present or future Documents and
contracts relating to the foregoing and all proceeds (cash proceeds and noncash
proceeds) of the foregoing.

“Investment Property” means a security, whether certificated or uncertificated,
security entitlement, securities account, commodity contract, or commodity
account, and all proceeds (cash proceeds and noncash proceeds) of, and
Supporting Obligations with respect to, the foregoing.

“Item of Payment” means each check, draft, cash, money, instrument, item, wire
transfer, ACH transfer, other electronic transfer and other remittance, in any
form or method whatsoever, in payment or on account of payment of the
Receivables or otherwise with respect to any Collateral, including, without
limitation, cash proceeds of any returned, rejected or repossessed goods, the
sale or lease of which gave rise to a Receivable, and other proceeds of
Collateral; and “Items of Payment” means the collective reference to all of the
foregoing.

“Laws” means all ordinances, statutes, rules, regulations, orders, injunctions,
writs, or decrees of any Governmental Authority.

 

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“Lease Obligations” of a Person means for any period the rental commitments of
such Person for such period under leases for real and/or personal property (net
of rent from subleases thereof, but including taxes, insurance, maintenance and
similar expenses that such Person, as the lessee, is obligated to pay under the
terms of said leases, except to the extent that such taxes, insurance,
maintenance and similar expenses are payable by sublessees), including rental
commitments under Capital Leases.

“Letter of Credit” and “Letters of Credit” shall have the meanings described in
Section 2.3.1 (Letters of Credit).

“Letter of Credit Agreement” means the collective reference to each letter of
credit application and agreement substantially in the form of the Lender’s then
standard form of application for letter of credit or such other form as may be
approved by the Lender, executed and delivered by any one or more of the
Borrowers in connection with the issuance of a Letter of Credit, as the same may
from time to time be amended, restated, supplemented or modified; and “Letter of
Credit Agreements” means all of the foregoing in effect at any time and from
time to time.

“Letter of Credit Documents” means any and all drafts under or purporting to be
under a Letter of Credit, any Letter of Credit Agreement, and any other
instrument, document or agreement executed and/or delivered by any one or more
of the Borrowers or any other Person under, pursuant to or in connection with a
Letter of Credit or any Letter of Credit Agreement.

“Letter of Credit Facility” means the facility established pursuant to
Section 2.3 (Letter of Credit Facility).

“Letter of Credit Fee” and “Letter of Credit Fees” have the meanings described
in Section 2.3.2 (Letter of Credit Fees).

“Letter of Credit Obligations” means the collective reference to all Obligations
of any one or more of the Borrowers with respect to the Letters of Credit and
the Letter of Credit Agreements.

“LIBOR Base Rate” means with respect to any LIBOR Loan, the per annum interest
rate rounded upward, if necessary, to the nearest 1/100 of 1%, appearing on
Telerate Page 3750 (or any successor page) as the London interbank offered rate
for deposits in U.S. Dollars at or about 11:00 a.m. (London time) on the date
that is two (2) LIBOR Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term “LIBOR Base Rate” shall mean, for any LIBOR Loan
for any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as
the London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two (2) LIBOR Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates (rounded upwards,
if necessary, to the nearest 1/100 of 1%).

“LIBOR Business Day” means any Business Day on which dealings in United States
Dollar deposits are carried out on the London interbank market and on which
commercial banks are open for domestic and international business (including
dealings in U.S. Dollar deposits) in London, England.

 

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“LIBOR Loan” means any Loan for which interest is to be computed with reference
to the LIBOR Rate.

“LIBOR Rate” means for any Interest Period with respect to any LIBOR Loan,
(a) the Applicable Margin, plus (b) the per annum rate of interest calculated
pursuant to the following formula:

LIBOR Base Rate

1.00 - Reserve Percentage

“Lien” means any mortgage, deed of trust, deed to secure debt, grant, pledge,
security interest, assignment, encumbrance, judgment, lien, financing statement,
hypothecation, provision in any instrument or other document for confession of
judgment, cognovit or other similar right or other remedy, claim, charge,
control over or interest of any kind in real or personal property securing any
indebtedness, duties, obligations, and liabilities owed to, or a claimed to be
owed to, a Person, all whether perfected or unperfected, avoidable or
unavoidable, based on the common law, statute or contract or otherwise,
including, without limitation, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction, excluding the precautionary filing of any financing statement by
any lessor in a true lease transaction or by any bailor in a true bailment
transaction under the Uniform Commercial Code of any jurisdiction or the
agreement to give any financing statement by any lessee in a true lease
transaction or by any bailee in a true bailment transaction.

“Loan” means each of the Revolving Loan or the Acquisition Line, as the case may
be, and “Loans” means the collective reference to the Revolving Loan and the
Acquisition Line.

“Loan Base Report” has the meaning described in Section 6.1.2 (Loan Base
Report).

“Loan Notice” has the meaning described in Section 2.1.2 (Procedure for Making
Advances).

“Lockbox” has the meaning described in Section 7.2.4 (Collateral Account;
Lockbox)2.1.7.

“Losberger Investment” means the capital contributions and loans by TVI in a new
Maryland or Delaware limited liability company, the members of which would be
(a) TVI, with a 70% ownership interest, and (b) a Maryland or Delaware limited
liability company to be formed and wholly-owned by Losberger Intertent Gmbh,
Gottlieb-Daimler-Ring 14, 74906 Bad Rappenau, Germany, with a 30% ownership
interest. Generally, the new LLC would engage in the marketing, sale and
distribution of inflatable and rigid shelters. Management of the new limited
liability company would be the subject of an operating agreement and other
agreements to be determined by TVI’s management in the exercise of its good
faith business judgment.

“Material Adverse Effect” means with respect to the applicable Person (in the
case of the Borrowers, TVI and its Subsidiaries in the aggregate) an effect,
either in any case or in the aggregate, which would reasonably be expected to
result in a material adverse change (w) in the

 

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business, condition, or operations of that Person, (x) to that Person’s material
properties or assets, (y) in the right or ability of that Person to carry on a
substantial portion of its operations as now conducted or, in the case of
Signature TVI, proposed to be conducted or to perform its obligations under the
Financing Documents, or (z) to the value of, or the ability of the Lender to
realize upon, the Collateral.

“Maximum Rate” has the meaning described in Section 2.4.8 (Maximum Interest
Rate).

“Multi-employer Plan” means a Plan that is a Multi-employer plan as defined in
Section 4001(a)(3) of ERISA.

“Note” means any Revolving Credit Note or any Acquisition Line Note, as the case
may be, and “Notes” means collectively each Revolving Credit Note and each
Acquisition Line Note, and any other promissory note that may from time to time
evidence all or any portion of the Obligations.

“Obligations” means (a) all present and future indebtedness, duties,
obligations, and liabilities, whether now existing or contemplated or hereafter
arising, of any one or more of the Borrowers to the Lender under, arising
pursuant to, in connection with and/or on account of the provisions of this
Agreement, each Note, each Security Document, and/or any of the other Financing
Documents, the Loans, and/or any of the Facilities including, without
limitation, the principal of, and interest on, each Note, late charges, the
Fees, Enforcement Costs, and prepayment fees (if any), letter of credit
reimbursement obligations, letter of credit fees or fees charged with respect to
any guaranty of any letter of credit; (b) all other present and future
indebtedness, duties, obligations, and liabilities, whether now existing or
contemplated or hereafter arising, of any one or more of the Borrowers to the
Lender or its Affiliates of any nature whatsoever including, without limitation,
any indebtedness, duties, obligations, and liabilities under or in connection
with, any Bank Products, regardless of whether such indebtedness, duties,
obligations, and liabilities be direct, indirect, primary, secondary, joint,
several, joint and several, fixed or contingent; and (c) any and all renewals,
extensions, substitutions, amendments, restatements and rearrangements of any or
all of the foregoing indebtedness, duties, obligations, and liabilities.

“OFAC” means the United States Department of the Treasury’s Office of Foreign
Assets Control or any successor thereto.

“Organizational Documents” means, with respect to any Person, the collective
reference to each of the constituent documents and agreements governing the
Person’s formation, governance and management, as amended, restated, modified,
substituted, extended and renewed from time to time, including, without
limitation, (a) with respect to a corporation, its charter and bylaws, (b) with
respect to a limited liability company, its operating agreement and articles of
organization, (c) with respect to a limited partnership, its limited partnership
certificate and its limited partnership agreement, and (d) with respect to a
general partnership, its partnership agreement.

“Origination Fee” has the meaning described in Section 2.4.5 (Origination Fee).

“Outstanding Letter of Credit Obligations” has the meaning described in
Section 2.3.3 (Terms of Letters of Credit).

 

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“Patents” means and includes, in each case whether now existing or hereafter
arising, all of each Borrower’s rights, title and interest in and to (a) any and
all patents and patent applications, (b) any and all inventions and improvements
described and claimed in such patents and patent applications, (c) reissues,
divisions, continuations, renewals, extensions and continuations-in-part of any
patents and patent applications, (d) income, royalties, damages, claims and
payments now or hereafter due and/or payable under and with respect to any
patents or patent applications, including, without limitation, damages and
payments for past and future infringements, (e) rights to sue for past, present
and future infringements of patents, and (f) all rights corresponding to any of
the foregoing throughout the world.

“PBGC” means the Pension Benefit Guaranty Corporation.

“Perfection Certificate” has the meaning described in Section 3.3 (Perfection
Certificate).

“Permitted Acquisitions” means the acquisition of the assets of any Person,
engaged substantially in the line of business as one of the Borrowers, which
acquisition meets each of the following conditions:

(a) the Lender shall have been provided such financial and other information
with respect to the assets and the enterprise associated with the assets as the
Lender may require, which financial and other information shall be in form and
substance satisfactory to the Lender and shall demonstrate that the enterprise
has a positive cash flow and is not a turnaround situation, as established by
the Lender, and shall establish the Acquisition Line Formula Value for the
acquired assets, all to the Lender’s satisfaction;

(b) such acquisition, and the terms and conditions related thereto, cannot
otherwise constitute or give rise to a Default or an Event of Default;

(c) the Borrowers shall have furnished financial projections in form and
substance satisfactory to the Lender which give effect to such acquisition and
which indicate that such acquisition could not or would not cause a Default or
Event of Default;

(d) at the time of acquisition, the assets acquired shall be subjected to the
Lien of this Agreement and other Security Documents, all in form and substance
satisfactory to the Lender and its counsel, and otherwise meet the requirements
of this Agreement with respect to assets of the Borrower;

(e) certificates, agreements, documents, audits, reports, financial information,
verifications, investigations, record searches, surveys, environmental reports,
insurance (including, without limitation, flood hazard insurance), instruments,
opinions of counsel, and appraisals; and

(f) the contract of acquisition, and all certificates, agreements, Financing
Documents, record searches, insurance, opinions of counsel, and appraisals
required by the Lender, and the due diligence by the Lender and its counsel,
must be satisfactory to the Lender in all other respects.

 

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“Permitted Liens” means: (a) Liens for Taxes that are not delinquent or that the
Lender has determined in the exercise of its sole and absolute discretion
(i) are being diligently contested in good faith and by appropriate proceedings,
and such contest operates to suspend collection of the contested Taxes and
enforcement of a Lien, (ii) the respective Borrower has the financial ability to
pay, with all penalties and interest, at all times without materially and
adversely affecting such Borrower, and (iii) are not, and will not be with
appropriate filing, the giving of notice and/or the passage of time, entitled to
priority over any Lien of the Lender; (b) deposits or pledges to secure
obligations under workers’ compensation, social security or similar laws, or
under unemployment insurance in the ordinary course of business; (c) Liens
securing the Obligations; (d) judgment Liens to the extent the entry of such
judgment does not constitute a Default or an Event of Default under the terms of
this Agreement or result in the sale or levy of, or execution on, any of the
Collateral; (e) liens imposed by law, such as carriers’, warehousemen’s and
mechanics’ liens and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 30 days past due or
which are being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on its books; (f) purchase money
security interests securing Indebtedness for Borrowed Money for the purchase of
Equipment in arms-length, commercially reasonable transactions (other than
Permitted Acquisitions) with persons who are not Affiliates; provided, however,
that (i) the indebtedness secured shall not exceed the unpaid purchase price of
the Equipment acquired, plus reasonable finance charges and the reasonable costs
of collection (including, without limitation, reasonable attorneys fees);
(ii) each item of Equipment shall secure only its portion of the indebtedness
described in item (i); and (iii) the aggregate outstanding amount of such
indebtedness outstanding at any time shall not exceed $200,000; and (g) such
other Liens, if any, as are set forth on Schedule 4.1.16 contained in the
Disclosure Schedule.

“Permitted Uses” means (a) on the Closing Date (i) with respect to the
Acquisition Line, payment of $10,000,000 of the purchase price under the
Purchase Agreement, of which $5,000,000 shall be an Acquisition Line Term
Advance, and (ii) with respect to the Revolving Loan, payment of $            
for amounts due under the Purchase Agreement and under the other Purchase
Agreement Documents and payment of the costs, fees and expenses related to the
closing of this Agreement and the Purchase Agreement Transaction, (b) after the
Closing Date with respect to the Acquisition Line, payment toward the purchase
price of Permitted Acquisitions, subject to the other limitations of this
Agreement, and (c) at any time with respect to the Revolving Loan, the working
capital purposes arising in the ordinary course of any Borrower’s business and
not prohibited by the provisions of this Agreement.

“Person” means and includes an individual, a corporation, a partnership, a joint
venture, a limited liability company or partnership, a trust, an unincorporated
association, a Governmental Authority, or any other organization or entity.

“Plan” means any pension plan that is covered by Title IV of ERISA and in
respect of that any Borrower or a ERISA Affiliate is an “employer” as defined in
Section 3 of ERISA.

“Post-Default Rate” means (a) with respect to the Loans, LIBOR Rate plus 400
basis points per annum in excess of the Applicable Margin from time to time, and
(b) with respect to other Obligations, the rate of interest applicable to the
Revolving Loan from time to time.

 

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“Prepayment” means a Revolving Loan Mandatory Prepayment, a Revolving Loan
Optional Prepayment, an Acquisition Line Mandatory Prepayment, or an Acquisition
Line Optional Prepayment, as the case may be, and “Prepayments” mean
collectively all Revolving Loan Mandatory Prepayments, all Revolving Loan
Optional Prepayments, all Acquisition Line Mandatory Prepayments and all
Acquisition Line Optional Prepayments.

“Prime Rate” means the floating and fluctuating per annum prime commercial
lending rate of interest of the Lender, as established and declared by the
Lender at any time or from time to time. The Prime Rate shall be adjusted
automatically, without notice, as of the effective date of any change in such
prime commercial lending rate. The Prime Rate does not necessarily represent the
lowest rate of interest charged by the Lender to borrowers.

“Purchase Agreement” means that certain Asset Purchase Agreement purchase
agreement dated October 31, 2006 by and among Signature TVI, the Seller and the
Seller’s members identified therein.

“Purchase Agreement Documents” means collectively (a) the Purchase Agreement,
(b) (i) the employment agreements between TVI and the management of TVI
Signature, (ii) the Finders Fee Agreement dated October 31, 2006, and (iii) any
and all other agreements, documents or instruments (together with any and all
amendments, modifications, and supplements thereto, restatements thereof, and
substitutes therefor) previously, now or hereafter executed and delivered by any
or all of the Borrowers, the Seller, or any other Person in connection with the
Purchase Agreement Transaction.

“Purchase Agreement Transaction” means the asset/stock purchase agreement
transaction contemplated by the provisions of the Purchase Agreement and the
other Purchase Agreement Documents.

“Receivable” means one of each Borrower’s now owned and hereafter owned,
acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments; and “Receivables” means all of each Borrower’s now or hereafter
owned, acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments, and all cash and non-cash proceeds and products thereof.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA
or the regulations thereunder.

“Reserves” means the collective reference to reserves, in amounts and with
respect to such matters, as the Lender in its sole discretion shall deem
necessary or appropriate to establish against the Borrowing Base, including,
without limitation, reserves with respect to (i) reserves required by this
Agreement or the other Financing Documents, (ii) sums that the Borrowers are
required to pay (such as taxes, assessments, insurance premiums, or, in the case
of leased assets, rents or other amounts payable under such leases) and has
failed to pay under any provision of this Agreement or any of the other
Financing Documents, and (iii) amounts owing by the Borrowers to any Person to
the extent secured by a Lien on, or trust over, any of the Collateral, which
Lien or trust as the Lender in its discretion deems likely to have a priority
superior to Liens of the Lender (such as Liens or trusts in favor of landlords,
warehousemen, carriers, mechanics, materialmen, laborers, or suppliers, or Liens
or trusts for ad valorem, excise, sales, or

 

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other taxes where given priority under applicable law) in all or any part of the
Collateral; it being understood and agreed that Reserves are established solely
for the benefit of the Lender and no other Person, including, without
limitation, the Borrowers, shall have any rights or interests with respect to
the establishment or failure to establish Reserves.

“Reserve Percentage” means, at any time, the then current maximum rate for which
reserves (including any basic, special, supplemental, marginal and emergency
reserves) are required to be maintained by member banks of the Federal Reserve
System under Regulation D of the Board of Governors of the Federal Reserve
System against “Eurocurrency liabilities”, as that term is defined in Regulation
D. Without limiting the effect of the foregoing, the Reserve Percentage shall
reflect any other reserves required to be maintained by such member banks with
respect to (i) any category of liabilities which includes deposits by reference
to which the LIBOR Rate is to be determined, or (ii) any category of extensions
of credit or other assets which include LIBOR Loans. The LIBOR Rate shall be
adjusted automatically on and as of the effective date of any change in the
Reserve Percentage.

“Responsible Officer” means for each Borrower, its chief executive officer or
president or, with respect to financial matters, its chief financial officer.

“Revolver Usage” means, as of any date of determination, the aggregate of the
outstanding principal balance of the Revolving Loan plus, with respect to
Letters of Credit, the aggregate face amount of all outstanding Letters of
Credit plus the amount of all drafts drawn thereon to the extent the same have
not been the subject of an Advance.

“Revolving Credit Commitment” means the agreement of the Lender relating to the
making of Advances subject to and in accordance with the provisions of this
Agreement.

“Revolving Credit Commitment Period” means the period of time from the Closing
Date to the Business Day preceding the Revolving Credit Termination Date.

“Revolving Credit Committed Amount” means Twenty-five Million Dollars
($25,000,000).

“Revolving Credit Expiration Date” means October 30, 2011.

“Revolving Credit Facility” means the facility established by the Lender
pursuant to Section 2.1 (Revolving Credit Facility).

“Revolving Credit Note” and “Revolving Credit Notes” have the meanings described
in Section 2.1.4 (Revolving Credit Notes).

“Revolving Credit Termination Date” means the earlier of (a) the Revolving
Credit Expiration Date, or (b) the date on which the Revolving Credit Commitment
is terminated pursuant to Section 7.2 (Remedies) or otherwise.

“Revolving Credit Unused Line Fee” and “Revolving Credit Unused Line Fees” have
the meanings described in Section 2.1.9 (Revolving Credit Unused Line Fee).

 

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“Revolving Loan” has the meaning described in Section 2.1.1 (Revolving Credit
Facility).

“Revolving Loan Account” has the meaning described in Section 0 (Revolving Loan
Account).

“Revolving Loan Mandatory Prepayment” and “Revolving Loan Mandatory Prepayments”
have the meanings described in Section 2.1.5 ((Mandatory Prepayments of
Revolving Loan).

“Revolving Loan Optional Prepayment” and “Revolving Loan Optional Prepayments”
have the meanings described in Section 2.1.6 (Optional Prepayment of Revolving
Loan).

“Sanctioned Country” means a country subject to the sanctions program identified
on the list maintained by OFAC and available at
http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html or as otherwise
published from time to time.

“Sanctioned Person” means (a) a Person named on the list of Specially Designated
Nationals or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/eotffc/ofac/sdn/index.html or as otherwise
published from time to time, or (ii) (A) an agency of the government of a
Sanctioned Country, (b) an organization controlled by a Sanctioned Country, or
(c) a Person resident in a Sanctioned Country, to the extent subject to a
sanctions program administered by OFAC.

“Security Documents” means collectively any assignment, pledge agreement,
security agreement, mortgage, deed of trust, deed to secure debt, financing
statement and any similar instrument, document or agreement under or pursuant to
which a Lien is now or hereafter granted to, or for the benefit of, the Lender
on any real or personal property of any Person to secure all or any portion of
the Obligations, all as the same may from time to time be amended, restated,
supplemented or otherwise modified, including, without limitation, this
Agreement, the Assignment of Patents, and the Assignment of Trademarks.

“Seller” means Signature Special Event Services, LLC, a Delaware limited
liability company.

“Solvent” means when used with respect to any Person that at the time of
determination (a) the assets of such Person, at a fair valuation, are in excess
of the total amount of its debts (including, without limitation, contingent
liabilities); (b) the present fair saleable value of its assets is greater than
its probable liability on its existing debts as such debts become absolute and
matured; (c) it is then able and expects to be able to pay its debts (including,
without limitation, contingent debts and other commitments) as they mature; and
(d) it has capital sufficient to carry on its business as conducted and as
proposed to be conducted. For purposes of determining whether a Person is
Solvent, the amount of any contingent liability shall be computed as the amount
that, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.

“State” means the State of Maryland.

 

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“Subsidiary” of a Person means any corporation, association, partnership, joint
venture or other business entity of which more than fifty percent (50%) of the
voting stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof.

“Supporting Obligation” means a letter-of-credit right, secondary obligation, or
obligation of a secondary obligor, or secondary obligation that supports the
payment or performance of an account, chattel paper, a document, a general
intangible, an instrument, or investment property.

“Taxes” means all taxes and assessments whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character (including all
penalties or interest thereon), that at any time may be assessed, levied,
confirmed or imposed by any Governmental Authority on any or all of the
Borrowers or any of its or their properties or assets or any part thereof or in
respect of any of its or their franchises, businesses, income or profits.

“Trademarks” means and includes in each case whether now existing or hereafter
arising, all of each Borrower’s rights, title and interest in and to (a) any and
all trademarks (including service marks), trade names and trade styles, and
applications for registration thereof and the goodwill of the business
symbolized by any of the foregoing, (b) any and all licenses of trademarks,
service marks, trade names and/or trade styles, whether as licensor or licensee,
(c) any renewals of any and all trademarks, service marks, trade names, trade
styles and/or licenses of any of the foregoing, (d) income, royalties, damages
and payments now or hereafter due and/or payable with respect thereto,
including, without limitation, damages, claims, and payments for past, present
and future infringements thereof, (e) rights to sue for past, present and future
infringements of any of the foregoing, including the right to settle suits
involving claims and demands for royalties owing, and (f) all rights
corresponding to any of the foregoing throughout the world.

“Uniform Commercial Code” means, unless otherwise provided in this Agreement,
the Uniform Commercial Code as adopted by and in effect from time to time in the
State or in any other jurisdiction, as applicable.

“USA Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act
of 2001.

“Wholly Owned Subsidiary” means any domestic United States corporation all the
shares of stock of all classes of which (other than directors’ qualifying
shares) at the time are owned directly or indirectly by a Borrower and/or by one
or more Wholly Owned Subsidiaries of a Borrower.

Section 1.2 Accounting Terms and Other Definitional Provisions.

Unless otherwise defined herein, as used in this Agreement and in any
certificate, report or other document made or delivered pursuant hereto,
accounting terms not otherwise defined herein, and accounting terms only partly
defined herein, to the extent not defined, shall have the respective meanings
given to them under GAAP, as consistently applied to the applicable Person. All
terms used herein which are defined by the Uniform Commercial Code shall have

 

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the same meanings as assigned to them by the Uniform Commercial Code unless and
to the extent varied by this Agreement. The words “hereof”, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, subsection, schedule and exhibit references are
references to articles, sections or subsections of, or schedules or exhibits to,
as the case may be, this Agreement unless otherwise specified. As used herein,
the singular number shall include the plural, the plural the singular and the
use of the masculine, feminine or neuter gender shall include all genders, as
the context may require. Reference to any one or more of the Financing Documents
shall mean the same as the foregoing may from time to time be amended, restated,
substituted, extended, renewed, supplemented or otherwise modified. Reference in
this Agreement and the other Financing Documents to the “Borrower”, the
“Borrowers”, “each Borrower” or otherwise with respect to any one or more of the
Borrowers shall mean each and every Borrower and any one or more of the
Borrowers, jointly and severally, unless a specific Borrower is expressly
identified.

Section 1.3 Interpretive Provisions.

(a) The terms “sign,” “signed” and signatures” shall have their ordinary
meanings except that, to the limited extent the Lender in an authenticated
record expressly agrees otherwise from time to time in the exercise of its sole
and absolute discretion, the terms may also include other methods used to
authenticate.

(b) The headings in this Agreement are included herein for convenience only,
shall not constitute a part of this Agreement for any other purpose, and shall
not be deemed to affect the meaning or construction of any of the provisions
hereof.

(c) This Agreement and the other Financing Documents are the result of
negotiations among and have been reviewed by counsel to the Lender, the
Borrowers and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lender merely because of
the involvement of the Lender and its counsel in their preparation.

ARTICLE II

THE CREDIT FACILITIES

Section 2.1 The Revolving Credit Facility.

2.1.1 Revolving Credit Facility.

(a) Subject to the provisions of this Agreement, the Lender establishes during
the Revolving Credit Commitment Period a revolving credit facility in favor of
the Borrowers (sometimes referred to in this Agreement as the “Revolving “Loan”)
in an amount at any one time outstanding not to exceed the lesser of (i) the
Revolving Credit Committed Amount or (ii) the Borrowing Base.

(b) Subject to the provisions of this Agreement, the Borrowers may request
Advances during the Revolving Credit Commitment Period in accordance with the
provisions of this Agreement; provided that after giving effect to the
Borrowers’ request, the aggregate Revolver Usage would not exceed the lesser of
(i) Revolving Credit Committed Amount or (ii) the Borrowing Base.

 

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(c) Unless sooner paid, the unpaid Revolving Loan, together with interest
accrued and unpaid thereon, and all other Obligations shall be due and payable
in full on the Revolving Credit Expiration Date.

(d) If at any time the Revolver Usage exceeds the Revolving Credit Committed
Amount in effect from time to time, the Borrower shall pay such excess to the
Lender ON DEMAND.

2.1.2 Procedure for Making Advances Under the Revolving Loan; Lender Protection
Loans.

The Borrowers may borrow under the Revolving Credit Facility on any Business
Day. Advances under the Revolving Loan shall be deposited to a demand deposit
account of a Borrower with the Lender or shall be otherwise applied as directed
by the Borrowers, which direction the Lender may require to be in writing. Not
later than 10:00 a.m. (Baltimore City Time) on the date of the requested
borrowing, the Borrowers shall give the Lender oral or written notice (a “Loan
Notice”) of the amount and (if requested by the Lender) the purpose of the
requested borrowing. Any oral Loan Notice shall be confirmed in writing by the
Borrowers within three (3) Business Days after the making of the requested
advance under the Revolving Loan. Each Loan Notice shall be irrevocable.

In addition, each of the Borrowers hereby irrevocably authorizes the Lender at
any time and from time to time, without further request from or notice to the
Borrowers, to make Advances, and irrevocably authorizes the Lender to establish,
without duplication, Reserves against the Borrowing Base, that the Lender, in
its sole and absolute discretion (but, unless an Event of Default has occurred
and is continuing, after consultation with the Borrower), deems necessary or
appropriate to protect the interests of the Lender under this Agreement,
including, without limitation, Advances and Reserves to cover debit balances in
the Revolving Loan Account, principal of and interest on any Loan, Bank
Products, Revolver Usage, Enforcement Costs and the other Obligations, all of
the foregoing whether prior to, on, or after the termination of other advances
under this Agreement, and regardless of whether the outstanding principal amount
of the Revolving Loan that the Lender may advance or the Lender may reserve
hereunder exceeds the Revolving Credit Committed Amount or the Borrowing Base.

2.1.3 Computation of Borrowing Base.

(a) As used in this Agreement, the term “Borrowing Base” means at any time, an
amount equal to the aggregate of (i) eighty-five percent (85%) of the amount of
Eligible Receivables plus (ii) the lesser of (A) fifty-five percent (55%) of the
amount of Eligible Inventory or (B) Six Million Dollars ($6,000,000), subject to
the adjustments provided in this Section 2.1, plus (iii) (A) sixty-five percent
(65%) of the amount of Eligible Fixed Assets through and including the first
anniversary date, and (B) fifty-five percent (55%) of the amount of Eligible
Fixed Assets, thereafter.

(b) The Borrowing Base shall be computed based on the Loan Base Report most
recently delivered to and accepted by the Lender in its sole and absolute
discretion. In the event the Borrowers fail to furnish a Loan Base Report
required by Section 6.1.2 (Loan Base Report), or in the event the Lender
believes that a Loan Base Report is no longer accurate, the Lender may, in its
sole and absolute discretion exercised from time to time and without

 

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limiting other rights and remedies under this Agreement, suspend the making of
or limit advances under the Revolving Loan. The amount of the Borrowing Base
shall be subject to reduction by the amount of Reserves applicable from time to
time and by the amount of any Receivable or any Inventory that was included in
the Borrowing Base but that the Lender determines fails to meet the respective
criteria applicable from time to time for Eligible Receivables or Eligible
Inventory.

(c) If at any time the aggregate Revolver Usage exceeds the Borrowing Base, a
borrowing base deficiency (“Borrowing Base Deficiency”) shall exist. Each time a
Borrowing Base Deficiency exists, the Borrowers at the sole and absolute
discretion of the Lender exercised from time to time shall pay the Borrowing
Base Deficiency ON DEMAND to Lender.

(d) Without implying any limitation on the Lender’s discretion with respect to
the Borrowing Base, the criteria for Eligible Receivables and for Eligible
Inventory contained in the respective definitions of Eligible Receivables and of
Eligible Inventory are in part based upon the business operations of the
Borrowers existing on or about the Closing Date and upon information and records
furnished to the Lender by the Borrowers. If at any time or from time to time
hereafter, the business operations of the Borrowers change or such information
and records furnished to the Lender is incorrect or misleading, the Lender in
its discretion, may at any time and from time to time during the duration of
this Agreement change such criteria or add new criteria. The Lender may
communicate such changed or additional criteria to the Borrowers from time to
time either orally or in writing.

2.1.4 Revolving Credit Note.

The obligation of the Borrowers to pay the Revolving Loan, with interest, shall
be evidenced by a promissory note (as from time to time extended, amended,
restated, supplemented or otherwise modified, the “Revolving Credit Note”)
substantially in the form of EXHIBIT A-1 attached hereto and made a part hereof,
with appropriate insertions. The Revolving Credit Note shall be dated as of the
Closing Date, shall be payable to the order of the Lender at the times provided
in the Revolving Credit Note, and shall be in the principal amount of the
Revolving Credit Committed Amount. Each of the Borrowers acknowledges and agrees
that, if the outstanding principal balance of the Revolving Loan outstanding
from time to time exceeds the face amount of the Revolving Credit Note, the
excess shall bear interest at the rates provided from time to time for advances
under the Revolving Loan evidenced by the Revolving Credit Note and shall be
payable, with accrued interest, ON DEMAND. The Revolving Credit Note shall not
operate as a novation of any of the Obligations or nullify, discharge, or
release any such Obligations or the continuing contractual relationship of the
parties hereto in accordance with the provisions of this Agreement.

2.1.5 Mandatory Prepayments of Revolving Loan.

The Borrowers shall make the mandatory prepayments (each a “Revolving Loan
Mandatory Prepayment” and collectively, the “Revolving Loan Mandatory
Prepayments”) of the Revolving Loan at any time and from time to time in such
amounts requested by the Lender pursuant to Section 2.1.3 (Computation of
Borrowing Base) in order to cover any Borrowing Base Deficiency.

 

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2.1.6 Optional Prepayments of Revolving Loan.

The Borrowers shall have the option at any time and from time to time to prepay
(each a “Revolving Loan Optional Prepayment” and collectively the “Revolving
Loan Optional Prepayments”) the Revolving Loan, in whole or in part without
premium or penalty.

2.1.7 The Operating Account.

The Borrowers will promptly deposit, or cause to be deposited, all Items of
Payment to a demand deposit account, or other deposit account approved by and,
with the Lender.

2.1.8 Revolving Loan Account.

The Lender will establish and maintain a loan account on its books (the
“Revolving Loan Account”) to which the Lender will (a) debit (i) the principal
amount of each advance under the Revolving Loan made by the Lender hereunder as
of the date made, (ii) the amount of any interest accrued on the Revolving Loan
as and when due, and (iii) any other amounts due and payable by the Borrowers to
the Lender from time to time under the provisions of this Agreement in
connection with the Revolving Loan, including, without limitation, Enforcement
Costs, Fees, late charges, and service, collection and audit fees, as and when
due and payable, and (b) credit all payments made by the Borrowers to the Lender
on account of the Revolving Loan as of the date made including, without
limitation, funds credited to the Revolving Loan Account from the Collateral
Account. The Lender may debit the Revolving Loan Account for the amount of any
Item of Payment which is returned to the Lender unpaid. All credit entries to
the Revolving Loan Account are conditional and shall be readjusted as of the
date made if final and indefeasible payment is not received by the Lender in
cash or solvent credits. Any and all periodic or other statements or
reconciliations, and the information contained in those statements or
reconciliations, of the Revolving Loan Account shall be presumed conclusively to
be correct, and shall constitute an account stated between the Lender and the
Borrowers unless the Lender receives specific written objection thereto from any
Borrower within sixty (60) Business Days after such statement or reconciliation
shall have been sent by the Lender.

2.1.9 Revolving Credit Unused Line Fee.

The Borrowers shall pay to the Lender a monthly revolving credit facility fee
(collectively, the “Revolving Credit Unused Line Fees” and individually, a
“Revolving Credit Unused Line Fee”) in an amount equal to the Applicable Margin
for Unused Line Fees per annum on the average daily unused and undisbursed
portion of the Revolving Credit Committed Amount in effect from time to time
accruing during each calendar month. The accrued and unpaid portion of the
Revolving Credit Unused Line Fee shall be paid by the Borrowers to the Lender on
the first day of each month, commencing on the first such date following the
date hereof, and on the Revolving Credit Termination Date.

Section 2.2 The Acquisition Line Facility.

2.2.1 Acquisition Line Commitment.

Subject to and upon the provisions of this Agreement, the Lender establishes a
credit line in the maximum principal amount of the Acquisition Line Committed
Amount in

 

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favor of the Borrowers. The aggregate of all advances under the Acquisition Line
Facility is sometimes referred to in this Agreement collectively as the
“Acquisition Line.” The obligation of the Lender to make an advance under the
Acquisition Line is herein called its “Acquisition Line Commitment.”

During the Acquisition Line Commitment Period, the Borrowers may request
advances under the Acquisition Line Facility in accordance with the provisions
of this Agreement; provided that after giving effect to the Borrowers’ request
(a) the outstanding principal balance of the Acquisition Line would not exceed
the Acquisition Line Commitment; and (b) the aggregate outstanding principal
balance of the Acquisition Line Term Advances would not exceed $5,000,000.
Amounts repaid on the Acquisition Line may be reborrowed in accordance with this
Section 2.2 (The Acquisition Line Facility).

2.2.2 Procedure for Making Advances Under the Acquisition Line.

The Borrowers may borrow under the Acquisition Line Facility on any Business
Day. The Borrowers shall give the Lender written notice (a “Acquisition Line
Notice”) at least fifteen (15) Business Days prior to the date on which the
Borrowers desire an Acquisition Line Advance. The Lender shall have no
obligation to make an Acquisition Line Advance unless and until the Lender is
satisfied that the Acquisition Line Advance will be solely for a Permitted
Acquisition and the other terms and conditions for advances under this Agreement
have been met.

2.2.3 Acquisition Line Notes.

The obligation of the Borrowers to pay each Acquisition Line Advance with
interest shall be evidenced by an Acquisition Line Term Note or by the
Acquisition Line Revolving Note (each, as from time to time extended, amended,
restated, supplemented or otherwise modified, an “Acquisition Line Note;”
collectively with each other Acquisition Line Note, the “Acquisition Line
Notes”). The Borrower’s obligation to repay an Acquisition Line Term Advance
shall be evidenced by a promissory note in substantially the form of EXHIBIT
“A-2” attached hereto and made a part hereof, with appropriate insertions (each,
as from time to time extended, amended, restated, supplemented or otherwise
modified, a “Acquisition Line Term Note;” collectively with each other
Acquisition Line Term Note, the “Acquisition Line Term Notes”). To the extent an
Acquisition Line Advance is not evidenced by an Acquisition Line Term Note, it
shall be evidenced by a promissory note (as from time to time extended, amended,
restated, supplemented or otherwise modified, the “Acquisition Line Revolving
Note”) , in the amount of the Acquisition Line Commitment, in substantially in
the form of EXHIBIT “A-3.” The Acquisition Line Notes shall not operate as a
novation of any of the Obligations or nullify, discharge, or release any such
Obligations or the continuing contractual relationship of the parties hereto in
accordance with the provisions of this Agreement.

2.2.4 Acquisition Line Term Payments.

The Borrowers shall make installment payments of principal (each an “Acquisition
Line Term Payment” and collectively the “Acquisition Line Term Payments”) on
each on each Acquisition Line Term Advance commencing on the first day of the
first month after the Acquisition Line Term Advance is made. Each Acquisition
Line Term Payment shall be in an amount equal to 1/24th of that portion of the
amount of the Acquisition Line Term Advance.

 

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2.2.5 Acquisition Line Maturity.

If not sooner paid, each Acquisition Line Term Advance shall mature and shall be
due and payable, together with interest accrued and unpaid thereon, on the due
date of its twenty-fourth Acquisition Line Term Payment. Notwithstanding the
foregoing, if not sooner paid, all Acquisition Line Advances shall mature and
shall be due and payable, together with interest accrued and unpaid thereon, on
the Revolving Credit Termination Date.

2.2.6 Mandatory Prepayments of Acquisition Line.

The Borrowers shall make mandatory prepayments (each a “Acquisition Line
Mandatory Prepayment” and collectively the “Acquisition Line Mandatory
Prepayments”) of the Acquisition Line Term Advances to the Lender annually. Each
Acquisition Line Mandatory Prepayment shall be in the amount of the Excess Cash
Flow for the then preceding fiscal year and shall be payable on the date the
Borrowers furnish to the Lender the annual financial statements referred to in
Section 6.1.1 (Financial Statements). Each Partial Acquisition Line Mandatory
Prepayment first shall be applied to the first Acquisition Line Term Note to be
executed and delivered until that Acquisition Line Term Note is paid in full,
and then to the subsequent Acquisition Line Term Notes sequentially in the order
of their respective dates until they each successively have been paid in full,
with Partial Acquisition Line Optional Prepayments being applied against the
Acquisition Line Term Payments under the applicable Acquisition Line Term Notes
in the inverse order of their maturity until all outstanding Acquisition Line
Term Advances have been paid in full.

2.2.7 Optional Prepayments of Acquisition Line.

The Borrowers may, at its option, at any time and from time to time prepay (each
a “Acquisition Line Optional Prepayment” and collectively the “Acquisition Line
Optional Prepayments”) the Acquisition Line, in whole or in part without premium
or penalty, upon five (5) Business Days prior written notice, specifying the
date and amount of prepayment. The amount to be so prepaid, together with
interest accrued thereon to date of prepayment if the amount is intended as a
prepayment of the Acquisition Line in whole, shall be paid by the Borrowers to
the Lender on the date specified for such prepayment. Each Partial Acquisition
Line Optional Prepayment shall be applied, first, to the first Acquisition Line
Term Note to be executed and delivered until that Acquisition Line Term Note is
paid in full, and then to the subsequent Acquisition Line Term Notes
sequentially in the order of their respective dates until they each successively
have been paid in full, with Partial Acquisition Line Optional Prepayments being
applied against the Acquisition Line Term Payments under the applicable
Acquisition Line Term Note in the inverse order of their maturity until all
outstanding Acquisition Line Term Advances have been paid in full; and, finally
to the Acquisition Line Revolving Note.

Section 2.3 The Letter of Credit Facility.

2.3.1 Letters of Credit.

Subject to and upon the provisions of this Agreement, and as a part of the
Revolving Credit Commitment, each of the Borrowers, upon the prior approval of
the Lender, may obtain letters of credit (as the same may from time to time be
amended, supplemented or otherwise modified, each a “Letter of Credit” and
collectively the “Letters of Credit”) from the Lender from time to time from the
Closing Date until the Business Day preceding the Revolving

 

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Credit Termination Date. The Borrowers will not be entitled to obtain a Letter
of Credit unless (a) after giving effect to the request, the aggregate Revolver
Usage would not exceed the lesser of (i) the Revolving Credit Committed Amount,
or (ii) the most current Borrowing Base and (b) the sum of the aggregate face
amount of the then outstanding Letters of Credit (including the face amount of
the requested Letter of Credit) does not exceed Two Million Dollars
($2,000,000).

2.3.2 Letter of Credit Fees.

Prior to or simultaneously with the opening of each Letter of Credit, the
Borrowers shall pay to the Lender, a letter of credit fee (each a “Letter of
Credit Fee” and collectively the “Letter of Credit Fees”) in an amount equal to
the Applicable Margin set forth in Section 2.4.1(c) for Letter of Credit Fees
applied to the face amount of the Letter of Credit. The Letter of Credit Fee
shall be an annual amount and prorated for that portion of a year the Letter of
Credit is issued if less than a full year. The Letter of Credit Fees shall be
paid upon the opening of each Letter of Credit and upon each anniversary
thereof, if any. In addition, the Borrowers shall pay to the Lender, for its own
account, any and all of its standard additional issuance, negotiation,
processing, transfer or other fees to the extent and as and when required by the
provisions of any Letter of Credit Agreement. All such additional fees are
included in and are a part of the “Fees” payable by the Borrowers under the
provisions of this Agreement and are for the sole and exclusive benefit of the
Lender and are a part of the Obligations. Subsequent to an Event of Default that
remains continuing, the Letter of Credit Fee shall be increased by a rate of 200
basis points per annum.

2.3.3 Terms of Letters of Credit; Post-Expiration Date Letters of Credit.

Each Letter of Credit shall (a) be opened pursuant to a Letter of Credit
Agreement and (b) expire on a date not later than the Business Day preceding the
Revolving Credit Expiration Date; provided, however, if any Letter of Credit
does have an expiration date later than the Business Day preceding the Revolving
Credit Termination Date (each a “Post-Expiration Date Letter of Credit” and
collectively, the “Post-Expiration Date Letters of Credit”), effective as of the
Business Day preceding the Revolving Credit Termination Date and without prior
notice to or the consent of the Borrowers, the Lender shall make advances under
the Revolving Loan for the account of the Borrowers in the aggregate face amount
of all such Letters of Credit. The Lender shall deposit the proceeds of such
advances into one or more non-interest bearing accounts with and in the name of
the Lender and over which the Lender alone shall have exclusive power of access
and withdrawal (collectively, the “Letter of Credit Cash Collateral Account”).
The Letter of Credit Cash Collateral Account is to be held by the Lender as
additional collateral and security for any Letter of Credit Obligations relating
to the Post-Expiration Date Letters of Credit. The Borrowers hereby assign,
pledge, grant and set over to the Lender a first priority security interest in,
and Lien on, all of the funds on deposit in the Letter of Credit Cash Collateral
Account, together with any and all proceeds (cash and non-cash) and products
thereof as additional collateral and security for the Letter of Credit
Obligations relating to the Post-Expiration Date Letters of Credit. The
Borrowers acknowledge and agree that the Lender shall be entitled to fund any
draw or draft on any Post-Expiration Date Letter of Credit from the monies on
deposit in the Letter of Credit Cash Collateral Account without notice to or
consent of the Borrowers or the Lender. The Borrowers further acknowledge and
agree that the Lender’s election to fund any draw or draft on any
Post-Expiration Date Letter of Credit from the Letter of Credit Cash Collateral
shall in no way limit, impair, lessen, reduce, release or

 

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otherwise adversely affect the Borrowers’ obligation to pay any Letter of Credit
Obligations under or relating to the Post-Expiration Date Letters of Credit. At
such time as all Post-Expiration Date Letters of Credit have expired and all
Letter of Credit Obligations relating to the Post-Expiration Date Letters of
Credit have been paid in full, the Lender agrees to apply the amount of any
remaining funds on deposit in the Letter of Credit Cash Collateral Account to
the then unpaid balance of the Obligations under the Revolving Credit Facility
in such order and manner as the Lender shall determine in its sole and absolute
discretion in accordance with the provisions of this Agreement and any excess
shall be paid to the Borrowers unless otherwise required by applicable Laws.

The aggregate face amount of all Letters of Credit at any one time outstanding
and issued by the Lender pursuant to the provisions of this Agreement,
including, without limitation, any and all Post-Expiration Date Letters of
Credit, plus the amount of any unpaid Letter of Credit Fees accrued or scheduled
to accrue thereon, and less the aggregate amount of all drafts issued under or
purporting to have been issued under such Letters of Credit that have been paid
by the Lender and for which the Lender has been reimbursed by the Borrowers in
full in accordance with Section 2.3.5 below and the Letter of Credit Agreements,
and for which the Lender has no further obligation or commitment to restore all
or any portion of the amounts drawn and reimbursed, is herein called the
“Outstanding Letter of Credit Obligations”.

2.3.4 Procedures for Letters of Credit.

The Borrowers shall give the Lender written notice at least five (5) Business
Days prior to the date on which the Borrower desires the Lender to issue a
Letter of Credit. Such notice shall be accompanied by a duly executed Letter of
Credit Agreement specifying, among other things: (a) the name and address of the
intended beneficiary of the Letter of Credit, (b) the requested face amount of
the Letter of Credit, (c) whether the Letter of Credit is to be revocable or
irrevocable, (d) the Business Day on which the Letter of Credit is to be opened
and the date on which the Letter of Credit is to expire, (e) the terms of
payment of any draft or drafts which may be drawn under the Letter of Credit,
and (f) any other terms or provisions the Borrowers desire to be contained in
the Letter of Credit. Such notice shall also be accompanied by such other
information, certificates, confirmations, and other items as the Lender may
require to assure that the Letter of Credit is to be issued in accordance with
the provisions of this Agreement and a Letter of Credit Agreement. In the event
of any conflict between the provisions of this Agreement and the provisions of a
Letter of Credit Agreement, the provisions of this Agreement shall prevail and
control unless otherwise expressly provided in the Letter of Credit Agreement.
Upon (x) receipt of such notice, (y) payment of all Letter of Credit Fees and
all other Fees payable in connection with the issuance of such Letter of Credit,
and (z) receipt of a duly executed Letter of Credit Agreement, the Lender shall
process such notice and Letter of Credit Agreement in accordance with its
customary procedures and open such Letter of Credit on the Business Day
specified in such notice.

2.3.5 Payments of Letters of Credit.

The Borrowers hereby promise to pay to the Lender, ON DEMAND and in United
States Dollars, the following which are herein collectively referred to as the
“Current Letter of Credit Obligations”:

 

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(a) the amount which the Lender has paid or will be required to pay under each
draft or draw on a Letter of Credit, whether such demand be in advance of the
Lender’s payment or for reimbursement for such payment;

(b) any and all reasonable charges and expenses which the Lender may pay or
incur relative to the Letter of Credit and/or such draws or drafts; and

(c) interest on the amounts described in (a) and (b) not paid by the Borrowers
as and when due and payable under the provisions of (a) and (b) above from the
day the same are due and payable until paid in full at a rate per annum equal to
the then current highest rate of interest on the Revolving Loan.

In addition, the Borrowers hereby promise to pay any and all other Letter of
Credit Obligations as and when due and payable in accordance with the provisions
of this Agreement and the Letter of Credit Agreements. The obligation of the
Borrowers to pay Current Letter of Credit Obligations and all other Letter of
Credit Obligations shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrowers or any other account party may have or have had against the
beneficiary of such Letter of Credit, the Lender, or any other Person
(excluding, however, any defense based on the failure of any draft or draw to
conform to the terms of such Letter of Credit), any draft or other document
proving to be forged, fraudulent or invalid, or the legality, validity,
regularity or enforceability of such Letter of Credit, any draft or other
documents presented with any draft, any Letter of Credit Agreement, this
Agreement, or any of the other Financing Documents, all whether or not the
Lender had actual or constructive knowledge of the same, and irrespective of any
Collateral, security or guarantee therefor or right of offset with respect
thereto and irrespective of any other circumstances whatsoever which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrowers for any Letter of Credit Obligations, in bankruptcy
or otherwise; provided, however, that the Borrowers shall not be obligated to
reimburse the Lender for any wrongful payment under such Letter of Credit made
as a result of the Lender’s gross negligence or willful misconduct. The
obligation of the Borrowers to pay the Letter of Credit Obligations shall not be
conditioned or contingent upon the pursuit by the Lender or any other Person at
any time of any right or remedy against any Person which may be or become liable
in respect of all or any part of such obligation or against any Collateral,
security or guarantee therefor or right of offset with respect thereto.

The Letter of Credit Obligations shall continue to be effective, or be
reinstated, as the case may be, if at any time payment of all or any portion of
the Letter of Credit Obligations is rescinded or must otherwise be restored or
returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of any Person, or upon or as a result of the appointment of a
receiver, intervenor, or conservator of, or trustee or similar officer for, any
Person, or any substantial part of such Person’s property, all as though such
payments had not been made.

2.3.6 Change in Law; Increased Cost.

If any change in any law or regulation or in the interpretation thereof by any
court or other Governmental Authority charged with the administration thereof
shall either (a) impose, modify or deem applicable any reserve, special deposit
or similar requirement against Letters of Credit issued by the Lender, or
(b) impose on the Lender any other condition regarding this

 

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Agreement or any Letter of Credit, and the result of any event referred to in
clauses (a) or (b) above shall be to increase the cost to the Lender of issuing,
maintaining or extending the Letter of Credit or the cost to the Lender of
funding any obligation under or in connection with the Letter of Credit (which
increase in cost shall be the result of the Lender’s reasonable allocation of
the aggregate of such cost increases resulting from such events), then, upon
demand by the Lender, the Borrowers shall immediately pay to the Lender from
time to time as specified by the Lender, additional amounts that shall be
sufficient to compensate the Lender for such increased cost, together with
interest on each such amount from the date demanded until payment in full
thereof at a rate per annum equal to the then highest current rate of interest
on the Revolving Loan. A certificate as to such increased cost incurred by the
Lender, submitted by the Lender to the Borrowers, shall be conclusive, absent
manifest error.

2.3.7 General Letter of Credit Provisions.

The Borrowers hereby instruct the Lender to pay any draft complying with the
terms of any Letter of Credit irrespective of any instructions of the Borrowers
to the contrary. The Borrowers assume all risks of the acts and omissions of the
beneficiary and other users of any Letter of Credit except presentation of any
draft and/or documents conforming to the terms of the Letter of Credit. The
Lender and its respective branches, Affiliates and/or correspondents shall not
be responsible for and the Borrowers hereby indemnify and hold the Lender and
its respective branches, Affiliates and/or correspondents harmless from and
against all liability, loss and expense (including reasonable attorney’s fees
and costs) incurred by the Lender and/or their respective branches, Affiliates
and/or correspondents relative to and/or as a consequence of (a) any failure by
the Borrowers to perform the agreements hereunder and under any Letter of Credit
Agreement, (b) any Letter of Credit Agreement, this Agreement, any Letter of
Credit and any draft, draw and/or acceptance under or purported to be under any
Letter of Credit, (c) any action taken or omitted by the Lender and/or any of
its respective branches, Affiliates and/or correspondents at the request of the
Borrowers, (d) any failure or inability to perform in accordance with the terms
of any Letter of Credit by reason of any control or restriction rightfully or
wrongfully exercised by any de facto or de jure Governmental Authority, group or
individual asserting or exercising governmental or paramount powers, and/or
(e) any consequences arising from causes beyond the control of the Lender and/or
any of its respective branches, Affiliates and/or correspondents.

Except for gross negligence or willful misconduct, the Lender and its respective
branches, Affiliates and/or correspondents, shall not be liable or responsible
in any respect for any (a) error, omission, interruption or delay in
transmission, dispatch or delivery of any one or more messages or advices in
connection with any Letter of Credit, whether transmitted by cable, telegraph,
mail or otherwise and despite any cipher or code which may be employed, and/or
(b) action, inaction or omission which may be taken or suffered by it or them in
good faith or through inadvertence in identifying or failing to identify any
beneficiary or otherwise in connection with any Letter of Credit.

Any Letter of Credit may be amended, modified or revoked only upon the receipt
by the Lender from the Borrowers and the beneficiary (including any transferee
and/or assignee of the original beneficiary), of a written consent and request
therefor.

If any Laws, order of court and/or ruling or regulation of any Governmental
Authority of the United States (or any state thereof) and/or any country other
than the United

 

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States permits a beneficiary under a Letter of Credit to require the Lender
and/or any of its respective branches, Affiliates and/or correspondents to pay
drafts under or purporting to be under a Letter of Credit after the expiration
date of the Letter of Credit, the Borrowers shall reimburse the Lender, as
appropriate, for any such payment pursuant to provisions of Section 2.3.6
(Change in Law; Increased Cost).

Except as may otherwise be specifically provided in a Letter of Credit or Letter
of Credit Agreement, the laws of the State and the Uniform Customs and Practice
for Documentary Credits, 1993 Revision, International Chamber of Commerce
Publication No. 500 (the “UCP”) shall govern commercial Letters of Credit and
the International Standby Practices, 1998, International Chamber of Commerce
Publication No. 590 (the “ISP”) shall govern standby letters of credit. The
provisions of the UCP and ISP are hereby incorporated by reference. In the event
of a conflict between the UCP and ISP and the laws of the State, the UCP and ISP
shall prevail.

Section 2.4 Interest and Certain Fee Provisions.

2.4.1 Applicable Margin.

(a) Each Loan shall bear interest at the LIBOR Rate, and the Letter of Credit
Fees and the Revolving Credit Unused Line Fees shall be determined, in
accordance with the provisions of this Section 2.4.1, and as may be adjusted
from time to time in accordance with the provisions of Section 2.4.2 (Inability
to Determine LIBOR Base Rate).

(b) Notwithstanding the foregoing, following the occurrence and during the
continuance of an Event of Default, at the option of the Lender, all Loans and
all other Obligations until paid shall bear interest at the Post-Default Rate.

(c) The Applicable Margin (i) for LIBOR Loans under the Revolving Credit
Facility and for LIBOR Loans evidenced by the Acquisition Line Revolving Note
shall be 175 basis points per annum, (ii) for Letter of Credit Fees, shall be
175 basis points per annum, and (iii) for the Revolving Credit Unused Line Fee
shall be 30 basis points per annum, all unless and until a change is required by
the operation of Section 2.4.1(d). The Applicable Margin for LIBOR Loans
evidenced by the Acquisition Line Term Notes shall be 225 basis points per
annum.

(d) Changes in the Applicable Margin for LIBOR Loans, the Letter of Credit Fees
and Revolving Credit Unused Line Fee shall be made not more frequently than
quarterly based on the Borrowers’ Funded Debt to EBITDA ratio determined in
accordance with Section 6.1.14(c) and reported on the Compliance Certificate
required by Section 6.1.1(c) (Quarterly Statements and Certificates) (except
that the first such determination shall be made based on the Borrowers’ annual
financial statements required by Section 6.1.1(a) (Annual Statements and
Certificates) for the Borrowers’ 2006 Fiscal Year) and shall be effective as of
the first day of the first month after the month in which the Lender receives
such statements. The Applicable Margin (expressed as basis points) shall vary
depending upon the Borrowers’ Borrowers’ Funded Debt to EBITDA ratio, as
follows:

 

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Funded Debt to

EBITDA Ratio

   Applicable Margin (expressed as basis points) for   

Revolving

Credit Facility
and Acquisition
Line Revolving
Note

   Letter of Credit
Fees    Revolving Credit
Unused Line Fee

Less than or equal to 1.5 to 1.0

   125    125    20

Greater than 1.5 to 1.0 but less than or equal to 1.75 to 1.0

   150    150    25

Greater than 1.75 to 1.0 but less than or equal to 2.50 to 1.0

   175    175    30

Greater than 2.50 to 1.0 but less than or equal to 2.75 to 1.0

   200    200    35

Greater than 2.75 to 1.0

   225    225    35

 

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2.4.2 Inability to Determine LIBOR Base Rate.

In the event that the Lender shall have determined that, by reason of
circumstances affecting the London interbank eurodollar market, adequate and
reasonable means do not exist for ascertaining the LIBOR Base Rate or (b) the
Lender shall reasonably determine that the LIBOR Base Rate does not adequately
and fairly reflect the cost to the Lender of funding or carrying the Loans, the
Lender shall give telephonic or written notice of such determination to the
Borrowers. Thereafter, the interest rate for the Loans shall be based on the
Prime Rate and the Applicable Margin shall be established by the Lender at
spreads reasonably determined by the Lender which, when added to the Prime Rate
on the Closing Date, would have substantially equaled the spreads over the LIBOR
Base Rate provided by the Applicable Margins on the Closing Date.

2.4.3 Indemnity. The Borrowers agree to indemnify and reimburse the Lender and
the Lender and to hold the Lender harmless from any loss, cost (including
administrative costs) or expense which the Lender may sustain or incur as a
consequence of (a) a default by the Borrowers in payment when due of the
principal amount of or interest on any LIBOR Loan, and/or (b) the failure of the
Borrowers to make any prepayment of a LIBOR Loan after the Borrowers have given
notice of such intention to make such a prepayment, including, without
limitation, any such loss or expense arising from the reemployment of funds
obtained by the Lender to maintain any LIBOR Loan or from fees payable to
terminate the deposits from which such funds were obtained. This agreement and
covenant of the Borrowers shall survive termination or expiration of this
Agreement and payment of the other Obligations.

2.4.4 Payment of Interest.

Unpaid and accrued interest on the Loans shall be paid monthly, in arrears, on
the first day of each calendar month, commencing on the first such date after
the date of this Agreement, and on the first day of each calendar month
thereafter, and at maturity (whether by acceleration, declaration, extension or
otherwise).

2.4.5 Origination Fee.

The Borrowers shall pay to the Lender on or before the Closing Date a loan
origination fee (the “Origination Fee”) in the amount of Forty-three Thousand
Seven Hundred Fifty Dollars ($43,750), which fee has been fully earned and is
non-refundable.

2.4.6 Field Examination Fees.

The Borrowers shall pay to the Lender a field examination fee (collectively, the
“Field Examination Fees” and individually a “Field Examination Fee”), which
Field Examination Fees shall be payable on the Closing Date and thereafter
monthly on the first day of month, and continuing until all Obligations arising
out of, or under, the Credit Facilities then outstanding have been paid in full.
Each Field Examination Fee shall be in the amount of $500.

2.4.7 Computation of Interest and Fees.

All applicable Fees and interest shall be calculated on the basis of a year of
360 days for the actual number of days elapsed. Any change in the interest rate
on any of the Obligations resulting from a change in the Prime Rate shall become
effective as of the opening of business on the day on which such change in the
Prime Rate is announced.

 

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2.4.8 Maximum Interest Rate.

In no event shall any interest rate provided for hereunder exceed the maximum
rate permissible for corporate borrowers under applicable law for loans of the
type provided for hereunder (the “Maximum Rate”). If, in any month, any interest
rate, absent such limitation, would have exceeded the Maximum Rate, then the
interest rate for that month shall be the Maximum Rate, and, if in future
months, that interest rate would otherwise be less than the Maximum Rate, then
that interest rate shall remain at the Maximum Rate until such time as the
amount of interest paid hereunder equals the amount of interest that would have
been paid if the same had not been limited by the Maximum Rate. In the event
that, upon payment in full of the Obligations, the total amount of interest paid
or accrued under the terms of this Agreement is less than the total amount of
interest that would, but for this Section, have been paid or accrued if the
interest rates otherwise set forth in this Agreement had at all times been in
effect, then the Borrowers shall, to the extent permitted by applicable law, pay
the Lender, an amount equal to the excess of (a) the lesser of (i) the amount of
interest that would have been charged if the Maximum Rate had, at all times,
been in effect or (ii) the amount of interest that would have accrued had the
interest rates otherwise set forth in this Agreement, at all times, been in
effect over (b) the amount of interest actually paid or accrued under this
Agreement. In the event that a court determines that the Lenders have received
interest and other charges hereunder in excess of the Maximum Rate, such excess
shall be deemed received on account of, and shall automatically be applied to
reduce, the Obligations other than interest, in the inverse order of maturity,
and if there are no Obligations outstanding, the Lenders shall refund to the
Borrowers such excess.

2.4.9 Requirements of Law.

In the event that any Lender shall have determined in good faith that (a) the
adoption of any Capital Adequacy Regulation, or (b) any change in any Capital
Adequacy Regulation or in the interpretation or application thereof or
(c) compliance by such Lender or any corporation controlling such Lender with
any request or directive regarding capital adequacy (whether or not having the
force of law) from any central bank or Governmental Authority, does or shall
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender, as a consequence of the obligations of
such Lender hereunder to a level below that which such Lender or any corporation
controlling such Lender would have achieved but for such adoption, change or
compliance (taking into consideration the policies of such Lender and the
corporation controlling such Lender, with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrowers of a written request therefor and a
statement of the basis for such determination, the Borrowers shall pay to such
Lender such additional amount or amounts in order to compensate for such
reduction.

Section 2.5 General Financing Provisions.

2.5.1 Borrowers’ Representatives.

(a) The Borrowers hereby represent and warrant to the Lender that each of them
will derive benefits, directly and indirectly, from each Letter of Credit and
from each Loan, both in their separate capacity and as a member of the
integrated group to which each of the Borrowers belong and because the
successful operation of the integrated group is dependent upon the continued
successful performance of the functions of the integrated group as a whole,
because (a) this financing is enabling the Purchase Agreement Transaction,
(b) the terms of the

 

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consolidated financing provided under this Agreement are more favorable than
would otherwise would be obtainable by the Borrowers individually, and (c) the
Borrowers’ additional administrative and other costs and reduced flexibility
associated with individual financing arrangements which would otherwise be
required if obtainable would substantially reduce the value to the Borrowers of
the financing. The Borrowers in the discretion of their respective managements
are to agree among themselves as to the allocation of the benefits of Letters of
Credit and the proceeds of Loans, provided, however, that the Borrowers shall be
deemed to have represented and warranted to the Lender at the time of allocation
that each benefit and use of proceeds is a Permitted Use.

(b) For administrative convenience, each Borrower hereby irrevocably appoints
TVI as the Borrower’s attorney-in-fact, with power of substitution (with the
prior written consent of the Lender in the exercise of its sole and absolute
discretion), in the name of TVI or in the name of the Borrower or otherwise to
take any and all actions with respect to the this Agreement, the other Financing
Documents, the Obligations and/or the Collateral (including, without limitation,
the proceeds thereof) as TVI may so elect from time to time, including, without
limitation, actions to (i) request advances under the Loans, apply for and
direct the benefits of Letters of Credits, and direct the Lender to disburse or
credit the proceeds of any Loan directly to an account of TVI, any one or more
of the Borrowers or otherwise, which direction shall evidence the making of such
Loan and shall constitute the acknowledgement by each of the Borrowers of the
receipt of the proceeds of such Loan or the benefit of such Letter of Credit,
(ii) enter into, execute, deliver, amend, modify, restate, substitute, extend
and/or renew this Agreement, any other Financing Documents, security agreements,
mortgages, deposit account agreements, instruments, certificates, waivers,
letter of credit applications, releases, documents and agreements from time to
time, and (iii) endorse any check or other item of payment in the name of the
Borrower or in the name of TVI. The foregoing appointment is coupled with an
interest, cannot be revoked without the prior written consent of the Lender, and
may be exercised from time to time through TVI’s duly authorized officer,
officers or other Person or Persons designated by TVI to act from time to time
on behalf of TVI.

(c) Each of the Borrowers hereby irrevocably authorizes the Lender to make Loans
to any one or more of the Borrowers, and hereby irrevocably authorizes the
Lender to issue or cause to be issued Letters of Credit for the account of any
or all of the Borrowers, pursuant to the provisions of this Agreement upon the
written, oral or telephone request of any one or more of the Persons who is from
time to time a Responsible Officer of a Borrower under the provisions of the
most recent certificate of corporate resolutions and/or incumbency of the
Borrowers on file with the Lender and also upon the written, oral or telephone
request of any one of the Persons who is from time to time a Responsible Officer
of the TVI under the provisions of the most recent certificate of corporate
resolutions and/or incumbency for the TVI on file with the Lender.

(d) The Lender assumes no responsibility or liability for any errors, mistakes,
and/or discrepancies in the oral, telephonic, written or other transmissions of
any instructions, orders, requests and confirmations between the Lender and the
Borrowers in connection with the Credit Facilities, any Loan, and Letter of
Credit or any other transaction in connection with the provisions of this
Agreement. Without implying any limitation on the joint and several nature of
the Obligations, the Lender agrees that, notwithstanding any other provision of
this Agreement, the Borrowers may create reasonable inter-company indebtedness

 

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between or among the Borrowers with respect to the allocation of the benefits
and proceeds of the advances and Credit Facilities under this Agreement. The
Borrowers agree among themselves, and the Lender consents to that agreement,
that each Borrower shall have rights of contribution from all of the other
Borrowers to the extent such Borrower incurs Obligations in excess of the
proceeds of the Loans received by, or allocated to purposes for the direct
benefit of, such Borrower. All such indebtedness and rights shall be, and are
hereby agreed by the Borrowers to be, subordinate in priority and payment to the
indefeasible repayment in full in cash of the Obligations, and, unless the
Lender agrees in writing otherwise, shall not be exercised or repaid in whole or
in part until all of the Obligations have been indefeasibly paid in full in
cash. The Borrowers agree that all of such inter-company indebtedness and rights
of contribution are part of the Collateral and secure the Obligations. Each
Borrower hereby waives all rights of counterclaim, recoupment and offset between
or among themselves arising on account of that indebtedness and otherwise. Each
Borrower shall not evidence the inter-company indebtedness or rights of
contribution by note or other instrument, and shall not secure such indebtedness
or rights of contribution with any Lien or security. Notwithstanding anything
contained in this Agreement to the contrary, the amount covered by each Borrower
under the Obligations (including, without limitation, Section 2.5.5 (Guaranty))
shall be limited to an aggregate amount (after giving effect to any collections
from, rights to receive contribution from or payments made by or on behalf of
any other Borrower in respect of the Obligations) which, together with other
amounts owing by such Borrowers to the Lender under the Obligations, is equal to
the largest amount that would not be subject to avoidance under the Bankruptcy
Code or any applicable provisions of any applicable, comparable state or other
Laws.

2.5.2 Use of Proceeds of the Loans.

The proceeds of each advance under the Loans shall be used by the Borrowers for
Permitted Uses, and for no other purposes except as may otherwise be agreed by
the Lender in writing. The Borrowers shall use the proceeds of the Loans
promptly.

2.5.3 Payments.

All payments of the Obligations, including, without limitation, principal,
interest, Prepayments, and Fees, shall be paid by the Borrowers without setoff
or counterclaim to the Lender (except as otherwise provided herein) at the
Lender’s office specified in Section 8.1 (Notices) in immediately available
funds not later than noon (Baltimore Maryland Time) on the due date of such
payment. All payments received by the Lender after such time shall be deemed to
have been received by the Lender for purposes of computing interest and Fees and
otherwise as of the next Business Day. Payments shall not be considered received
by the Lender until such payments are paid to the Lender in immediately
available funds. The Lender shall have no obligation, however, to apply to the
Obligations any proceeds from Receivables, any other Collateral, other
obligation or property of any kind due from, owed by or belonging to, a
Sanctioned Person.

2.5.4 Liens; Setoff.

The Borrowers hereby grant to the Lender a continuing Lien for all of the
Obligations upon any and all monies, securities, and other property of the
Borrowers and the proceeds thereof, now or hereafter held or received by or in
transit to, the Lender, and/or any Affiliate of the Lender, from or for the
Borrowers, and also upon any and all deposit accounts (general or special) and
credits of the Borrowers, if any, with the Lender or any Affiliate of the

 

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Lender, at any time existing, excluding any deposit accounts held by the
Borrowers in their capacity as trustee for Persons who are not Borrowers or
Affiliates of the Borrowers, separate payroll, employee benefit plan deposit
accounts, and escrow accounts, but only to the extent the same are clearly
titled as such and cannot be subject to a Lien or levy of any Person. Without
implying any limitation on any other rights the Lender may have under the
Financing Documents or applicable Laws, during the continuance of an Event of
Default, the Lender is hereby authorized by the Borrowers at any time and from
time to time, without notice to the Borrowers, to set off, appropriate and apply
any or all items hereinabove referred to (except excluded items) against all
Obligations then outstanding (whether or not then due), all in such order and
manner as shall be determined by the Lender in its sole and absolute discretion.

2.5.5 Guaranty.

(a) Each Borrower hereby unconditionally and irrevocably, guarantees to the
Lender:

(i) the due and punctual payment in full (and not merely the collectibility) by
the other Borrowers of the Obligations, including unpaid and accrued interest
thereon, in each case when due and payable, all according to the terms of this
Agreement, the Notes and the other Financing Documents;

(ii) the due and punctual payment in full (and not merely the collectibility) by
the other Borrowers of all other sums and charges which may at any time be due
and payable in accordance with this Agreement, the Notes or any of the other
Financing Documents;

(iii) the due and punctual performance by the other Borrowers of all of the
other terms, covenants and conditions contained in the Financing Documents; and

(iv) all the other Obligations of the other Borrowers.

(b) The obligations and liabilities of each Borrower as a guarantor under this
Section 2.5.5 shall be absolute and unconditional and joint and several,
irrespective of the genuineness, validity, priority, regularity or
enforceability of this Agreement, any of the Notes or any of the Financing
Documents or any other circumstance which might otherwise constitute a legal or
equitable discharge of a surety or guarantor. Each Borrower in its capacity as a
guarantor expressly agrees that the Lender may, in its sole and absolute
discretion, without notice to or further assent of such Borrower and without in
any way releasing, affecting or in any way impairing the joint and several
obligations and liabilities of such Borrower as a guarantor hereunder:

(i) waive compliance with, or any defaults under, or grant any other indulgences
under or with respect to any of the Financing Documents;

 

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(ii) modify, amend, change or terminate any provisions of any of the Financing
Documents;

(iii) grant extensions or renewals of or with respect to the Credit Facilities,
the Notes or any of the other Financing Documents;

(iv) effect any release, subordination, compromise or settlement in connection
with this Agreement, any of the Notes or any of the other Financing Documents;

(v) agree to the substitution, exchange, release or other disposition of the
Collateral or any part thereof, or any other collateral for the Loan or to the
subordination of any lien or security interest therein;

(vi) make advances for the purpose of performing any term, provision or covenant
contained in this Agreement, any of the Notes or any of the other Financing
Documents with respect to which the Borrowers shall then be in default;

(vii) make future advances pursuant to the Financing Agreement or any of the
other Financing Documents;

(viii) assign, pledge, hypothecate or otherwise transfer the Commitment, the
Obligations, the Notes, any of the other Financing Documents or any interest
therein, all as and to the extent permitted by the provisions of this Agreement;

(ix) deal in all respects with the other Borrowers as if this Section 2.5.5 were
not in effect;

(x) effect any release, compromise or settlement with any of the other
Borrowers, whether in their capacity as a Borrower or as a guarantor under this
Section 2.5.5, or any other guarantor; and

(xi) provide debtor-in-possession financing or allow use of cash collateral in
proceedings under the Bankruptcy Code, it being expressly agreed by all
Borrowers that any such financing and/or use would be part of the Obligations.

(c) The obligations and liabilities of each Borrower, as guarantor under this
Section 2.5.5, shall be primary, direct and immediate, shall not be subject to
any counterclaim, recoupment, set off, reduction or defense based upon any claim
that a Borrower may have against any one or more of the other Borrowers, the
Lender, and/or any other guarantor and shall not be conditional or contingent
upon pursuit or enforcement by the Lender of any remedies it may have against
the Borrowers with respect to this Agreement, the Notes or any of the other
Financing Documents, whether pursuant to the terms thereof or by operation of
law. Without limiting the generality of the foregoing, the Lender shall not be
required to make any

 

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demand upon any of the Borrowers, or to sell the Collateral or otherwise pursue,
enforce or exhaust its remedies against the Borrowers or the Collateral either
before, concurrently with or after pursuing or enforcing its rights and remedies
hereunder. Any one or more successive or concurrent actions or proceedings may
be brought against each Borrower under this Section 2.5.5, either in the same
action, if any, brought against any one or more of the Borrowers or in separate
actions or proceedings, as often as the Lender may deem expedient or advisable.
Without limiting the foregoing, it is specifically understood that any
modification, limitation or discharge of any of the liabilities or obligations
of any one or more of the Borrowers, any other guarantor or any obligor under
any of the Financing Documents, arising out of, or by virtue of, any bankruptcy,
arrangement, reorganization or similar proceeding for relief of debtors under
federal or state law initiated by or against any one or more of the Borrowers,
in their respective capacities as borrowers and guarantors under this
Section 2.5.5, or under any of the Financing Documents shall not modify, limit,
lessen, reduce, impair, discharge, or otherwise affect the liability of each
Borrower under this Section 2.5.5 in any manner whatsoever, and this
Section 2.5.5 shall remain and continue in full force and effect. It is the
intent and purpose of this Section 2.5.5 that each Borrower shall and does
hereby waive all rights and benefits which might accrue to any other guarantor
by reason of any such proceeding, and the Borrowers agree that they shall be
liable for the full amount of the obligations and liabilities under this
Section 2.5.5, regardless of, and irrespective to, any modification, limitation
or discharge of the liability of any one or more of the Borrowers, any other
guarantor or any obligor under any of the Financing Documents, that may result
from any such proceedings.

(d) Each Borrower, as guarantor under this Section 2.5.5, hereby
unconditionally, jointly and severally, irrevocably and expressly waives:

(i) presentment and demand for payment of the Obligations and protest of
non-payment;

(ii) notice of acceptance of this Section 2.5.5 and of presentment, demand and
protest thereof;

(iii) notice of any default hereunder or under the Notes or any of the other
Financing Documents and notice of all indulgences;

(iv) notice of any increase in the amount of any portion of or all of the
indebtedness guaranteed by this Section 2.5.5;

(v) demand for observance, performance or enforcement of any of the terms or
provisions of this Section 2.5.5, the Notes or any of the other Financing
Documents;

(vi) all errors and omissions in connection with the Lender’s administration of
all indebtedness guaranteed by this Section 2.5.5, except errors and omissions
resulting from acts of bad faith;

(vii) any right or claim of right to cause a marshalling of the assets of any
one or more of the other Borrowers;

 

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(viii) any act or omission of the Lender which changes the scope of the risk as
guarantor hereunder; and

(ix) all other notices and demands otherwise required by law which the Borrower
may lawfully waive.

Within ten (10) days following any request of the Lender so to do, each Borrower
will furnish the Lender and such other persons as the Lender may direct with a
written certificate, duly acknowledged stating in detail whether or not any
credits, offsets or defenses exist with respect to this Section 2.5.5.

2.5.6 Bank Products.

The Borrowers may request, and the Lender or its Affiliates may, in their sole
and absolute discretion, provide, Bank Products although the Borrowers are not
required to do so. In the event the Borrowers request the Lender and/or its
Affiliates to procure or provide Bank Products, then the Borrowers agree with
the Lender and/or such Affiliates, as applicable, to pay when due all
indebtedness, liabilities and obligations with respect to Bank Products and
further agree to indemnify and hold the Lender and/or such Affiliates harmless
from any and all indebtedness, liabilities, obligations, losses, costs and
expenses (including, without limitation, reasonable attorneys fees) now or
hereafter owing to or incurred by the Lender (including, without limitation,
those under agreements of indemnifications or assurances provided by the Lender
to its affiliates) and/or its Affiliates with respect to Bank Products, all as
the same may arise. In the event the Borrowers shall not have paid to the Lender
and/or its Affiliates such amounts, the Lender may cover such amounts by an
advance under the Revolving Loan, which advance shall be deemed to have been
requested by the Borrowers. The Borrowers acknowledge and agree that (a) all
indebtedness, liabilities and obligations with respect to Bank Products provided
by the Lender or its affiliates, and all of its agreements under this Section,
are part of the Obligations secured by the Collateral, and (b) the obtaining of
Bank Products from the Lender or its affiliates (i) is in the sole and absolute
discretion of the Lender or its affiliates and (ii) is subject to all rules and
regulations of the Lender or its affiliates.

2.5.7 USA Patriot Act Notice.

The Lender hereby gives the Borrowers notice that pursuant to the requirements
of the USA Patriot Act, the Lender is required to obtain, verify and record
information that identifies the Borrowers, which information includes the name
and address of the Borrowers and other information that will allow such Lender,
to identify the Borrowers in accordance with the USA Patriot Act.

ARTICLE III

THE COLLATERAL

Section 3.1 Debt and Obligations Secured.

All property and Liens assigned, pledged or otherwise granted under or in
connection with this Agreement (including, without limitation, those under
Section 3.2 (Grant of Liens)) or any of the Financing Documents shall secure
(a) the payment of all of the Obligations, including, without limitation, any
and all Outstanding Letter of Credit Obligations, and (b) the performance,
compliance with and observance by the Borrowers of the provisions of this
Agreement and all of the other Financing Documents or otherwise under the
Obligations.

 

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Section 3.2 Grant of Liens.

Each of the Borrowers hereby assigns, pledges and grants to the Lender, and
agrees that the Lender shall have a perfected and continuing security interest
in, and Lien on, all of the personal property of the Borrower, whether now owned
or existing or hereafter acquired or created and wherever situated and
including, without limitation, (a) all of the Borrowers’ Accounts, Inventory,
Chattel Paper, Documents, Instruments, Equipment, Investment Property, and
General Intangibles and all of the Borrowers’ deposit accounts, whether now
owned or existing or hereafter acquired or arising, (b) all returned, rejected
or repossessed goods, the sale or lease of which shall have given or shall give
rise to an Account or Chattel Paper, (c) all insurance policies relating to the
foregoing, (d) all books and records in whatever media (paper, electronic or
otherwise) recorded or stored, with respect to the foregoing and all equipment
and general intangibles necessary or beneficial to retain, access and/or process
the information contained in those books and records, and all of the Borrower’s
other personal property of any kind or nature whatsoever, and (e) all cash
proceeds and noncash proceeds and products of the foregoing. Each of the
Borrowers further agrees that the Lender shall have in respect thereof all of
the rights and remedies of a secured party under the Uniform Commercial Code as
well as those provided in this Agreement, under each of the other Financing
Documents and under applicable Laws.

Without implying any limitation to the foregoing, as additional Collateral and
security for the Obligations, each of the Borrowers hereby assigns to the Lender
all of its respective rights, title and interest in, to, and under, the Purchase
Agreement and all of the Purchase Agreement Documents, including, without
limitation, all of the benefits of any representations and warranties provided
by the Seller and any and all rights of any or all of the Borrowers to
indemnification from the Seller or any other Person contained therein. The
Borrowers agree that neither the assignment to the Lender nor any other
provision contained in this Agreement or any of the other Financing Documents
shall impose on the Lender any obligation or liability of any of the Borrowers
under the Purchase Agreement and/or under any of the other Purchase Agreement
Documents. The Borrowers hereby agree to indemnify the Lender and hold the
Lender harmless from any and all claims, actions, suits, losses, damages, costs,
expenses, fees, obligations and liabilities that may be incurred by or imposed
upon the Lender by virtue of the assignment of and Lien on each of the
Borrower’s rights, title and interest in, to, and under the Purchase Agreement
and the Purchase Agreement Documents. The Borrowers further acknowledge and
agree that following the occurrence of an Event of Default, the Lender shall be
entitled to enforce any and all rights and remedies available to any or all of
the Borrowers under the Purchase Agreement and/or under any or all of the
Purchase Agreement Documents and/or applicable Laws with respect to the Purchase
Agreement Transaction.

Section 3.3 Perfection Certificate.

On or prior to the Closing Date, the Borrowers shall deliver to the Lender a
certificate in substantially the form attached to this Agreement as EXHIBIT B
(the “Perfection Certificate”) shall contain such information with respect to
each Borrower’s business and real and personal property as the Lender may
require and shall be certified by a Responsible Officer of each of the
Borrowers, all in the form provided to the Borrowers by the Lender. Promptly
after demand by

 

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the Lender, the Borrowers, as appropriate, shall furnish to the Lender an update
of the information contained in the Perfection Certificate at any time and from
time to time as may be requested by the Lender.

Section 3.4 Personal Property.

The Borrowers acknowledge and agree that it is the intention of the parties to
this Agreement that the Lender shall have a first priority, perfected Lien, in
form and substance satisfactory to the Lender and its counsel, on all of the
Borrowers’ personal property of any kind and nature whatsoever, whether now
owned or hereafter acquired, subject only to the Permitted Liens, if any. In
furtherance of the foregoing:

3.4.1 Investment Property, Chattel Paper, Promissory Notes, etc.

On the Closing Date and without implying any limitation on the scope of
Section 3.2 (Grant of Liens), each of the Borrowers shall deliver to the Lender
all originals of all of the Borrower’s letters of credit, Investment Property,
Chattel Paper, Documents and Instruments and, if the Lender so requires, shall
execute and deliver a separate pledge, assignment and security agreement in form
and content acceptable to the Lender, which pledge, assignment and security
agreement shall assign, pledge and grant a Lien to the Lender on all of each
Borrower’s letters of credit, Investment Property, Chattel Paper, Documents and
Instruments.

In the event that any of the Borrowers shall acquire after the Closing Date any
letters of credit, Investment Property, Chattel Paper, Documents or Instruments,
each such Borrower shall promptly (and in any event within thirty (30) days of
each acquisition) so notify the Lender and, if the Lender so requires, deliver
the originals of all of the foregoing to the Lender promptly.

All letters of credit, Investment Property, Chattel Paper, Documents and
Instruments shall be delivered to the Lender endorsed and/or assigned as
required by the pledge, assignment and security agreement and/or as the Lender
may require and, if applicable, shall be accompanied by blank irrevocable and
unconditional stock or bond powers.

3.4.2 Patents, Copyrights and Other Property Requiring Additional Steps to
Perfect.

On the Closing Date and without implying any limitation on the scope of
Section 3.2 (Grant of Liens), the Borrowers shall execute and deliver all
Financing Documents and take all actions requested by the Lender in order to
perfect a first priority collateral assignment of Patents, Copyrights,
Trademarks, customer lists or any other type or kind of intellectual property
acquired by any of the Borrowers after the Closing Date.

Section 3.5 Record Searches.

As of the Closing Date and, if requested by Lender, thereafter at the time any
Financing Document is executed and delivered by the Borrowers pursuant to this
Section, the Lender shall have received, in form and substance satisfactory to
the Lender, such Lien or record searches with respect to all of the Borrowers
and/or any other Person, as appropriate, and the property covered by such
Financing Document showing that the Lien of such Financing Document will be a
perfected first priority Lien on the property covered by such Financing Document
subject only to Permitted Liens or to such other matters as the Lender may
approve.

 

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Section 3.6 Real Property.

The Borrowers acknowledge and agree that it is the intention of the parties to
this Agreement that the Lender shall have a first priority, perfected Lien, in
form and substance satisfactory to the Lender and its counsel, on all of each
Borrower’s real property of any kind and nature whatsoever, whether now owned or
hereafter acquired, subject only to the Permitted Liens, if any. In furtherance
of the foregoing:

With respect to each parcel of real property now owned by any of the Borrowers
if requested by Lender, each of the Borrowers, as appropriate, shall on the
Closing Date execute and deliver a deed of trust or a mortgage or other
document, as appropriate, which deed of trust, mortgage and/or other document
shall be included among the Financing Documents. With respect to real property
acquired by any of the Borrowers after the Closing Date, each of the Borrowers,
as appropriate, shall, promptly after acquisition thereof, grant a Lien covering
such real property to the Lender under the provisions of a mortgage, deed of
trust or other document, as appropriate. Each Financing Document to be executed
and delivered pursuant hereto shall:

(a) be in form and substance satisfactory to the Lender;

(b) create a first priority Lien in such real property in favor of the Lender
subject only to Permitted Liens, zoning ordinances, and such other matters as
the Lender may approve; and

(c) upon request of the Lender, be accompanied by a signed opinion of counsel
addressed to the Lender, in form and substance satisfactory to the Lender, and
from counsel, reasonably satisfactory to the Lender, licensed to practice in the
state where the subject real property is located.

Section 3.7 Costs.

The Borrowers agree to pay, as part of the Enforcement Costs and to the fullest
extent permitted by applicable Laws, on demand all costs, fees and expenses
incurred by the Lender in connection with the taking, perfection, preservation,
protection and/or release of a Lien on the Collateral, including, without
limitation:

(a) fees and expenses incurred by the Lender in preparing, reviewing,
negotiating and finalizing the Financing Documents from time to time (including,
without limitation, reasonable attorneys’ fees incurred in connection with
preparing, reviewing, negotiating, and finalizing any of the Financing
Documents, including, any amendments and supplements thereto);

(b) all filing and/or recording taxes or fees;

(c) all title insurance premiums and costs;

(d) all costs of Lien and record searches;

(e) reasonable attorneys’ fees in connection with all legal opinions required;

 

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(f) appraisal and/or survey costs; and

(g) all related costs, fees and expenses.

Section 3.8 Release.

Upon the indefeasible repayment in full in cash of the Obligations and
performance of all Obligations of the Borrowers and all obligations and
liabilities of each other Person, other than the Lender, under this Agreement
and all other Financing Documents, the termination and/or expiration of all of
the Commitment, all Letters of Credit and all Outstanding Letter of Credit
Obligations, upon the Borrowers’ request and at the Borrowers’ sole cost and
expense, the Lender shall release and/or terminate any Financing Document but
only if and provided that there is no commitment or obligation (whether or not
conditional) of the Lender to re-advance amounts that would be secured thereby
and/or no commitment or obligation of the Lender to issue any Letter of Credit
or return or restore any payment of any Current Letter of Credit Obligations.

Section 3.9 Inconsistent Provisions.

In the event that the provisions of any Financing Document directly conflict
with any provision of this Agreement, the provisions of this Agreement govern.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.1 Representations and Warranties.

The Borrowers, for themselves and for each other, represent and warrant to the
Lender, as follows:

4.1.1 Subsidiaries.

The Borrowers have no Subsidiaries, except as noted on the Perfection
Certificate. Each of the Subsidiaries is a Wholly Owned Subsidiary, except as
shown on the Perfection Certificate, which correctly indicates the nature and
amount of the Borrower’s ownership interests therein. Each of the Subsidiaries
(a) is the type of entity identified in the Preamble to this Agreement, duly
organized, existing and in good standing under the laws of the jurisdiction of
its incorporation, (b) has the entity power to own its property and to carry on
its business as now being conducted, and (c) is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary.

4.1.2 Good Standing.

Each Borrower (a) is a corporation duly organized, existing and in good standing
under the laws of the jurisdiction of its incorporation stated in the Perfection
Certificate and is organized in no other jurisdiction, (b) has the corporate
power to own its property and to carry on its business as now being conducted,
and (c) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned by it therein or in
which the transaction of its business makes such qualification necessary.

 

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4.1.3 Power and Authority.

Each Borrower has full entity power and authority to execute and deliver this
Agreement, the other Financing Documents and the Purchase Agreement Documents to
which it is a party, to make the borrowings and request Letters of Credit under
this Agreement, to close and consummate the Purchase Agreement Transaction and
to incur and perform the Obligations whether under this Agreement, the other
Financing Documents or otherwise, all of which have been duly authorized by all
proper and necessary corporate action. Except for consents or approvals that the
Borrowers have obtained or, in the case of the Purchase Agreement Documents, the
parties to such Purchase Agreement Documents have obtained, no consent or
approval of shareholders or any creditors of any Borrower, and no consent,
approval, filing or registration with or notice to any Governmental Authority on
the part of any Borrower, is required as a condition to the execution, delivery,
validity or enforceability of this Agreement, or any of the other Financing
Documents or any of the Purchase Agreement Documents, the performance by any
Borrower of the Obligations or the closing and consummation of the Purchase
Agreement Transaction.

4.1.4 Binding Agreements.

This Agreement and the other Financing Documents executed and delivered by the
Borrowers have been properly executed and delivered and constitute the valid and
legally binding obligations of the Borrowers and are fully enforceable against
each of the Borrowers in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties,
and general principles of equity regardless of whether applied in a proceeding
in equity or at law.

4.1.5 No Conflicts.

Neither the execution, delivery and performance of the terms of this Agreement
or of any of the other Financing Documents executed and delivered by any
Borrower nor the consummation of the transactions contemplated by this Agreement
will conflict with, violate or be prevented by (a) any Borrower’s Organizational
Documents, (b) any existing mortgage, indenture, contract or agreement binding
on any Borrower or affecting its property, or (c) any Laws.

4.1.6 No Defaults, Violations.

(a) No Default or Event of Default has occurred and is continuing.

(b) None of the Borrowers nor any of their respective Subsidiaries is in default
under or with respect to any obligation under any existing mortgage, indenture,
contract or agreement binding on it or affecting its property in any respect
which would reasonably be expected to have a Material Adverse Effect.

4.1.7 Compliance with Laws.

None of the Borrowers nor any of their respective Subsidiaries is in violation
of any applicable Laws (including, without limitation, any Laws relating to
employment practices, to environmental, occupational and health standards and
controls) or order, writ, injunction, decree or demand of any court, arbitrator,
or any Governmental Authority affecting any Borrower, or any Subsidiary, or any
of its properties, the violation of which, considered in the aggregate, would
reasonably be expected to have a Material Adverse Effect.

 

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4.1.8 Margin Stock.

None of the proceeds of the Loans will be used, directly or indirectly, by any
Borrower or any Subsidiary for the purpose of purchasing or carrying, or for the
purpose of reducing or retiring any indebtedness that was originally incurred to
purchase or carry, any “margin stock” within the meaning of Regulation U (12 CFR
Part 221), of the Board of Governors of the Federal Reserve System or for any
other purpose that might make the transactions contemplated in this Agreement a
“purpose credit” within the meaning of Regulation U, or cause this Agreement to
violate any other regulation of the Board of Governors of the Federal Reserve
System or the Securities Exchange Act of 1934 or the Small Business Investment
Act of 1958, as amended, or any rules or regulations promulgated under any of
such statutes.

4.1.9 Investment Company Act; Margin Securities.

None of the Borrowers nor any of their respective Subsidiaries is an investment
company within the meaning of the Investment Company Act of 1940, as amended,
nor is it, directly or indirectly, controlled by or acting on behalf of any
Person which is an investment company within the meaning of said Act. None of
the Borrowers nor any of their respective Subsidiaries is engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying “margin stock” within the meaning of
Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve
System.

4.1.10 Litigation.

Except as otherwise disclosed on Schedule 4.1.10 contained in the Disclosure
Schedule, there are no proceedings, actions or investigations pending or, so far
as any Borrower knows, threatened before or by any court, arbitrator or any
Governmental Authority that, in any one case or in the aggregate, if determined
adversely to the interests of any Borrower or any Subsidiary, would have a
material adverse effect on the business, properties, condition (financial or
otherwise) or operations, present or prospective, of any Borrower.

4.1.11 Financial Condition.

The consolidated financial statements of the Borrowers (excluding Signature TVI)
for the six months ended June 30, 2006, are complete and correct and fairly
present the financial position of each of the Borrowers and its Subsidiaries and
the results of their operations and transactions in their surplus accounts as of
the date and for the period referred to and have been prepared in accordance
with GAAP applied on a consistent basis throughout the period involved. There
are no liabilities, direct or indirect, fixed or contingent, of any Borrower or
any Subsidiary as of the date of such financial statements that are not
reflected therein or in the notes thereto. There has been no material adverse
change in the financial condition or operations of any Borrower or any
Subsidiary since the date of such financial statements and to the Borrowers’
knowledge no such material adverse change is pending or threatened. None of the
Borrowers nor any Subsidiary has guaranteed the obligations of, or made any
investment in or advances to, any Person, except as disclosed in such financial
statements.

 

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4.1.12 Full Disclosure.

The financial statements referred to in Section 4.1.11 (Financial Condition) of
this Agreement, the Financing Documents (including, without limitation, this
Agreement), and the statements, reports or certificates furnished by any
Borrower in connection with the Financing Documents (a) do not contain any
untrue statement of a material fact and (b) when taken in their entirety, do not
omit any material fact necessary to make the statements contained therein not
misleading. There is no fact known to any Borrower which such Borrower has not
disclosed to the Lender in writing prior to the date of this Agreement with
respect to the transactions contemplated by the Financing Documents which
materially and adversely affects or in the future is reasonably likely to, in
the reasonable opinion of the Borrowers materially adversely affect the
condition, financial or otherwise, results of operations, business, or assets of
any Borrower or of any Subsidiary.

4.1.13 Indebtedness for Borrowed Money.

Except for the Obligations and except as set forth in Schedule 4.1.13 contained
in the Disclosure Schedule, the Borrowers have no Indebtedness for Borrowed
Money. The Lender has received photocopies of all promissory notes evidencing
any Indebtedness for Borrowed Money set forth in Schedule 4.1.13, together with
any and all subordination agreements, other agreements, documents, or
instruments securing, evidencing, guarantying or otherwise executed and
delivered in connection therewith.

4.1.14 Taxes.

Each of the Borrowers and its Subsidiaries has filed all returns, reports and
forms for Taxes which, to the knowledge of the Borrowers, are required to be
filed, and has paid all Taxes as shown on such returns or on any assessment
received by it, to the extent that such Taxes have become due, unless and to the
extent only that such Taxes, assessments and governmental charges are currently
contested in good faith and by appropriate proceedings by a Borrower, such Taxes
are not the subject of any Liens other than Permitted Liens, and adequate
reserves therefor have been established as required under GAAP. All tax
liabilities of the Borrowers were as of the date of audited financial statements
referred to in Section 4.1.11 (Financial Condition), and are now, adequately
provided for on the books of the Borrowers and its Subsidiaries, as appropriate.
No tax liability has been asserted by the Internal Revenue Service or any state
or local authority against any Borrower for Taxes in excess of those already
paid.

4.1.15 ERISA.

With respect to any Plan that is maintained or contributed to by any Borrower
and/or by any ERISA Affiliate or as to which any of the Borrowers retains
material liability: (a) no “accumulated funding deficiency” as defined in Code
§412 or ERISA §302 has occurred, whether or not that accumulated funding
deficiency has been waived; (b) no Reportable Event has occurred other than
events for which reporting has been waived or that are unlikely to result in
material liability for any of the Borrowers; (c) no termination of any plan
subject to Title IV of ERISA has occurred; (d) neither any Borrower nor any
ERISA Affiliate has incurred a “complete withdrawal” within the meaning of ERISA
§4203 from any Multi-employer Plan that is likely to result in material
liability for one or more of the Borrowers; (e) neither any Borrower nor any
ERISA Affiliate has incurred a “partial withdrawal” within the meaning of ERISA
§4205 with

 

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respect to any Multi-employer Plan that is likely to result in material
liability for one or more of the Borrowers; (f) no Multi-employer Plan to which
any Borrower or any ERISA Affiliate has an obligation to contribute is to the
knowledge of the Borrowers, in “reorganization” within the meaning of ERISA
§4241 nor has notice been received by any Borrower or any ERISA Affiliate that
such a Multi-employer Plan will be placed in “reorganization.”

4.1.16 Title to Properties.

The Borrowers have good and marketable title to all of their respective
properties, including, without limitation, the Collateral and the properties and
assets reflected in the balance sheets described in Section 4.1.11 (Financial
Condition). The Borrowers have legal, enforceable and uncontested rights to use
freely such property and assets. All of such properties, including, without
limitation, the Collateral that were purchased, were purchased for fair
consideration and reasonably equivalent value in the ordinary course of business
of both the seller and the Borrowers and not, by way of example only, as part of
a bulk sale.

4.1.17 Patents, Trademarks, Etc.

Except for items disclosed on Schedule 4.1.17 contained in the Disclosure
Schedule, each of the Borrowers and its Subsidiaries owns, possesses, or has the
right to use all necessary Patents, licenses, Trademarks, Copyrights, permits
and franchises to own its properties and to conduct its business as now
conducted, without known conflict with the rights of any other Person. Any and
all obligations to pay royalties or other charges with respect to such
properties and assets are properly reflected on the financial statements
described in Section 4.1.11 (Financial Condition), except where the failure to
do so would reasonably be expected to have a Material Adverse Effect.

4.1.18 Employee Relations.

Except as disclosed on Schedule 4.1.18 contained in the Disclosure Schedule,
(a) no Borrower nor any Subsidiary thereof nor any of the Borrower’s or
Subsidiary’s employees is subject to any collective bargaining agreement, (b) no
petition for certification or union election is pending with respect to the
employees of any Borrower or any Subsidiary and no union or collective
bargaining unit has sought such certification or recognition with respect to the
employees of a Borrower, and (c) there are no strikes, slowdowns, work stoppages
or controversies pending or, to the best knowledge of the Borrowers after due
inquiry, threatened between any Borrower and its employees. To the knowledge of
the Borrowers, hours worked and payments made to the employees of any one or
more of the Borrowers have not been in material violation of the Fair Labor
Standards Act or any other applicable law dealing with such matters. To the
knowledge of the Borrowers, all material payments due from any one or more of
the Borrowers or for which any claim may be made against a Borrower, on account
of wages and employee and retiree health and welfare insurance and other
benefits have been paid or accrued as a liability on its books. The consummation
of the transactions contemplated by the Financing Agreement or any of the other
Financing Documents, or by the Purchase Agreement or any of the other Purchase
Agreement Documents, will not give rise to a right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which any Borrower is a party or by which it is bound.

 

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4.1.19 Presence of Hazardous Materials or Hazardous Materials Contamination.

To the best of each Borrower’s knowledge, (a) no Hazardous Materials are located
on any real property owned, controlled or operated by of any Borrower or for
which any Borrower is, or is claimed to be, responsible, except for reasonable
quantities of necessary supplies for use by a Borrower in the ordinary course of
its current line of business and stored, used and disposed in accordance with
applicable Laws; and (b) no property owned, controlled or operated by any
Borrower or for which any Borrower has, or is claimed to have, responsibility
has ever been used as a manufacturing, storage, or dump site for Hazardous
Materials nor is affected by Hazardous Materials Contamination at any other
property, except where such Hazardous Materials Contamination would reasonably
be expected to have a Material Adverse Effect on the Borrowers.

4.1.20 Perfection and Priority of Collateral.

The Lender has, or upon execution and recording of this Agreement and the
Security Documents will have, and will continue to have as security for the
Obligations, a valid and perfected Lien on and security interest in all
Collateral, free of all other Liens, claims and rights of third parties
whatsoever except Permitted Liens, including, without limitation, those
described on Schedule 4.1.20 contained in the Disclosure Schedule.

4.1.21 Places of Business and Location of Collateral.

The information contained in the Perfection Certificate is complete and correct.
The Perfection Certificate completely and accurately identifies the address of
(a) the state of organization of each Borrower, (b) the chief executive office
of each Borrower, (c) any and each other place of business of each Borrower,
(d) the location of all books and records pertaining to the Collateral, and
(e) each location, other than the foregoing, where any of the Collateral is
located.

4.1.22 Business Information.

Except as disclosed in Schedule 4.1.22 contained in the Disclosure Schedule, in
the five (5) years preceding the date hereof, no Borrower has changed its name,
state of organization, identity or organizational structure, has conducted
business under any name other than its current name, and has conducted its
business in any jurisdiction other than those disclosed on the Perfection
Certificate.

4.1.23 Equipment.

All Equipment is personalty and is not and will not be affixed to real estate in
such manner as to become a fixture or part of such real estate. No equipment is
held by any Borrower on a sale on approval basis.

4.1.24 Inventory.

The Inventory of the Borrowers is (a) of good and merchantable quality, free
from material defects, (b) not stored with a bailee, warehouseman, carrier, or
similar party, (c) not on consignment, sale on approval, or sale or return, and
(d) located at the places of business set forth on the Perfection Certificate,
except for demonstration models located at prospective purchasers and
demonstration samples with field salesmen. No goods offered for sale by any
Borrower are consigned to or held on sale or return terms by that Borrower.

 

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4.1.25 Accounts.

With respect to all Accounts and to the best of the Borrowers’ knowledge
(a) they are genuine, and in all respects what they purport to be, and are not
evidenced by a judgment, an Instrument, or Chattel Paper (unless such judgment
has been assigned and such Instrument or Chattel Paper has been endorsed and
delivered to the Lender); (b) they represent bona fide transactions completed in
accordance with the terms and provisions contained in the invoices, purchase
orders and other contracts relating thereto, and the underlying transaction
therefor is in accordance with all applicable Laws; (c) the amounts shown on the
respective Borrower’s books and records, with respect thereto are actually and
absolutely owing to that Borrower and are not contingent or subject to reduction
for any reason other than regular discounts, credits or adjustments allowed by
that Borrower in the ordinary course of its business; (d) to Borrower’s
knowledge, all Account Debtors thereon have the capacity to contract; and
(e) the goods sold, leased or transferred or the services furnished giving rise
thereto are not subject to any Liens except the security interest granted to the
Lender by this Agreement and Permitted Liens.

4.1.26 Compliance with Eligibility Standards.

Each Account and all Inventory included in the calculation of the Borrowing Base
does and will at all times meet and comply with all of the standards for
Eligible Receivables and Eligible Inventory. With respect to those Accounts that
the Lender has deemed Eligible Receivables (a) there are no facts, events or
occurrences that in any way impair the validity, collectibility or
enforceability thereof or tend to reduce the amount payable thereunder; and
(b) there are no proceedings or actions known to any Borrower which are
threatened or pending against any Account Debtor that might result in any
material adverse change in the Borrowing Base.

4.1.27 Purchase Agreement Transaction.

The Lender has received true and correct photocopies of the Purchase Agreement
and each of the other Purchase Agreement Documents, executed, delivered and/or
furnished on or before the Closing Date in connection with the Purchase
Agreement Transaction. Neither the Purchase Agreement nor any of the other
Purchase Agreement Documents have been modified, changed, supplemented,
canceled, amended or otherwise altered or affected, except as otherwise
disclosed to the Lender in writing on or before the Closing Date. The Purchase
Agreement Transaction has been effected, closed and consummated pursuant to, and
in accordance with, the terms and conditions of the Purchase Agreement and with
all applicable Laws.

4.1.28 Solvency

Each of the Borrowers is Solvent prior to and after giving effect to the
Purchase Transaction and the making of the Loans.

4.1.29 OFAC Matters.

None of Borrowers, their Subsidiaries or its Affiliates (i) is a Sanctioned
Person or (ii) does business in a Sanctioned Country or with a Sanctioned Person
in violation of the economic sanctions of the United States administered by
OFAC. The proceeds of any Loan will not be used to fund any operation in,
finance any investments or activities in or make any payments to, a Sanctioned
Person or a Sanctioned Country.

 

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Section 4.2 Survival; Updates of Representations and Warranties.

All representations and warranties contained in or made under or in connection
with this Agreement and the other Financing Documents shall survive the Closing
Date, the making of any advance under the Loans and extension of credit made
hereunder, and the incurring of any other Obligations and shall be deemed to
have been made at the time of each request for, and again at the time of the
making of, each advance under the Loans or other extension of credit made
hereunder, except that the representations and warranties that relate to the
financial statements which are referred to in Section 4.1.11 (Financial
Condition), shall also be deemed to cover financial statements furnished from
time to time to the Lender pursuant to Section 6.1.1 (Financial Statements).

ARTICLE V

CONDITIONS PRECEDENT

Section 5.1 Conditions to the Initial Advance.

The making of the initial advance under the Loans initial advance under the
Loans and other Revolver Usage is subject to the fulfillment on or before the
Closing Date of the following conditions precedent in a manner satisfactory in
form and substance to the Lender and its counsel:

5.1.1 Organizational Documents - Borrowers.

The Lender shall have received for each Borrower:

(a) a certificate of good standing certified by the Secretary of State, or other
appropriate Governmental Authority, of the state of incorporation of such
Borrower;

(b) a certified copy from the appropriate Governmental Authority under which
such Borrower is organized, of such Borrower’s recorded Organizational
Documents;

(c) a certificate of qualification to do business for such Borrower certified by
the Secretary of State or other Governmental Authority of each state in which
such Borrower conducts business (except Signature TVI shall have thirty
(30) days after the Closing Date to satisfy this condition);

(d) a certificate dated as of the Closing Date by the Secretary or an Assistant
Secretary, members or other appropriate body of such Borrower covering

(i) the Organizational Documents;

(ii) the authorization of (A) the execution, delivery and performance of the
Financing Documents and the Purchase Agreement Documents to which it is a party,
(B) the borrowings hereunder, (C) the granting of the Liens contemplated by this
Agreement and the Financing Documents to which that Borrower is a party, and
(D) the Purchase Agreement Transaction if and to the extent such Borrower is a
party;

 

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(iii) the incumbency, authority and signatures of the officers and other
representatives of such Borrower authorized to sign this Agreement and the other
Financing Documents to which such Borrower is a party; and

(iv) the identity of such Borrower’s current directors, officers, members,
partners, and equity holders, as well as their respective percentage ownership
interests.

5.1.2 Opinion of Borrowers’ Counsel.

The Lender shall have received the favorable opinion of counsel for the
Borrowers addressed to the Lender in form satisfactory to the Lender.

5.1.3 Consents, Licenses, Approvals, Etc.

The Lender shall have received copies of all consents, licenses and approvals,
required in connection with the execution, delivery, performance, validity and
enforceability of the Financing Documents and the Purchase Agreement Documents
(or such consents, licenses or approvals are to be delivered on the Closing Date
pursuant to the terms of the Purchase Acquisition Documents), and such consents,
licenses and approvals shall be in full force and effect.

5.1.4 Notes.

The Lender shall have received the Acquisition Line Revolving Note, the initial
Acquisition Line Term Loan, and the Revolving Credit Note, each conforming to
the requirements hereof and executed by a Responsible Officer of each Borrower
and attested by a duly authorized representative of each Borrower.

5.1.5 Financing Documents and Collateral.

Each Borrower shall have executed and delivered the Financing Documents to be
executed by it, and shall have delivered original Chattel Paper, Instruments,
Investment Property, and related Collateral and all opinions, title insurance,
and other documents contemplated by Article III (The Collateral).

5.1.6 Other Financing Documents.

In addition to the Financing Documents to be delivered by the Borrowers, the
Lender shall have received the Financing Documents duly executed and delivered
by Persons other than the Borrowers.

5.1.7 Other Documents, Etc.

The Lender shall have received such other certificates, opinions, documents and
instruments confirmatory of or otherwise relating to the transactions
contemplated hereby as may have been reasonably requested by the Lender.

5.1.8 Payment of Fees.

The Lender shall have received payment of any Fees due on or before the Closing
Date.

 

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5.1.9 Perfection Certificate.

Each Borrower shall have delivered the Perfection Certificate required under the
provisions of Section 3.3 (Perfection Certificate) duly executed by a
Responsible Officer of each Borrower.

5.1.10 Recordings and Filings.

Each Borrower shall have: (a) executed and delivered all Financing Documents
(including, without limitation, UCC-1 and UCC-3 statements) required to be
filed, registered or recorded in order to create, in favor of the Lender, a
perfected Lien in the Collateral (subject only to the Permitted Liens) in form
and in sufficient number for filing, registration, and recording in each office
in each jurisdiction in which such filings, registrations and recordations are
required, and (b) delivered such evidence as the Lender may deem satisfactory
that all necessary filing fees and all recording and other similar fees, and all
Taxes and other expenses related to such filings, registrations and recordings
will be or have been paid in full.

5.1.11 Insurance Certificate.

The Lender shall have received an insurance certificate in accordance with the
provisions of Section 6.1.9 (Insurance) and Section 6.1.21 (Insurance With
Respect to Equipment and Inventory).

5.1.12 Landlord’s Waivers.

The Lender shall have received a landlord’s waiver from each landlord of each
and every business premise leased by each Borrower and on which any of the
Collateral is or may hereafter be located, which landlords’ waivers must be
reasonably acceptable to the Lender and its counsel in their sole and absolute
discretion.

5.1.13 Bailee Acknowledgements.

The Lender shall have received an agreement acknowledging the Liens of the
Lender from each bailee, warehouseman, consignee or similar third party who has
possession of any of the Collateral, which agreements must be reasonably
acceptable to the Lender and its counsel in their sole and absolute discretion.

5.1.14 Field Examination.

The Lender shall have completed a field examination of each Borrower’s business,
operations and income, the results of which field examination shall be in all
respects acceptable to the Lender in its sole and absolute discretion and shall
include reference discussions with key customers and vendors.

5.1.15 Other Documents.

The Lender shall have received the executed and delivered Electronic Transaction
Agreement in substantially the form attached to this Agreement as EXHIBIT D, an
executed BB&T Client Contact Information Form in form and substance satisfactory
to the Lender, and an executed Compliance Certificate dated as of the Closing
Date .

 

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5.1.16 Purchase Agreement Transaction.

The Purchase Agreement Transaction shall have been completed and closed prior to
or simultaneously herewith upon terms and conditions satisfactory to the Lender,
in accordance with the Purchase Agreement and applicable Laws.

The Lender shall have received photocopies of all Purchase Agreement Documents
executed, delivered and/or furnished in connection with the Purchase Agreement
Transaction, together with a certificate signed by a Responsible Officer of
Signature TVI certifying that the Purchase Agreement and the other Purchase
Agreement Documents furnished to the Lender are true, correct, in full force and
effect and the provisions thereof have not been in any way modified, amended or
waived, the Purchase Agreement Transaction has been closed and completed in
accordance with the Purchase Agreement and the other Purchase Agreement
Documents furnished to the Lender and in accordance with all applicable Laws.
Signature TVI shall have obtained all consents, licenses and approvals to permit
it to engage in the business previously operated and conducted by the Seller,
and the Seller has duly and properly assigned to Signature TVI all of the
Sellers’ right, title and interest in, and to, any and all Trademarks,
Copyrights and Patents, together with the goodwill of the Seller associated
with, and/or symbolized by, any of the foregoing, and such assignment has been,
or will be within thirty (30) days following the Closing Date, duly and properly
filed, registered and recorded with the United States Patent and Trademark
Office, the United States Copyright Office and with such other state or federal
Governmental Authorities as may be necessary to effect and consummate an
assignment of such Trademarks, Copyrights and Patents, together with the
goodwill associated with, or symbolized by any of the foregoing from the Seller
to the Borrowers.

With respect to the obligations and liabilities, other than those which arise in
the ordinary course of business, of the Seller assumed by any one or more of the
Borrowers under, and in connection with, the Purchase Agreement, the Lender
shall have received from the Borrowers a list setting forth the name of each
Person to whom such obligations and liabilities are owed, the amount owed to
such Person, and the due date or maturity date of each such amount.

Section 5.2 Conditions to all Extensions of Credit.

The making of all advances under the Loans and the issuance of all Letters of
Credit is subject to the fulfillment of the following conditions precedent in a
manner satisfactory in form and substance to the Lender and its counsel:

5.2.1 Compliance.

Each Borrower shall have complied and shall then be in compliance with all
terms, covenants, conditions and provisions of this Agreement and the other
Financing Documents that are binding upon it.

5.2.2 Borrowing Base.

The Borrowers shall have furnished all Loan Base Reports required by
Section 6.1.2 (Loan Base Report), there shall exist no Borrowing Base
Deficiency, and as evidence thereof, the Borrowers shall have furnished to the
Lender such reports, schedules, certificates, records and other papers as may be
requested by the Lender, and the Borrowers shall be in compliance with the
provisions of this Agreement both immediately before and immediately after the
making of the advance requested.

 

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5.2.3 Default.

There shall exist no Event of Default or Default hereunder.

5.2.4 Representations and Warranties.

The representations and warranties of each of the Borrowers contained among the
provisions of this Agreement shall be true and with the same effect as though
such representations and warranties had been made at the time of the making of,
and of the request for, each advance under the Loans or the issuance of each
Letter of Credit, except that the representations and warranties which relate to
financial statements which are referred to in Section 4.1.11 (Financial
Condition), shall also be deemed to cover financial statements furnished from
time to time to the Lender pursuant to Section 6.1.1 (Financial Statements).

5.2.5 Adverse Change.

No adverse change shall have occurred in the condition (financial or otherwise),
operations or business of any Borrower that would, in the good faith judgment of
the Lender, materially impair the ability of that Borrower to pay or perform any
of the Obligations.

5.2.6 Legal Matters.

All legal documents incident to each advance under the Loans and each of the
Letters of Credit shall be reasonably satisfactory to counsel for the Lender.

ARTICLE VI

COVENANTS OF THE BORROWERS

Section 6.1 Affirmative Covenants.

So long as any of the Obligations (or any the Commitment therefor) shall be
outstanding hereunder, the Borrowers agree jointly and severally with the Lender
as follows:

6.1.1 Financial Statements.

The Borrowers shall furnish to the Lender:

(a) Annual Statements and Certificates. The Borrowers shall furnish to the
Lender as soon as available, but in no event more than one hundred twenty
(120) days after the close of the Borrowers’ fiscal years, (i) a copy of the
annual financial statement in reasonable detail satisfactory to the Lender
relating to the Borrowers and their Subsidiaries, prepared in accordance with
GAAP and examined and certified by independent certified public accountants
reasonably satisfactory to the Lender, which financial statement shall include a
consolidated and consolidating balance sheet of the Borrowers and their
Subsidiaries as of the end of such fiscal year and consolidated and
consolidating statements of income, cash flows and changes in shareholders
equity of the Borrowers and their Subsidiaries for such fiscal year, and (ii) a
Compliance Certificate, in substantially the form attached to this Agreement as
EXHIBIT D, containing a detailed computation of each financial covenant in this
Agreement that is applicable for the period reported, a certification that no
change has occurred to the information contained

 

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in the Perfection Certificate (except as set forth in any schedule attached to
the Compliance Certificate), and a cash flow projection report, each prepared by
a Responsible Officer of the Borrowers in a format acceptable to the Lender and
(iii) a management letter in the form prepared by the Borrowers’ independent
certified public accountants.

(b) Annual Opinion of Accountant. The Borrowers shall furnish to the Lender as
soon as available, but in no event more than one hundred twenty (120) days after
the close of the Borrowers’ fiscal years, an opinion of the accountant who
examined and certified the annual financial statement relating to the Borrowers
and their Subsidiaries, which opinion shall not be qualified due to any
limitations in scope imposed by Borrower or, unless the Lender has given its
prior approval in writing, otherwise qualified.

(c) Quarterly Statements and Certificates. The Borrowers shall furnish to the
Lender as soon as available, but in no event more than forty-five (45) days
after the close of the Borrowers’ fiscal quarters, consolidated and
consolidating balance sheets of the Borrowers and its Subsidiaries as of the
close of such period, consolidated and consolidating income, cash flows,
contract backlog report, and changes in shareholders equity statements for such
period, and a Compliance Certificate, in substantially the form attached to this
Agreement as EXHIBIT D, containing a detailed computation of each financial
covenant in this Agreement that is applicable for the period reported, a
certification that no change has occurred to the information contained in the
Perfection Certificate (except as set forth on any schedule attached to the
certification), each prepared by a Responsible Officer of or on behalf of each
Borrower in a format acceptable to the Lender, all as prepared and certified by
a Responsible Officer of the Borrowers and accompanied by a certificate of that
officer stating whether any event has occurred which constitutes a Default or an
Event of Default hereunder, and, if so, stating the facts with respect thereto.

(d) Opening Balance Sheet. The Borrowers shall furnish to the Lender as soon as
available, but in no event more than sixty (60) days after the date of this
Agreement, a copy of the consolidated and consolidating balance sheet of the
Borrowers and its Subsidiaries as of the date of, and reflecting, the closing of
the Purchase Agreement Transaction and this Agreement, which balance sheet shall
be prepared in accordance with GAAP and examined and certified by independent
certified public accountants satisfactory to the Lender.

(e) Annual Budget and Projections. The Borrowers shall furnish to the Lender as
soon as available, but in no event later than the March 31 of each fiscal year a
consolidated and consolidating budget and pro forma financial statements on a
quarter-to-quarter basis for the fiscal year.

(f) Additional Reports and Information. The Borrowers shall furnish to the
Lender promptly, such additional information, reports or statements as the
Lender may from time to time reasonably request.

6.1.2 Collateral Reporting .

(a) Loan Base Report. The Borrowers will furnish to the Lender no less
frequently than monthly, within twenty (20) days after the end of each fiscal
month, and at such other times as may be requested by the Lender a report of the
Borrowing Base (each a “Loan Base Report”; collectively, the “Loan Base
Reports”) in the form required from time to time by

 

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the Lender, appropriately completed and duly signed. The Loan Base Report shall
contain the amount and payments on the Receivables, the value of Inventory, and
the calculations of the Borrowing Base, all in such detail, and accompanied by
such supporting and other information, as the Lender may from time to time
request. The items to be provided under this subsection shall be in form
satisfactory to the Lender, and certified as true and correct by a Responsible
Officer, and delivered to the Lender from time to time solely for the Lender’s
convenience in maintaining records of the Collateral. Any Borrower’s failure to
deliver any of such items to the Lender shall not affect, terminate, modify, or
otherwise limit the Liens of the Lender in the Collateral.

(b) Monthly reports. The Borrowers shall furnish to the Lender within twenty
(20) days after the end of each fiscal month, a report containing the following
information:

(i) a detailed aging schedule of all Receivables by Account Debtor, in such
detail, and accompanied by such supporting information, as the Lender may from
time to time reasonably request;

(ii) a detailed aging of all accounts payable by supplier, in such detail, and
accompanied by such supporting information, as the Lender may from time to time
reasonably request;

(iii) a listing of all Inventory by component, cost, category and location, in
such detail, and accompanied by such supporting information as the Lender may
from time to time reasonably request; and

(iv) such other information as the Lender may reasonably request.

The items to be provided under this subsection shall be in form satisfactory to
the Lender, and certified as true and correct by a Responsible Officer, and
delivered to the Lender from time to time solely for the Lender’s convenience in
maintaining records of the Collateral.

(c) Fixed Asset Report. The Borrowers shall furnish to the Lender within
forty-five (45) days after the end of each fiscal quarter, a report listing of
all Fixed or Capital Assets by component, cost, category and location, in such
detail, and accompanied by such supporting information as the Lender may from
time to time reasonably request. The report to be provided under this subsection
shall be in form satisfactory to the Lender, and certified as true and correct
by a Responsible Officer, and delivered to the Lender from time to time solely
for the Lender’s convenience in maintaining records of the Collateral.

(d) Perfection Certificates. Promptly after request by the Lender from time to
time and no later than ten (10) Business Days) days prior to any material change
to information contained on the Perfection Certificate, the Borrowers shall
furnish to the Lender an update of the information contained in the Perfection
Certificate.

 

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6.1.3 Reports to SEC and to Stockholders.

The Borrowers will furnish to the Lender, promptly upon the filing or making
thereof, at least one (l) copy of all financial statements, reports, notices and
proxy statements sent by any Borrower to its stockholders, and of all regular
and other reports filed by any Borrower with any securities exchange or with the
Securities and Exchange Commission.

6.1.4 Recordkeeping, Rights of Inspection, Field Examination, Etc.

(a) Each of the Borrowers shall, and shall cause each of its Subsidiaries to,
maintain (i) a standard system of accounting in accordance with GAAP, and
(ii) proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its properties,
business and activities.

(b) Each of the Borrowers shall, and shall cause each of its Subsidiaries to,
permit authorized representatives of the Lender to visit and inspect the
properties of the Borrowers and its Subsidiaries, to review, audit, check and
inspect the Collateral at any time with or without notice, to review, audit,
check and inspect the Borrowers’ other books of record at any time with
reasonable notice (except that no notice shall be required during the
continuance of an Event of Default) and to make abstracts and photocopies
thereof, and to discuss the affairs, finances and accounts of the Borrowers and
their Subsidiaries, with the officers, directors, employees and other
representatives of the Borrowers and their Subsidiaries and their respective
accountants, all at such times during normal business hours and other reasonable
times and as often as the Lender may reasonably request.

(c) Each of the Borrowers hereby irrevocably authorizes and directs all
accountants and auditors employed by any of the Borrowers and/or any of their
Subsidiaries at any time prior to the repayment in full of the Obligations to
exhibit and deliver to the Lender copies of any and all of the financial
statements, trial balances, management letters, or other accounting records of
any nature of any or all of the Borrowers and/or any or all of their respective
Subsidiaries in the accountant’s or auditor’s possession, and to disclose to the
Lender any information they may have concerning the financial status and
business operations of any or all of the Borrowers and/or any or all of their
respective Subsidiaries. Further, each of the Borrowers hereby authorizes all
Governmental Authorities to furnish to the Lender copies of reports or
examinations relating to any and all of the Borrowers and/or any or all
Subsidiaries, whether made by the Borrowers or otherwise.

(d) Any and all costs and expenses reasonably incurred by, or on behalf of, the
Lender in connection with the conduct of any of the foregoing, including,
without limitation, travel, lodging, meals, and other expenses together with an
allocated charge of $850 per day for each auditor employed by the Lender for
inspections of the Collateral and the Borrowers’ operations, shall be part of
the Enforcement Costs and shall be payable to the Lender upon demand. The
Borrowers acknowledge and agree that such expenses may include, but shall not be
limited to, any and all out-of-pocket costs and expenses of the Lender’s
employees and agents in, and when, traveling to any of the Borrowers’
facilities.

6.1.5 Entity Existence.

Each of the Borrowers shall maintain, and cause each of its Subsidiaries to
maintain, its entity existence in good standing in the jurisdiction in which it
is organized and in

 

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each other jurisdiction where it is required to register or qualify to do
business if the failure to do so in such other jurisdiction might have a
material adverse effect on the ability of the Borrower to perform the
Obligations, on the conduct of the Borrower’s operations, on the Borrower’s
financial condition, or on the value of, or the ability of the Lender to realize
upon, the Collateral.

6.1.6 Compliance with Laws.

Each of the Borrowers shall comply, and cause each of its Subsidiaries to
comply, with all applicable Laws and observe the valid requirements of
Governmental Authorities, the noncompliance with or the nonobservance of which
might have a material adverse effect on the ability of the Borrowers to perform
the Obligations, on the conduct of the Borrowers’ operations, on the Borrowers’
consolidated financial condition, or on the value of, or the ability of the
Lender to realize upon, the Collateral.

6.1.7 Preservation of Properties.

Each of the Borrowers will, and will cause each of its Subsidiaries to, at all
times (a) maintain, preserve, protect and keep its properties, whether owned or
leased, in good operating condition, working order and repair (ordinary wear and
tear excepted), and from time to time will make all proper repairs, maintenance,
replacements, additions and improvements thereto needed to maintain such
properties in good operating condition, working order and repair, and (b) do or
cause to be done all things necessary to preserve and to keep in full force and
effect its material franchises, leases of real and personal property, trade
names, patents, trademarks and permits that are necessary for the orderly
continuance of its business.

6.1.8 Lines of Business.

Each of the Borrowers will continue to engage substantially only in their
respective lines of businesses described on Schedule 6.1.8 contained in the
Disclosure Schedule.

6.1.9 Insurance.

Each of the Borrowers will, and will cause each of its Subsidiaries to, at all
times maintain, with financially sound and reputable insurers having a rating of
at least A-VII or better by Best Rating Guide or other comparable rating chosen
by the Lender, such insurance as is required by applicable Laws and such other
insurance, in such amounts, of such types and against such risks, hazards,
liabilities, casualties and contingencies as are usually insured against in the
same geographic areas by business entities engaged in the same or similar
business. Without limiting the generality of the foregoing, each of the
Borrowers will, and will cause each of its Subsidiaries to, keep adequately
insured all of its property against loss or damage resulting from fire or other
risks insured against by extended coverage and maintain public liability
insurance against claims for personal injury, death or property damage occurring
upon, in or about any properties occupied or controlled by it, or arising in any
manner out of the businesses carried on by it, all in such amounts not less than
the Lender shall reasonably determine from time to time. Each of the Borrowers
shall deliver to the Lender on the Closing Date (and thereafter on each date
there is a reduction in the insurance coverage) a certificate of a Responsible
Officer of the Borrowers containing a detailed list of the insurance then in
effect and stating the names of the insurance companies, the types, the amounts
and rates of the insurance, dates of the expiration thereof and the properties
and risks covered thereby. Within thirty (30) days after notice in writing from
the Lender, the Borrowers will obtain such additional insurance as the Lender
may reasonably request.

 

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6.1.10 Taxes.

Except to the extent that the validity or amount thereof is being contested in
good faith and by appropriate proceedings, each of the Borrowers will, and will
cause each of its Subsidiaries, to pay and discharge all Taxes prior to the date
when any interest or penalty would accrue for the nonpayment thereof. Each of
the Borrowers shall furnish to the Lender at such times as the Lender may
require proof satisfactory to the Lender of the making of payments or deposits
required by applicable Laws including, without limitation, payments or deposits
with respect to amounts withheld by any of the Borrowers from wages and salaries
of employees and amounts contributed by any of the Borrowers on account of
federal and other income or wage taxes and amounts due under the Federal
Insurance Contributions Act, as amended.

6.1.11 ERISA.

Each Borrower will, and will cause each of its ERISA Affiliates to, comply with
the funding requirements of ERISA with respect to Plans for its respective
employees. No Borrower will permit with respect to any Plan (a) any prohibited
transaction or transactions under ERISA or the Internal Revenue Code, that
results, or may result, in any material liability of the Borrower, or (b) any
Reportable Event if, upon termination of the plan or plans with respect to which
one or more such Reportable Events shall have occurred, there is or would be any
material liability of the Borrower to the PBGC. Upon the Lender’s request, each
Borrower will deliver to the Lender a copy of the most recent actuarial report,
financial statements and annual report completed with respect to any Plan.

6.1.12 Notification of Events of Default and Adverse Developments.

Each of the Borrowers shall promptly notify the Lender upon obtaining knowledge
of the occurrence of:

(a) any Event of Default;

(b) any Default;

(c) any litigation instituted or threatened in writing against any of the
Borrowers or any of their Subsidiaries and of the entry of any judgment or Lien
(other than any Permitted Liens) against any of the assets or properties of any
of the Borrowers or any Subsidiary where the claims against any Borrower or any
Subsidiary exceed One Hundred Thousand Dollars ($100,000) and are not covered by
insurance;

(d) any event, development or circumstance whereby the financial statements
furnished hereunder fail in any material respect to present fairly, in
accordance with GAAP, the financial condition and operational results of any of
the Borrowers or any of their respective Subsidiaries;

(e) any judicial, administrative or arbitral proceeding pending against TVI or
any of its respective Subsidiaries and any judicial or administrative proceeding
known by the chief executive officer, chief financial officer or general counsel
of TVI to be threatened against TVI or any Subsidiary of TVI that, if adversely
decided, would reasonably be expected to have a Material Adverse Effect;

 

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(f) the receipt by any of the Borrowers or any Subsidiary of any notice, claim
or demand from any Governmental Authority that alleges that any of the Borrowers
or any Subsidiary is in violation of any of the terms of, or has failed to
comply with any applicable Laws regulating its operation and business,
including, but not limited to, the Occupational Safety and Health Act and the
Environmental Protection Act which if adversely resolved would reasonably be
expected to have a Material Adverse Effect; and

(g) any other development in the business or affairs of any of the Borrowers or
any of their respective Subsidiaries which would have a Material Adverse Effect;

in each case describing in detail satisfactory to the Lender the nature thereof
and the action the Borrowers propose to take with respect thereto.

6.1.13 Hazardous Materials; Contamination.

Each of the Borrowers agrees to:

(a) give notice to the Lender immediately upon acquiring knowledge of the
presence of any Hazardous Materials or any Hazardous Materials Contamination on
any property owned, operated or controlled by any Borrower or for which any
Borrower is, or is claimed to be, responsible (provided that such notice shall
not be required for Hazardous Materials placed or stored on such property in
accordance with applicable Laws in the ordinary course (including, without
limitation, quantity) of a Borrower’s line of business expressly described in
this Agreement), with a full description thereof;

(b) promptly comply with any Laws requiring the removal, treatment or disposal
of Hazardous Materials or Hazardous Materials Contamination and provide the
Lender with satisfactory evidence of such compliance;

(c) provide the Lender, within thirty (30) days after a demand by the Lender,
with a bond, letter of credit or similar financial assurance evidencing to the
Lender’s satisfaction that the necessary funds are available to pay the cost of
removing, treating, and disposing of such Hazardous Materials or Hazardous
Materials Contamination and discharging any Lien that may be established as a
result thereof on any property owned, operated or controlled by any Borrower or
for which any Borrower is, or is claimed to be, responsible; and

(d) as part of the Obligations, defend, indemnify and hold harmless the Lender
and its agents, employees, trustees, successors and assigns from any and all
claims which may now or in the future (whether before or after the termination
of this Agreement) be asserted as a result of the presence of any Hazardous
Materials or any Hazardous Materials Contamination on any property owned,
operated or controlled by any Borrower for which any Borrower is, or is claimed
to be, responsible. Each Borrower acknowledges and agrees that this
indemnification shall survive the termination of this Agreement and the
Commitment and the payment and performance of all of the other Obligations.

 

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6.1.14 Financial Covenants.

(a) Definitions. As used in this Agreement, the term:

“Debt Service” means as to each Borrower and its Subsidiaries for any period of
determination thereof an amount equal to the sum of (a) all payments of
principal and interest with respect to Indebtedness for Borrowed Money
(including, without limitation, Capital Leases) of each Borrower and its
Subsidiaries scheduled to be due and payable during such period, (b) without
duplication, real property rent or lease expense, and (c) without duplication,
interest expense and income tax provisions for such period.

“EBITDA” means as to each Borrower and its Subsidiaries for any period of
determination thereof, the sum of (a) the net profit (or loss) determined in
accordance with GAAP consistently applied, plus (b) interest expense and income
tax provisions for such period, plus (c) depreciation and amortization of assets
for such period.

“EBITDAR” means as to each Borrower and its Subsidiaries for any period of
determination thereof, the sum of (a) EBITDA plus (b) real property rent or
lease expense.

“Funded Debt” means at any date, the aggregate of all interest-bearing
Indebtedness for Borrowed Money (including, without limitation, Capital Leases)
of each Borrower and its Subsidiaries, whether secured or unsecured.

(b) Fixed Charge Coverage Ratio. The Borrowers will maintain, on a consolidated
basis and tested as of the last day of each of the Borrowers’ fiscal quarters
for the four (4) quarter period ending on that date, a ratio of EBITDAR to Debt
Service of not less than 1.3 to 1.0.

(c) Funded Debt to EBITDA Ratio. The Borrowers will maintain, on a consolidated
basis and tested as of the last day of each of the Borrowers’ fiscal quarters, a
ratio of Funded Debt, determined on the test date, to EBITDA, determined for the
four (4) quarter period ending on the test date, of not more than 3.0 to 1.0.

(d) Capital Expenditures. The Borrower will not, and will not permit any
Subsidiary to, directly or indirectly (by way of the acquisition of the
securities of a Person or otherwise), make any Capital Expenditures in the
aggregate for the Borrower and the Subsidiaries (taken as a whole) in any fiscal
year exceeding Six Million Dollars ($6,000,000).

6.1.15 Principal Depository

The Borrowers shall maintain the Lender as their principal depository bank,
including for the maintenance of operating, administrative, cash management,
collection activity and other deposit accounts for the conduct of its business.
The Borrowers may, however, take up to sixty (60) days after the Closing Date to
transition those services to the Lender and may maintain the existing lockbox
with Bank of America for up to one hundred twenty (120) days after the Closing
Date. In addition, the Lender acknowledges that deposit accounts containing
non-material amounts may be maintained to the extent reasonably necessary for
the conduct of the Borrowers’ businesses.

6.1.16 Collection of Receivables.

Until such time, after and during the continuation of an Event of Default, that
the Lender shall notify the Borrowers of the revocation of such privilege, the
Borrowers and their

 

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Subsidiaries shall at their own expense have the privilege for the account of,
and in trust for, the Lender of collecting their Receivables and receiving in
respect thereto all Items of Payment and shall otherwise completely service all
of the Receivables including (a) the billing, posting and maintaining of
complete records applicable thereto, (b) the taking of such action with respect
to the Receivables as the Lender may request or in the absence of such request,
as each of the Borrowers and each of the Subsidiaries may deem advisable; and
(c) the granting, in the ordinary course of business, to any Account Debtor, any
rebate, refund or adjustment to which the Account Debtor may be lawfully
entitled, and may accept, in connection therewith, the return of goods, the sale
or lease of which shall have given rise to a Receivable and may take such other
actions relating to the settling of any Account Debtor’s claim as may be
commercially reasonable. The Lender may, at its option, at any time or from time
to time after and during the continuance of an Event of Default hereunder,
revoke the collection privilege given in this Agreement to any one or more of
the Borrowers and each of the Subsidiaries by either giving notice of its
assignment of, and Lien on the Collateral to the Account Debtors or giving
notice of such revocation to the Borrowers. The Lender shall not have any duty
to, and the Borrowers hereby release the Lender from all claims of loss or
damage caused by the delay or failure to collect or enforce any of the
Receivables or to preserve any rights against any other party with an interest
in the Collateral except for acts or omissions of gross negligence or willful
misconduct. The Lender shall be entitled at any time and from time to time to
confirm and verify Receivables.

6.1.17 Assignments of Receivables.

After the occurrence of an Event of Default that is continuing, each Borrower
will promptly, upon request, execute and deliver to the Lender written
assignments, in form and content acceptable to the Lender, of specific
Receivables or groups of Receivables; provided, however, the Lien and/or
security interest granted to the Lender under this Agreement shall not be
limited in any way to or by the inclusion or exclusion of Receivables within
such assignments. Receivables so assigned shall secure payment of the
Obligations and are not sold to the Lender whether or not any assignment
thereof, that is separate from this Agreement, is in form absolute. The
Borrowers agree that neither any assignment to the Lender nor any other
provision contained in this Agreement or any of the other Financing Documents
shall impose on the Lender any obligation or liability of any of the Borrowers
with respect to that which is assigned and the Borrowers hereby agree jointly
and severally to indemnify the Lender and hold the Lender harmless from any and
all claims, actions, suits, losses, damages, costs, expenses, fees, obligations
and liabilities that may be incurred by or imposed upon the Lender by virtue of
the assignment of and Lien on any Borrower’s rights, title and interest in, to,
and under the Collateral.

6.1.18 Government Accounts.

After the occurrence of an Event of Default that is continuing, the Borrowers
will immediately notify the Lender if any of the Receivables arise out of
contracts with the United States or with any other Governmental Authority. If
the Lender so requires, the applicable Borrowers shall execute any documents and
take any steps required by the Lender in order that all moneys due and to become
due under such contracts shall be assigned to the Lender and notice thereof
given to the Governmental Authority under the Federal Assignment of Claims Act
or any other applicable Laws.

 

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6.1.19 Notice of Commercial Tort Claims.

Each Borrower shall promptly notify the Lender in writing in the event the
Borrower shall have, receive or otherwise obtain a commercial tort claim, as
plaintiff or otherwise in its favor against any third party and, upon the
request of the Lender, shall promptly amend the Perfection Certificate and,
without implying any limitation on the provisions of Section 6.1.24 (Further
Assurances; Defense of Title), confirm that the Lender is authorized to file
additional, and to amend, financing statements and do such other acts or things
deemed necessary or desirable by the Lender to grant the Lender a first
priority, perfected security interest in any such commercial tort claim,
including, without limitation executing an assignment of such commercial tort
claim.

6.1.20 Inventory.

With respect to the Inventory, the Borrowers and their Subsidiaries will:
(a) maintain a perpetual inventory reporting system at all times, (b) conduct a
physical count of the Inventory at least once per Fiscal Year, and at such other
times as the Lender reasonably requests, and shall promptly, upon completion,
supply the Lender with a copy of such count accompanied by a report of the value
of such Inventory (valued at the lower of cost, on a first-in, first-out basis,
or market value) (c) as soon as possible upon demand by the Lender from time to
time, prepare and deliver to the Lender designations of Inventory specifying the
Borrowers’ and Subsidiaries’ cost of Inventory and such other matters and
information relating to the Inventory as the Lender may reasonably request;
(d) keep correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, and the Borrowers’ and Subsidiaries’ cost
therefor, all of which records shall be available to the officers, employees or
agents of the Lender upon demand for inspection and copying thereof; (e) not
store any Inventory with a bailee, warehouseman or similar Person without the
Lender’s prior written consent, which consent may be conditioned on, among other
things, delivery by the bailee, warehouseman or similar Person to the Lender of
warehouse receipts, in form acceptable to the Lender, in the name of the Lender
evidencing the storage of Inventory and the interests of the Lender therein;
(f) permit the Lender and its agents or representatives to inspect and examine
the Inventory and to check and test the same as to quality, quantity, value and
condition at any time or times hereafter during the Borrowers’ and Subsidiaries’
usual business hours or at other reasonable times and (g) at the Lender’s
request, following the Lender’s request following an Event of Default that is
continuing, designate the Lender as the consignee on all bills of lading and
other negotiable and non-negotiable documents. The Borrowers shall be permitted
to sell their Inventory in the ordinary course of business until the occurrence
of an Event of Default.

6.1.21 Insurance With Respect to Equipment and Inventory.

The Borrowers will (a) maintain and cause each of their Subsidiaries to maintain
hazard insurance with fire and extended coverage and naming the Lender as an
additional insured with loss payable to the Lender as its respective interest
may appear on the Equipment and Inventory in an amount at least equal to the
lesser amount of the outstanding principal amount of the Obligations or the fair
market value of the Equipment and Inventory (but in any event sufficient to
avoid any co-insurance obligations) and with a specific endorsement to each such
insurance policy pursuant to which the insurer agrees to give the Lender at
least thirty (30) days written notice before any alteration or cancellation of
such insurance policy and that no act or default of any of the Borrowers shall
affect the right of the Lender to recover under such policy in the event of loss
or damage; (b) file, and cause each of their Subsidiaries to file, with

 

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the Lender, upon its request, a detailed list of the insurance then in effect
and stating the names of the insurance companies, the amounts and rates of the
insurance, dates of the expiration thereof and the properties and risks covered
thereby; and (c) within thirty (30) days after notice in writing from the
Lender, obtain, and cause each of their Subsidiaries to obtain, such additional
insurance as the Lender may reasonably request.

6.1.22 Maintenance of the Collateral.

The Borrowers will maintain the Collateral in good working order, saving and
excepting ordinary wear and tear, and will not permit anything to be done to the
Collateral which may materially impair the value thereof. The Lender, or an
agent designated by the Lender, shall be permitted to enter the premises of each
of the Borrowers and their Subsidiaries and examine, audit and inspect the
Collateral at any reasonable time and from time to time upon reasonable notice
(except that no notice shall be required during the continuance of an Event of
Default). The Lender shall not have any duty to, and the Borrowers hereby
release the Lender from all claims of loss or damage caused by the delay or
failure to collect or enforce any of the Receivables or to, preserve any rights
against any other party with an interest in the Collateral.

6.1.23 Equipment.

The Borrowers shall (a) maintain all Equipment as personalty, (b) not affix any
Equipment to any real estate in such manner as to become a fixture or part of
such real estate, and (c) shall hold no Equipment on a sale on approval basis.
The Borrowers hereby declare their intent that, notwithstanding the means of
attachment, no goods of the Borrowers hereafter attached to any realty shall be
deemed a fixture, which declaration shall be irrevocable, without the Lender’s
consent, until all of the Obligations have been paid in full and the Commitment
and Letters of Credit have been terminated or have expired.

6.1.24 Further Assurances; Defense of Title.

At their expense, the Borrowers will defend the title to the Collateral (and any
part thereof), and will immediately execute, acknowledge and deliver any
financing statement, other notice, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate or other document which
the Lender may require in order to perfect, preserve, maintain, continue,
protect and/or extend the Lien or security interest granted to the Lender under
this Agreement, under any of the other Financing Documents and the first
priority of that Lien, subject only to the Permitted Liens. The Borrowers will
from time to time do whatever the Lender may require by way of obtaining,
executing, delivering, and/or filing financing statements, landlords’ or
mortgagees’ waivers, notices of assignment and other notices and amendments and
renewals thereof and the Borrowers will take any and all steps and observe such
formalities as the Lender may require, in order to create and maintain a valid
Lien upon, pledge of, or paramount security interest in, the Collateral, subject
to the Permitted Liens. Without implying any limitation on the foregoing, with
respect to the Collateral that may be perfected by control, each Borrowers shall
take such steps as the Lender may require in order that Lender may have such
control. The Borrowers shall pay to the Lender on demand all taxes, costs and
expenses incurred by the Lender in connection with the preparation, execution,
recording and filing of any such document or instrument. To the extent that the
proceeds of any of the Accounts or Receivables of the Borrowers are expected to
become subject to the control of, or in the possession of, a party other than
the Borrowers or the Lender, the Borrowers shall cause all such parties to
execute and deliver on the Closing Date security documents, financing

 

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statements or other documents as requested by the Lender and as may be necessary
to evidence and/or perfect the security interest of the Lender in those
proceeds. Each Borrower agrees that a copy of a fully executed security
agreement and/or financing statement shall be sufficient to satisfy for all
purposes the requirements of a financing statement as set forth in Article 9 of
the applicable Uniform Commercial Code. Further, to the extent permitted by
applicable Laws, the Lender may file, without any Borrower’s signature, one or
more financing statements or other notices disclosing the Lender’s liens and
other security interests. All financing statements and notices may describe the
Lender’s collateral as all assets or all personal property of Borrower. Each
Borrower hereby irrevocably appoints the Lender as the Borrower’s
attorney-in-fact, with power of substitution, in the name of the Lender or in
the name of the Borrower or otherwise, for the use and benefit of the Lender,
but at the cost and expense of the Borrowers and without notice to the
Borrowers, to execute and deliver any and all of the instruments and other
documents and take any action which the Lender may require pursuant the
foregoing provisions of this Section 6.1.24. . Each Borrower hereby ratifies and
confirms the validity of any and all financing statements filed by the Lender
prior to the date of this Agreement.

6.1.25 Business Information.

Each Borrower will notify and cause each of the Subsidiaries to notify the
Lender (a) not less than thirty (30) days prior to (i) any change in its name or
in the name under which the Borrower or the applicable Subsidiary conducts its
business, (ii) any change of the state of organization, identity or
organizational structure of the applicable Borrower or Subsidiary, and (iii) any
change to the location of the chief executive office of the applicable Borrower
or Subsidiary, and (b) not less than ten (10) days prior to the opening of any
new place of business or the closing of any existing place of business, and any
change in the location of the places where the Collateral, or any part thereof,
or the books and records, or any part thereof, are kept, unless such location is
so identified on the Perfection Certificate.

6.1.26 Subsequent Opinion of Counsel as to Recording Requirements.

In the event that any Borrower or any Subsidiary shall transfer its principal
place of business or the office where it keeps its records pertaining to the
Collateral, upon the Lender’s request the Borrowers will provide to the Lender a
subsequent opinion of counsel as to the filing, recording and other requirements
with which the Borrowers and their Subsidiaries have complied to maintain the
Lien and security interest in favor of the Lender in the Collateral.

6.1.27 Use of Premises and Equipment.

The Borrowers agree that until the Obligations are fully paid and the Commitment
and the Letters of Credit have been terminated or have expired, the Lender
(a) after and during the continuance of an Event of Default, may use any of the
Borrowers’ owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (b) shall have, and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located, and may proceed over and through any of the Borrowers’ owned or
leased property.

6.1.28 Protection of Collateral.

The Borrowers agree that the Lender may at any time following an Event of
Default that remains continuing take such steps as the Lender deems reasonably
necessary to protect the interest of the Lender in, and to preserve the
Collateral, including, without limitation,

 

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the hiring of such security guards, the placing of other security protection
measures, and otherwise restricting access to owned or leased locations where
Collateral is located, all as the Lender deems appropriate from time to time,
may employ and maintain at any of the Borrowers’ premises a custodian who shall
have full authority to do all acts necessary to protect the interests of the
Lender in the Collateral and may lease warehouse facilities to which the Lender
may move all or any part of the Collateral to the extent commercially
reasonable. The Borrowers agree to cooperate fully with the Lender’s efforts to
preserve the Collateral and will take such actions to preserve the Collateral as
the Lender may reasonably direct. All of the Lender’s expenses of preserving the
Collateral, including any reasonable expenses relating to the compensation and
bonding of a custodian, shall be part of the Enforcement Costs.

6.1.29 Appraisals.

Whenever a Default or an Event of Default exists and is continuing, and at such
other times as the Lender may request, but not more frequently than once a year,
the Borrowers shall, at their expense, provide the Lender with appraisals or
updates thereof of any or all of the Collateral from an appraiser and in form in
all respects satisfactory to the Lender.

6.1.30 Management.

TVI shall maintain Richard V. Priddy, as its President and Chief Executive
Officer, and George J. Roberts, as its Senior Vice President & Chief Financial
Officer, or such replacements in those offices as the Borrower may choose,
provided, however, that TVI shall use diligent efforts to fill any vacancy in
such office.

Section 6.2 Negative Covenants.

So long as any of the Obligations or the Commitment or Letters of Credit
therefor shall be outstanding hereunder, the Borrowers agree with the Lender
that without the prior written consent of the Lender:

6.2.1 Capital Structure, Merger, Acquisition or Sale of Assets.

Except as set forth in Schedule 6.2.1 to the Disclosure Schedule, none of the
Borrowers will alter or amend their capital structure, authorize any additional
class of equity, issue any stock or equity of any class, enter into any merger
or consolidation or amalgamation, change its State of organization, organize in
any additional State, wind up or dissolve themselves (or suffer any liquidation
or dissolution) or, other than Permitted Acquisitions, acquire all or
substantially all the assets of any Person, or sell, lease or otherwise dispose
of any of its assets (except Inventory disposed of in the ordinary course of
business prior to an Event of Default that is continuing and except as provided
in Section 6.2.17 (Disposition of Collateral)). Any consent of the Lender to the
disposition of any assets may be conditioned on a specified use of the proceeds
of disposition.

6.2.2 Subsidiaries.

None of the Borrowers will create or acquire any Subsidiaries other than the
Subsidiaries identified on the Perfection Certificate.

 

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6.2.3 Purchase or Redemption of Securities, Dividend Restrictions.

Without the Lender’s prior written consent, none of the Borrowers will purchase,
redeem or otherwise acquire any shares of its capital stock or warrants now or
hereafter outstanding, declare or pay any dividends thereon (other than stock
dividends), apply any of its property or assets to the purchase, redemption or
other retirement of, set apart any sum for the payment of any dividends on, or
for the purchase, redemption, or other retirement of, make any distribution by
reduction of capital or otherwise in respect of, any shares of any class of
capital stock of any Borrower, or any warrants, permit any Subsidiary to
purchase or acquire any shares of any class of capital stock of, or warrants
issued by, any Borrower, make any distribution to stockholders or set aside any
funds for any such purpose, and not prepay, purchase or redeem any Indebtedness
for Borrowed Money other than the Obligations.

6.2.4 Indebtedness.

None of the Borrowers will create, incur, assume or suffer to exist any
Indebtedness for Borrowed Money or permit any Subsidiary to do so, except:

(a) the Obligations;

(b) current accounts payable arising in the ordinary course;

(c) indebtedness secured by Permitted Liens;

(d) indebtedness of the Borrowers existing on the date hereof and reflected on
the financial statements furnished pursuant to Section 4.1.11 (Financial
Condition);

(e) credit card charges incurred in the ordinary course of business by
authorized personnel of the Borrowers; and

(f) other Indebtedness for Borrowed Money not exceeding more than $250,000 in
the aggregate outstanding at any time.

6.2.5 Investments, Loans and Other Transactions.

Except as otherwise provided in this Agreement, none of the Borrowers will, and
will permit any of its Subsidiaries to, (a) make, assume, acquire or continue to
hold any investment in any real property (other than in connection with
Permitted Acquisitions and unless used in connection with its business and
treated as a Fixed or Capital Asset of any Borrower or any Subsidiary) or any
Person, whether by stock purchase, capital contribution, acquisition of
indebtedness of such Person or otherwise (including, without limitation,
investments in any joint venture or partnership), (b) guaranty or otherwise
become contingently liable for the indebtedness, liabilities and other
obligations of any Person, or (c) make any loans or advances, or otherwise
extend credit to any Person, except:

(i) any advance to an officer or employee of any Borrower or any Subsidiary for
wages and salary and for travel or other business expenses in the ordinary
course of business,;

 

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(ii) the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;

(iii) any investment in Cash Equivalents or investment grade equity securities
(but only if in each instance the Borrowers shall have provided prior to such
investment written evidence satisfactory the Lender that the representations and
warranties under Section 4.1.9 (Investment Company Act; Margin Securities) are
true and correct in all respects), all of which investments are pledged to the
Lender as collateral and security for the Obligations;

(iv) the Losberger Investment to the extent that does not exceed $200,000 in the
aggregate; and

(v) trade credit extended to customers in the ordinary course of business.

6.2.6 Stock of Subsidiaries.

None of the Borrowers will sell or otherwise dispose of any shares of capital
stock of any Subsidiary (except in connection with a merger or consolidation of
a Wholly Owned Subsidiary into any of the Borrowers or another Wholly Owned
Subsidiary of any of the Borrowers or with the dissolution of any Subsidiary) or
permit any Subsidiary to issue any additional shares of its capital stock except
pro rata to its stockholders.

6.2.7 Liens.

Each Borrower agrees that it (a) will not create, incur, assume or suffer to
exist any Lien upon any of its properties or assets, whether now owned or
hereafter acquired, or permit any Subsidiary so to do, except for Liens securing
the Obligations and Permitted Liens, (b) will not agree to, assume or suffer to
exist any provision in any instrument or other document for confession of
judgment, cognovit or other similar right or remedy, (c) will not allow or
suffer to exist any Permitted Liens to be superior to Liens securing the
Obligations, (d) will not enter into any contracts for the consignment of goods,
will not execute or suffer the filing of any financing statements or the posting
of any signs giving notice of consignments, and will not, as a material part of
its business, engage in the sale of goods belonging to others, and (e) will not
allow or suffer to exist the failure of any Lien described in the Security
Documents to attach to, and/or remain at all times perfected on, any of the
property described in the Security Documents.

6.2.8 Transactions with Affiliates.

Except for items disclosed in Schedule 6.2.8 contained in the Disclosure
Schedule, none of the Borrowers nor any of their Subsidiaries will enter into or
participate in any transaction with any Affiliate or, except in the ordinary
course of business, with the officers, directors, employees and other
representatives of any Borrower and/or any Subsidiary, which in each case would
result in payments to any Person in excess of $25,000 annually.

 

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6.2.9 Other Businesses.

None of the Borrowers nor any of their Subsidiaries will engage in any business
other than its current line of business described elsewhere in this Agreement.

6.2.10 ERISA Compliance.

None of the Borrowers nor any ERISA Affiliate shall: (a) engage in or permit any
“prohibited transaction” (as defined in ERISA); (b) cause any “accumulated
funding deficiency” as defined in ERISA and/or the Internal Revenue Code;
(c) terminate any pension plan in a manner that could result in the imposition
of a lien on the property of any Borrower pursuant to ERISA; (d) terminate or
consent to the termination of any Multi-employer Plan; or (e) incur a complete
or partial withdrawal with respect to any Multi-employer Plan.

6.2.11 Prohibition on Hazardous Materials.

None of the Borrowers shall place, manufacture or store or permit to be placed,
manufactured or stored any Hazardous Materials on any property owned, operated
or controlled by any Borrower or for which any Borrower is responsible other
than Hazardous Materials placed or stored on such property in accordance with
applicable Laws in the ordinary course of a Borrower’s business expressly
described in this Agreement.

6.2.12 Amendments.

None of the Borrowers will amend or terminate or agree to amend or terminate the
describe any essential agreements, e.g., franchise, license, partnership
agreement, material operating agreements, leases, construction contracts, etc.
or consent to or waive any material provisions thereof, other than in the normal
course of business.

6.2.13 Method of Accounting; Fiscal Year.

Each Borrower agrees that:

(a) it shall not change the method of accounting employed in the preparation of
any financial statements furnished to the Lender under the provisions of
Section 6.1.1 (Financial Statements), unless required to conform to GAAP and on
the condition that the Borrowers’ accountants shall furnish such information as
the Lender may request to reconcile the changes with the Borrowers’ prior
financial statements

(b) it will not change its Fiscal Year.

6.2.14 Compensation.

None of the Borrowers nor any Subsidiary will pay any bonuses, fees,
compensation, commissions, salaries, drawing accounts, or other payments (cash
and non-cash), whether direct or indirect, to any stockholders of any Borrower
or any Subsidiary, or any Affiliate of any Borrower or any Subsidiary, other
than reasonable compensation for actual services rendered by stockholders in
their capacity as directors, officers, employees or other business
counterparties.

 

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6.2.15 Transfer of Collateral.

None of the Borrowers nor any of their Subsidiaries will transfer, or permit the
transfer, to another location of any of the Collateral or the books and records
related to any of the Collateral, unless the Borrower has complied with the
requirements of Section 6.1.25 (Business Information).

6.2.16 Sale and Leaseback.

None of the Borrowers nor any of the Subsidiaries will directly or indirectly
enter into any arrangement to sell or transfer all or any substantial part of
its fixed assets and thereupon or within one year thereafter rent or lease the
assets so sold or transferred.

6.2.17 Disposition of Collateral.

None of the Borrowers will sell, discount, allow credits or allowances,
transfer, assign, extend the time for payment on, convey, lease, assign,
transfer or otherwise dispose of the Collateral, except, prior to an Event of
Default that remains continuing, dispositions expressly permitted elsewhere in
this Agreement, the sale of Inventory in the ordinary course of business, and
the sale of unnecessary or obsolete Equipment, but only if the Borrowing Base is
adjusted proportionally and the proceeds of the sale of such Equipment are
(a) used to purchase similar Equipment to replace the unnecessary or obsolete
Equipment or (b) immediately turned over to the Lender for application to the
Obligations in accordance with the provisions of this Agreement.

ARTICLE VII

DEFAULT AND RIGHTS AND REMEDIES

Section 7.1 Events of Default.

The occurrence of any one or more of the following events shall constitute an
“Event of Default” under the provisions of this Agreement:

7.1.1 Failure to Pay.

The failure of the Borrowers to pay any of the Obligations as and when due and
payable in accordance with the provisions of this Agreement, the Notes and/or
any of the other Financing Documents.

7.1.2 Breach of Representations and Warranties.

Any representation or warranty made in this Agreement or in any report,
statement, schedule, certificate, opinion (including any opinion of counsel for
the Borrowers), financial statement or other document furnished in connection
with this Agreement, any of the other Financing Documents, or the Obligations,
shall prove to have been false or misleading when made (or, if applicable, when
reaffirmed) in any material respect.

7.1.3 Failure to Comply with Covenants.

The failure of the Borrowers to perform, observe or comply with any covenant,
condition or agreement contained in this Agreement, provided, however,

 

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(a) only with respect to a failure under subsections (a) (Annual Statements and
Certificates), (b) (Annual Opinion of Accountant), (c) (Quarterly Statements and
Certificates), (d) (Opening Balance Sheet), and (e) (Annual Budget and
Projections) of Section 6.1.1 (Financial Statements), no Event of Default shall
arise until such failure continues uncured for a period of five (5) Business
Days, or

(b) only with respect to a failure under Section 6.1.2 (Financial Statements),
no Event of Default shall arise until such failure continues uncured for a
period of five (5) days, or

(c) only with respect to a failure under Sections 6.1.4(a) (Recordkeeping,
Rights of Inspection, Field Examination, Etc.), 6.1.5 (Entity Existence),
6.1.7(a) (Preservation of Properties), Section 6.1.10 (Taxes) which does not
relate to Taxes due or claimed to be due in excess of $100,000 in the aggregate,
or 6.1.28 (Protection of Collateral), no Event of Default shall arise unless the
Borrower after discovering such failure, fails to diligently and continuously
pursue the cure of such failure or unless such failure continues uncured thirty
(30) days after discovery; or

(d) except with respect to a failure under Section 2.5.2 (Use of Proceeds of the
Loans), Section 6.1.4(b), Section 6.1.12 (Notification of Events of Default and
Adverse Developments), Section 6.1.14 (Financial Covenants) or Section 6.2
(Negative Covenants) or with respect to a failure that is intentional on the
part of a Borrower and except for matters described in clauses (a), (b) and
(c) above or in any other part of this Section 7.1 (Events of Default)), no
Event of Default shall arise unless the Borrower after discovering such failure,
fails to diligently and continuously pursue the cure of such failure or unless
such failure continues uncured thirty (30) days after discovery.

7.1.4 Default Under Other Financing Documents or Obligations.

A default shall occur under any of the other Financing Documents or under any
other Obligations or any other indebtedness, liabilities and obligations to the
Lender’s Affiliates, and such default is not cured within any applicable grace
period provided therein.

7.1.5 Receiver; Bankruptcy.

Any Borrower or any Subsidiary shall (a) apply for or consent to the appointment
of a receiver, trustee or liquidator of itself or any of its property, (b) admit
in writing its inability to pay its debts as they mature, (c) make a general
assignment for the benefit of creditors, (d) be adjudicated a bankrupt or
insolvent, (e) file a voluntary petition in bankruptcy or a petition or an
answer seeking or consenting to reorganization or an arrangement with creditors
or to take advantage of any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law, or take corporate action for the purposes of effecting any of the
foregoing, (f) by any act indicate its consent to, approval of or acquiescence
in any such proceeding or the appointment of any receiver of or trustee for any
of its property, or suffer any such receivership, trusteeship or proceeding to
continue undischarged for a period of sixty (60) days, or (g) by any act
indicate its consent to, approval of or acquiescence in any order, judgment or
decree by any court of competent jurisdiction or any Governmental Authority
enjoining or otherwise prohibiting the operation of a material portion of any
Borrower’s or any Subsidiary’s business or the use or disposition of a material
portion of any Borrower’s or any Subsidiary’s assets.

 

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7.1.6 Involuntary Bankruptcy, etc.

(a) An order for relief shall be entered in any involuntary case brought against
any Borrower or any Subsidiary under the Bankruptcy Code, or (b) any such case
shall be commenced against any Borrower or any Subsidiary and shall not be
dismissed within sixty (60) days after the filing of the petition, or (c) an
order, judgment or decree under any other Law is entered by any court of
competent jurisdiction or by any other Governmental Authority on the application
of a Governmental Authority or of a Person other than any Borrower or any
Subsidiary (i) adjudicating any Borrower, or any Subsidiary bankrupt or
insolvent, or (ii) appointing a receiver, trustee or liquidator of any Borrower
or of any Subsidiary, or of a material portion of any Borrower’s or any
Subsidiary’s assets, or (iii) enjoining, prohibiting or otherwise limiting the
operation of a material portion of any Borrower’s or any Subsidiary’s business
or the use or disposition of a material portion of any Borrower’s or any
Subsidiary’s assets, and such order, judgment or decree continues unstayed and
in effect for a period of thirty (30) days from the date entered.

7.1.7 Judgment.

Unless adequately insured in the opinion of the Lender, the entry of a final
judgment for the payment of money involving more than $250,000 against any
Borrower or any Subsidiary, and the failure by such Borrower or such Subsidiary
to discharge the same, or cause it to be discharged, within thirty (30) days
from the date of the order, decree or process under which or pursuant to which
such judgment was entered, or to secure a stay of execution pending appeal of
such judgment.

7.1.8 Execution; Attachment.

Any execution or attachment shall be levied against the Collateral, or any part
thereof, and such execution or attachment shall not be set aside, discharged or
stayed within thirty (30) days after the same shall have been levied.

7.1.9 Default Under Other Borrowings.

Default shall be made with respect to any Indebtedness for Borrowed Money of any
of the Borrowers (other than the Loans) if the effect of such default is to
accelerate the maturity of such Indebtedness for Borrowed Money or to permit the
holder or obligee thereof or other party thereto to cause such Indebtedness for
Borrowed Money to become due prior to its stated maturity.

7.1.10 Challenge to Agreements.

Any Borrower shall challenge the validity and binding effect of any provision of
any of the Financing Documents or shall state its intention to make such a
challenge of any of the Financing Documents or any of the Financing Documents
shall for any reason (except to the extent permitted by its express terms) cease
to be effective or to create a valid and perfected first priority Lien (except
for Permitted Liens) on, or security interest in, any of the Collateral
purported to be covered thereby.

 

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7.1.11 Material Adverse Effect.

An event has occurred that has a Material Adverse Effect on any of the Borrowers
or the Collateral.

7.1.12 Change of Control.

Any change shall occur a Change of Control.

7.1.13 Liquidation, Termination, Dissolution, etc.

Any Borrower shall liquidate, dissolve or terminate its existence.

Section 7.2 Remedies.

Upon the occurrence of any Event of Default which is continuing, the Lender may,
in the exercise of its sole and absolute discretion from time to time, at any
time thereafter exercise any one or more of the following rights, powers or
remedies.

7.2.1 Acceleration.

The Lender may declare any or all of the Obligations to be immediately due and
payable, notwithstanding anything contained in this Agreement or in any of the
other Financing Documents to the contrary, without presentment, demand, protest,
notice of protest or of dishonor, or other notice of any kind, all of which the
Borrowers hereby waive.

7.2.2 Further Advances.

The Lender may from time to time without notice to the Borrowers suspend,
terminate or limit any further Advances, loans or other extensions of credit
under the Commitment, under this Agreement and/or under any of the other
Financing Documents. Further, upon the occurrence of an Event of Default or
Default specified in Sections 7.1.5 (Receiver; Bankruptcy) or 7.1.6 (Involuntary
Bankruptcy, etc.), the Revolving Credit Commitment and any agreement in any of
the Financing Documents to provide additional credit and/or to issue Letters of
Credit shall immediately and automatically terminate and the unpaid principal
amount of the Notes (with accrued interest thereon) and all other Obligations
then outstanding, shall immediately become due and payable without further
action of any kind and without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrowers.

7.2.3 Uniform Commercial Code.

The Lender shall have all of the rights and remedies of a secured party under
the applicable Uniform Commercial Code and other applicable Laws. Upon demand by
the Lender, the Borrowers shall assemble the Collateral and make it available to
the Lender, at a place designated by the Lender. The Lender or its agents may
without notice from time to time enter upon any Borrower’s premises to take
possession of the Collateral, to remove it, to render it unusable, to process it
or otherwise prepare it for sale, or to sell or otherwise dispose of it.

Any written notice of the sale, disposition or other intended action by the
Lender with respect to the Collateral that is sent by regular mail, postage
prepaid, to the Borrowers at the address set forth in Section 8.1 (Notices), or
such other address of the Borrowers that may from

 

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time to time be shown on the Lender’s records, at least ten (10) days prior to
such sale, disposition or other action, shall constitute commercially reasonable
notice to the Borrowers. The Lender may alternatively or additionally give such
notice in any other commercially reasonable manner. Nothing in this Agreement
shall require the Lender to give any notice not required by applicable Laws.

If any consent, approval, or authorization of any state, municipal or other
Governmental Authority or of any other Person or of any Person having any
interest therein, should be necessary to effectuate any sale or other
disposition of the Collateral, the Borrowers agree to execute all such
applications and other instruments, and to take all other action, as may be
required in connection with securing any such consent, approval or
authorization.

The Borrowers recognize that the Lender may be unable to effect a public sale of
all or a part of the Collateral consisting of Investment Property by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, and
other applicable Federal and state Laws. The Lender may, therefore, in its
discretion, take such steps as it may deem appropriate to comply with such Laws
and may, for example, at any sale of the Collateral consisting of securities
restrict the prospective bidders or purchasers as to their number, nature of
business and investment intention, including, without limitation, a requirement
that the Persons making such purchases represent and agree to the satisfaction
of the Lender that they are purchasing such securities for their account, for
investment, and not with a view to the distribution or resale of any thereof.
The Borrowers covenant and agree to do or cause to be done promptly all such
acts and things as the Lender may request from time to time and as may be
necessary to offer and/or sell the securities or any part thereof in a manner
that is valid and binding and in conformance with all applicable Laws. Upon any
such sale or disposition, the Lender shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral consisting of securities so
sold.

7.2.4 Collateral Account; Lockbox.

Without implying any limitation on any of the Lender’s other rights and
remedies, if directed by the Lender, the Borrowers will deposit, or cause to be
deposited, all Items of Payment to a bank account designated by the Lender and
from which the Lender alone has power of access and withdrawal (the “Collateral
Account”). Each deposit shall be made not later than the next Business Day after
the date of receipt of the Items of Payment. The Items of Payment shall be
deposited in precisely the form received, except for the endorsements of the
Borrowers where necessary to permit the collection of any such Items of Payment,
which endorsement the Borrowers hereby agree to make. In the event the Borrowers
fail to do so, the Borrowers hereby authorize the Lender to make the endorsement
in the name of any or all of the Borrowers. Prior to such a deposit, the
Borrowers will not commingle any Items of Payment with any of the Borrowers’
other funds or property, but will hold them separate and apart in trust and for
the account of the Lender.

The Borrowers hereby authorize the Lender to inspect all Items of Payment,
endorse all Items of Payment in the name of any or all of the Borrowers, and
deposit such Items of Payment in the Collateral Account. The Lender reserves the
right, exercised in its sole and absolute discretion from time to time, to
provide to the Collateral Account credit prior to final collection of an Item of
Payment and to disallow credit for any Item of Payment that is unsatisfactory to
the Lender. In the event Items of Payment are returned to the Lender for any
reason whatsoever, the Lender may, in the exercise of its discretion from time
to time, forward such Items of Payment a second time. Any returned Items of
Payment shall be charged back to the Collateral Account, the Revolving Loan
Account, or other account, as appropriate.

 

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The Lender will apply the whole or any part of the collected funds credited to
the Collateral Account against any of the Obligations, the order and method of
such application to be in the sole discretion of the Lender.

If so directed by the Lender, the Borrowers shall direct the mailing of all
Items of Payment from their Account Debtors to one or more post-office boxes
designated by the Lender, or to such other additional or replacement post-office
boxes pursuant to the request of the Lender from time to time (collectively, the
“Lockbox”). The Lender shall have unrestricted and exclusive access to the
Lockbox.

7.2.5 Specific Rights With Regard to Collateral.

In addition to all other rights and remedies provided hereunder or as shall
exist at law or in equity from time to time, the Lender may (but shall be under
no obligation to), without notice to any of the Borrowers, and each Borrower
hereby irrevocably appoints the Lender as its attorney-in-fact, with power of
substitution, in the name of the Lender and/or in the name of any or all of the
Borrowers or otherwise, for the use and benefit of the Lender, but at the cost
and expense of the Borrowers and without notice to the Borrowers:

(a) request any Account Debtor obligated on any of the Accounts to make payments
thereon directly to the Lender, with the Lender taking control of the cash and
non-cash proceeds thereof;

(b) compromise, extend or renew any of the Collateral or deal with the same as
it may deem advisable;

(c) make exchanges, substitutions or surrenders of all or any part of the
Collateral;

(d) copy, transcribe, or remove from any place of business of any Borrower or
any Subsidiary all books, records, ledger sheets, correspondence, invoices and
documents, relating to or evidencing any of the Collateral or without cost or
expense to the Lender, make such use of any Borrower’s or any Subsidiary’s
place(s) of business as may be reasonably necessary to administer, control and
collect the Collateral;

(e) repair, alter or supply goods if necessary to fulfill in whole or in part
the purchase order of any Account Debtor;

(f) demand, collect, receipt for and give renewals, extensions, discharges and
releases of any of the Collateral;

(g) institute and prosecute legal and equitable proceedings to enforce
collection of, or realize upon, any of the Collateral;

 

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(h) settle, renew, extend, compromise, compound, exchange or adjust claims in
respect of any of the Collateral or any legal proceedings brought in respect
thereof;

(i) endorse or sign the name of any Borrower upon any items of payment,
certificates of title, instruments, securities, stock powers, documents,
documents of title, financing statements, assignments, notices or other writing
relating to or part of the Collateral and on any proof of claim in bankruptcy
against an Account Debtor;

(j) clear Inventory through customs in the Lender’s or any Borrower’s name and
to sign and deliver to customs officials powers of attorney in that Borrower’s
name for such purpose;

(k) notify the Post Office authorities to change the address for the delivery of
mail to the Borrowers to such address or Post Office Box as the Lender may
designate and receive and open all mail addressed to any of the Borrowers; and

(l) take any other action necessary or beneficial to realize upon or dispose of
the Collateral or to carry out the terms of this Agreement.

7.2.6 Application of Proceeds.

Any proceeds of sale or other disposition of the Collateral will be applied by
the Lender to the payment of any and all Enforcement Costs, and any balance of
such proceeds will be applied to the Obligations in such order and manner as the
Lender may from time to time in its sole and absolute discretion determine. If
the sale or other disposition of the Collateral fails to fully satisfy the
Obligations, the Borrowers shall remain liable to the Lender for any deficiency.

7.2.7 Performance by Lender.

If the Borrowers shall fail to pay the Obligations or otherwise fail to perform,
observe or comply with any of the conditions, covenants, terms, stipulations or
agreements contained in this Agreement or any of the other Financing Documents,
the Lender without notice to or demand upon the Borrowers and without waiving or
releasing any of the Obligations or any Default or Event of Default, may (but
shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of the Borrowers, and may
enter upon the premises of the Borrowers for that purpose and take all such
action thereon as the Lender may consider necessary or appropriate for such
purpose and each of the Borrowers hereby irrevocably appoints the Lender as its
attorney-in-fact to do so, with power of substitution, in the name of the
Lender, in the name of any or all of the Borrowers or otherwise, for the use and
benefit of the Lender, but at the cost and expense of the Borrowers and without
notice to the Borrowers. All sums so paid or advanced by the Lender together
with interest thereon from the date of payment, advance or incurring until paid
in full at the Post-Default Rate and all costs and expenses, shall be deemed
part of the Enforcement Costs, shall be paid by the Borrowers to the Lender on
demand, and shall constitute and become a part of the Obligations.

 

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7.2.8 Other Remedies.

The Lender may from time to time proceed to protect or enforce the rights of the
Lender by an action or actions at law or in equity or by any other appropriate
proceeding, whether for the specific performance of any of the covenants
contained in this Agreement or in any of the other Financing Documents, or for
an injunction against the violation of any of the terms of this Agreement or any
of the other Financing Documents, or in aid of the exercise or execution of any
right, remedy or power granted in this Agreement, the Financing Documents,
and/or applicable Laws. The Lender is authorized to offset and apply to all or
any part of the Obligations all moneys, credits and other property of any nature
whatsoever of any or all of the Borrowers now or at any time hereafter in the
possession of, in transit to or from, under the control or custody of, or on
deposit with, the Lender or any Affiliate of the Lender.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 Notices.

All notices, requests and demands to or upon the parties to this Agreement shall
be in writing and shall be deemed to have been given or made when delivered by
hand on a Business Day, or two (2) days after the date when deposited in the
mail, postage prepaid by registered or certified mail, return receipt requested,
or when sent by overnight courier, on the Business Day next following the day on
which the notice is delivered to such overnight courier, addressed as follows:

 

Borrowers:    c/o TVI Corporation    7100 Holladay-Tyler Road    Glenn Dale, MD
20769    Attention: Chief Financial Officer    c/o TVI Corporation    7100
Holladay-Tyler Road    Glenn Dale, MD 20769    Attention: General Counsel

 

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with a copy to:    Whiteford, Taylor & Preston L.L.P.    Suite 1400    Seven St.
Paul Street    Baltimore, Maryland 21202    Attention: Frank S. Jones, Jr.
Lender:    Branch Banking and Trust Company    8200 Greensboro Drive, Suite 1000
   McLean, Virginia 22102    Attention: Jun H. Nemitz with a copy to:    Miles &
Stockbridge P.C.    10 Light Street    Baltimore, MD 21202    Attention:
Frederick W. Runge, Jr.

By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.

Section 8.2 Amendments; Waivers.

8.2.1 In General.

This Agreement and the other Financing Documents may not be amended, modified,
or changed in any respect except by an agreement in writing signed by the Lender
and the Borrowers. No waiver of any provision of this Agreement or of any of the
other Financing Documents, nor consent to any departure by the Borrowers
therefrom, shall in any event be effective unless the same shall be in writing
signed by the Lender. No course of dealing between the Borrowers and the Lender
and no act or failure to act from time to time on the part of the Lender shall
constitute a waiver, amendment or modification of any provision of this
Agreement or any of the other Financing Documents or any right or remedy under
this Agreement, under any of the other Financing Documents or under applicable
Laws. Without implying any limitation on the foregoing:

(a) Any waiver or consent shall be effective only in the specific instance, for
the terms and purpose for which given, subject to such conditions as the Lender
may specify in any such instrument.

(b) No waiver of any Default or Event of Default shall extend to any subsequent
or other Default or Event of Default, or impair any right consequent thereto.

(c) No notice to or demand on the Borrowers in any case shall entitle the
Borrowers to any other or further notice or demand in the same, similar or other
circumstance.

(d) No failure or delay by the Lender to insist upon the strict performance of
any term, condition, covenant or agreement of this Agreement or of any of the
other Financing Documents, or to exercise any right, power or remedy consequent

 

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upon a breach thereof, shall constitute a waiver, amendment or modification of
any such term, condition, covenant or agreement or of any such breach or
preclude the Lender from exercising any such right, power or remedy at any time
or times.

(e) By accepting payment after the due date of any amount payable under this
Agreement or under any of the other Financing Documents, the Lender shall not be
deemed to waive the right either to require prompt payment when due of all other
amounts payable under this Agreement or under any of the other Financing
Documents, or to declare a default for failure to effect such prompt payment of
any such other amount.

Section 8.3 Cumulative Remedies.

The rights, powers and remedies provided in this Agreement and in the other
Financing Documents are cumulative, may be exercised concurrently or separately,
may be exercised from time to time and in such order as the Lender shall
determine and are in addition to, and not exclusive of, rights, powers and
remedies provided by existing or future applicable Laws, all without regard to
any right of the Borrowers or any other Person to the marshalling of assets,
which right the Borrowers and any other Person who may be liable (by
endorsement, guaranty, indemnity or otherwise) for all or any part of the
Obligations hereby waive to the extent permitted by applicable Laws. In order to
entitle the Lender to exercise any remedy reserved to it in this Agreement, it
shall not be necessary to give any notice, other than such notice as may be
expressly required in this Agreement. Without limiting the generality of the
foregoing and subject to the terms of this Agreement, the Lender may:

(a) proceed against any one or more of the Borrowers with or without proceeding
against any other Person who may be liable (by endorsement, guaranty, indemnity
or otherwise) for all or any part of the Obligations;

(b) proceed against any one or more of the Borrowers with or without proceeding
under any of the other Financing Documents or against any Collateral or other
collateral and security for all or any part of the Obligations;

(c) without reducing or impairing the obligation of the Borrowers and without
notice, release or compromise with any guarantor or other Person liable for all
or any part of the Obligations under the Financing Documents or otherwise; and

(d) without reducing or impairing the obligations of the Borrowers and without
notice thereof:

(i) fail to perfect the Lien in any or all Collateral or to release any or all
the Collateral or to accept substitute Collateral;

(ii) approve the making of Advances under the Revolving Loan under this
Agreement;

(iii) waive any provision of this Agreement or the other Financing Documents;

 

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(iv) exercise or fail to exercise rights of set-off or other rights; or

(v) accept partial payments or extend from time to time the maturity of all or
any part of the Obligations.

Section 8.4 Severability.

In case one or more provisions, or part thereof, contained in this Agreement or
in the other Financing Documents shall be invalid, illegal or unenforceable in
any respect under any Law, then without need for any further agreement, notice
or action:

(a) the validity, legality and enforceability of the remaining provisions shall
remain effective and binding on the parties thereto and shall not be affected or
impaired thereby;

(b) the obligation to be fulfilled shall be reduced to the limit of such
validity;

(c) if such provision or part thereof pertains to repayment of the Obligations,
then, at the sole and absolute discretion of the Lender, all of the Obligations
of the Borrowers to the Lender shall become immediately due and payable; and

(d) if the affected provision or part thereof does not pertain to repayment of
the Obligations, but operates or would prospectively operate to invalidate this
Agreement in whole or in part, then such provision or part thereof only shall be
void, and the remainder of this Agreement shall remain operative and in full
force and effect.

Section 8.5 Assignments by Lender.

The Lender may, without notice to, or consent of, the Borrowers, sell, assign or
transfer to or participate with any Person or Persons all or any part of the
Obligations, and each such Person or Persons shall have the right to enforce the
provisions of this Agreement and any of the other Financing Documents as fully
as the Lender, provided that the Lender shall continue to have the unimpaired
right to enforce the provisions of this Agreement and any of the other Financing
Documents as to so much of the Obligations that the Lender has not sold,
assigned or transferred. In connection with the foregoing, the Lender shall have
the right to disclose to any such actual or potential purchaser, assignee,
transferee or participant all financial records, information, reports, financial
statements and documents obtained in connection with this Agreement and any of
the other Financing Documents or otherwise, subject, however, to applicable Laws
relating to confidentiality of bank information. In addition, notwithstanding
the foregoing, the Lender may at any time pledge all or any portion of the
Lender’s rights under this Agreement, any Commitment or any of the Obligations
to a Federal Reserve Bank.

Section 8.6 Successors and Assigns.

This Agreement and all other Financing Documents shall be binding upon and inure
to the benefit of the Borrowers and the Lender and their respective heirs,
personal representatives, successors and assigns, except that the Borrowers
shall not have the right to assign their rights hereunder or any interest herein
without the prior written consent of the Lender.

 

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Section 8.7 Continuing Agreements.

All covenants, agreements, representations and warranties made by the Borrowers
in this Agreement, in any of the other Financing Documents, and in any
certificate delivered pursuant hereto or thereto shall survive the making by the
Lender of the Loans, the issuance of Letters of Credit by the Lender and the
execution and delivery of the Notes, shall be binding upon the Borrowers
regardless of how long before or after the date hereof any of the Obligations
were or are incurred, and shall continue in full force and effect so long as any
of the Obligations are outstanding and unpaid. From time to time upon the
Lender’s request, and as a condition of the release of any one or more of the
Security Documents, the Borrowers and other Persons obligated with respect to
the Obligations shall provide the Lender with such acknowledgments and
agreements as the Lender may require to the effect that there exists no
defenses, rights of setoff or recoupment, claims, counterclaims, actions or
causes of action of any kind or nature whatsoever against the Lender and/or any
of its agents and others, or to the extent there are, the same are waived and
released.

Section 8.8 Enforcement Costs.

The Borrowers agree to pay to the Lender on demand all Enforcement Costs,
together with interest thereon from the date incurred or advanced until paid in
full at a per annum rate of interest equal at all times to the Post-Default
Rate. Enforcement Costs shall be immediately due and payable at the time
advanced or incurred, whichever is earlier. Without implying any limitation on
the foregoing, the Borrowers agree, as part of the Enforcement Costs, to pay
upon demand any and all stamp and other Taxes and fees payable or determined to
be payable in connection with the execution and delivery of this Agreement and
the other Financing Documents and to save the Lender harmless from and against
any and all liabilities with respect to or resulting from any delay in paying or
omission to pay any Taxes or fees referred to in this Section. The provisions of
this Section shall survive the execution and delivery of this Agreement, the
repayment of the other Obligations and shall survive the termination of this
Agreement.

Section 8.9 Applicable Law; Jurisdiction.

8.9.1 Applicable Law.

The Borrowers acknowledge and agree that the Financing Documents, including,
this Agreement, shall be governed by the Laws of the State, as if each of the
Financing Documents and this Agreement had each been executed, delivered,
administered and performed solely within the State even though for the
convenience and at the request of the Borrowers, one or more of the Financing
Documents may be executed elsewhere. The Lender acknowledges, however, that
remedies under certain of the Financing Documents which relate to property
outside the State may be subject to the laws of the state in which the property
is located.

8.9.2 Submission to Jurisdiction.

The Borrowers irrevocably submit to the jurisdiction of any state or federal
court sitting in the State over any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Financing Documents. Each of the
Borrowers irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient

 

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forum. Final judgment in any such suit, action or proceeding brought in any such
court shall be conclusive and binding upon the Borrowers and may be enforced in
any court in which the Borrowers are subject to jurisdiction, by a suit upon
such judgment, provided that service of process is effected upon the Borrowers
in one of the manners specified in this Section or as otherwise permitted by
applicable Laws.

8.9.3 Appointment of Agent for Service of Process.

The Borrowers hereby irrevocably designate and appoint the resident agent for
TVI as disclosed in the records of the Maryland State Department of Assessments
and Taxation, as the Borrowers’ authorized agent to receive on the Borrowers’
behalf service of any and all process that may be served in any suit, action or
proceeding of the nature referred to in this Section in any state or federal
court sitting in the State. If such agent shall cease so to act, the Borrowers
shall irrevocably designate and appoint without delay another such agent in the
State satisfactory to the Lender and shall promptly deliver to the Lender
evidence in writing of such other agent’s acceptance of such appointment and its
agreement that such appointment shall be irrevocable.

8.9.4 Service of Process.

Each of the Borrowers hereby consents to process being served in any suit,
action or proceeding of the nature referred to in this Section by (a) the
mailing of a copy thereof by registered or certified mail, postage prepaid,
return receipt requested, to the Borrower at the Borrower’s address designated
in or pursuant to Section 8.1 (Notices), and (b) serving a copy thereof upon the
agent, if any, designated and appointed by the Borrower as the Borrower’s agent
for service of process by or pursuant to this Section. The Borrowers irrevocably
agree that such service (y) shall be deemed in every respect effective service
of process upon the Borrowers in any such suit, action or proceeding, and
(z) shall, to the fullest extent permitted by law, be taken and held to be valid
personal service upon the Borrowers. Nothing in this Section shall affect the
right of the Lender to serve process in any manner otherwise permitted by law or
limit the right of the Lender otherwise to bring proceedings against the
Borrowers in the courts of any jurisdiction or jurisdictions.

Section 8.10 Duplicate Originals and Counterparts.

This Agreement may be executed in any number of duplicate originals or
counterparts, each of such duplicate originals or counterparts shall be deemed
to be an original and all taken together shall constitute but one and the same
instrument.

Section 8.11 No Agency.

Nothing herein contained shall be construed to constitute the Borrowers as the
agent of the Lender for any purpose whatsoever or to permit the Borrowers to
pledge any of the credit of the Lender. The Lender shall not be responsible or
liable for any shortage, discrepancy, damage, loss or destruction of any part of
the Collateral wherever the same may be located and regardless of the cause
thereof. The Lender shall not, by anything herein or in any of the Financing
Documents or otherwise, assume any of the Borrowers’ obligations under any
contract or agreement assigned to the Lender, and the Lender shall not be
responsible in any way for the performance by the Borrowers of any of the terms
and conditions thereof.

 

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Section 8.12 Date of Payment.

Should the principal of or interest on the Notes become due and payable on other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and in the case of principal, interest shall be payable
thereon at the rate per annum specified in the Notes during such extension.

Section 8.13 Entire Agreement.

This Agreement is intended by the Lender and the Borrowers to be a complete,
exclusive and final expression of the agreements contained herein. Neither the
Lender nor the Borrowers shall hereafter have any rights under any prior
agreements pertaining to the matters addressed by this Agreement but shall look
solely to this Agreement for definition and determination of all of their
respective rights, liabilities and responsibilities under this Agreement.

Section 8.14 Waiver of Trial by Jury.

THE BORROWERS AND THE LENDERS HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES,
ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE
FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF
TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS,
INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT.

This waiver is knowingly, willingly and voluntarily made by the Borrowers and
the Lender, and the Borrowers and the Lender hereby represent that no
representations of fact or opinion have been made by any individual to induce
this waiver of trial by jury or to in any way modify or nullify its effect. The
Borrowers and the Lender further represent that they have been represented in
the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and that they have had the
opportunity to discuss this waiver with counsel.

Section 8.15 Liability of the Lender.

The Borrowers hereby agree that the Lender shall not be chargeable for any
negligence, mistake, act or omission of any accountant, examiner, agency or
attorney employed by the Lender in making examinations, investigations or
collections, or otherwise in perfecting, maintaining, protecting or realizing
upon any lien or security interest or any other interest in the Collateral or
other security for the Obligations.

By inspecting the Collateral or any other properties of the Borrowers or by
accepting or approving anything required to be observed, performed or fulfilled
by the Borrowers or to be given to the Lender pursuant to this Agreement or any
of the other Financing Documents, the Lender shall not be deemed to have
warranted or represented the condition, sufficiency, legality, effectiveness or
legal effect of the same, and such acceptance or approval shall not constitute
any warranty or representation with respect thereto by the Lender.

 

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Section 8.16 Indemnification.

The Borrowers agrees to indemnify and hold harmless, Lender, the respective
parent and Affiliates of the Lender and the respective parent’s and Affiliates’
officers, directors, shareholders, employees and agents (each an “Indemnified
Party,” and collectively, the “Indemnified Parties”), from and against any and
all claims, liabilities, losses, damages, costs and expenses (whether or not
such Indemnified Party is a party to any litigation), including without
limitation, reasonable attorney’s fees and costs and costs of investigation,
document production, attendance at depositions or other discovery, incurred by
any Indemnified Party with respect to, arising out of or as a consequence of
(a) this Agreement or any of the other Financing Documents, including without
limitation, any failure of the Borrowers to pay when due (at maturity, by
acceleration or otherwise) any principal, interest, fee or any other amount due
under this Agreement or the other Loan documents, or any other Event of Default;
(b) the use by the Borrowers of any proceeds advanced hereunder; (c) the
transactions contemplated hereunder; or (d) any civil penalty or fine assessed
by OFAC against the Lender or any Affiliate of the Lender and all reasonable
costs and expense (including counsel fees and disbursements) incurred in
connection with defense thereof by the Lender or such Affiliate, as a result of
the funding of Loans or the extension of credit, the acceptance of payments due
under the Financing Documents or any Hedge Agreement or acceptance of
Collateral; (e) any claim, demand, action or cause of action being asserted
against (i) the Borrowers or any of their Affiliates by any other Person, or
(ii) any Indemnified Party by the Borrowers in connection with the transactions
contemplated hereunder. Notwithstanding anything herein or elsewhere to the
contrary, the Borrowers shall not be obligated to indemnify or hold harmless any
Indemnified Party from any liability, loss or damage resulting from the gross
negligence or willful misconduct (as determined by a final non-appealable order
by a court of competent jurisdiction) of such Indemnified Party. Any amount
payable to the Lender under this Section will bear interest at the Post- Default
Rate from the due date until paid.

[Signatures Begin on Next Page]

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BORROWERS’ SIGNATURE PAGE TO FINANCING AND SECURITY AGREEMENT

(Page 1 of 2 Signature Pages)

IN WITNESS WHEREOF, each of the parties hereto have executed and delivered this
Agreement under their respective seals as of the day and year first written
above.

 

ATTEST:      TVI CORPORATION

/s/ Sean Hunt

     By:   

/s/ Richard V. Priddy

   (Seal)         Richard V. Priddy            President and Chief Executive
Officer    ATTEST:      CAPA MANUFACTURING CORP.

/s/ Sean Hunt

     By:   

/s/ Richard V. Priddy

   (Seal)         Richard V. Priddy            President    ATTEST:      SAFETY
TECH INTERNATIONAL, INC.

/s/ Sean Hunt

     By:   

/s/ Richard V. Priddy

   (Seal)         Richard V. Priddy            President    ATTEST:      TVI
HOLDINGS ONE, INC.

/s/ Sean Hunt

     By:   

/s/ Richard V. Priddy

   (Seal)         Richard V. Priddy            President   

 

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LENDER’S SIGNATURE PAGE TO FINANCING AND SECURITY AGREEMENT

(Page 2 of 2 Signature Pages)

IN WITNESS WHEREOF, each of the parties hereto have executed and delivered this
Agreement under their respective seals as of the day and year first written
above.

 

WITNESS:   BRANCH BANKING AND TRUST COMPANY   By:  

/s/ Jun H. Nemitz

  (Seal)     Jun H. Nemitz,       Senior Vice President  

 

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LIST OF EXHIBITS

 

A-1    Revolving Credit Note A-2    Acquisition Line Note A-3    Acquisition
Line Term Note B.    Perfection Certificate [Omitted] C.    Form of Compliance
Certificate [Omitted] D.    Electronic Transaction Agreement [Omitted] E.   
Disclosure Schedule [Omitted]

 

92

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Exhibit A-1 Revolving Credit Note

REVOLVING CREDIT NOTE

$25,000,000                                     
                                        
                                        
                                               Baltimore, Maryland

October 31, 2006

FOR VALUE RECEIVED, TVI CORPORATION, a Maryland corporation (“TVI”), CAPA
MANUFACTURING CORP., a Maryland corporation (“CAPA”), SAFETY TECH INTERNATIONAL,
INC., a Maryland corporation (“Safety Tech”) and TVI HOLDINGS ONE, INC., a
Maryland corporation (“Signature TVI”), jointly and severally (each of TVI,
CAPA, Safety Tech and Signature TVI, a “Borrower”; TVI, CAPA, Safety Tech and
Signature TVI, collectively, the “Borrowers”), promise to pay to the order of
BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation (the
“Lender”), the principal sum of TWENTY-FIVE MILLION DOLLARS ($25,000,000) (the
“Principal Sum”), or so much thereof as has been or may be advanced/readvanced
to or for the account of the Borrowers pursuant to the terms and conditions of
the Financing Agreement (as hereinafter defined) under the Revolving Credit
Facility (as that term is defined in the Financing Agreement), together with
interest thereon at the rate or rates hereinafter provided, in accordance with
the following:

 

  1. Interest.

Commencing as of the date hereof and continuing until repayment in full of all
sums due hereunder, the unpaid Principal Sum shall bear interest in accordance
with Section 2.4 (Interest and Certain Fee Provisions) of the Financing
Agreement.

 

  2. Payments and Maturity.

The unpaid Principal Sum, together with interest thereon at the rate or rates
provided above, shall be payable as follows:

        (a) Interest only on the unpaid Principal Sum shall be due and payable
in accordance with Section 2.4.4 (Payment of Interest) of the Financing
Agreement; and

        (b) Unless sooner paid, the unpaid Principal Sum, together with interest
accrued and unpaid thereon, shall be due and payable in full on the Revolving
Credit Termination Date (as defined in the Financing Agreement).

The fact that the balance hereunder may be reduced to zero from time to time
pursuant to the Financing Agreement will not affect the continuing validity of
this Note or the Financing Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero.

 

  3. Default Interest.

Upon the occurrence of an Event of Default (as hereinafter defined), the unpaid
Principal Sum shall bear interest thereafter at the Post-Default Rate (as
defined in the Financing Agreement) until such Event of Default is cured.

 

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

  4. Late Charges.

If the Borrowers shall fail to make any payment under the terms of this Note
within ten (10) days after the date such payment is due, the Borrowers shall pay
to the Lender on demand a late charge equal to five percent (5%) of such
payment.

 

  5. Application and Place of Payments.

All payments, made on account of this Note shall be applied first to the payment
of any late charge then due hereunder, second to the payment of any prepayment
fee then due hereunder, third to the payment of accrued and unpaid interest then
due hereunder, and the remainder, if any, shall be applied to the unpaid
Principal Sum. All payments on account of this Note shall be paid in lawful
money of the United States of America in immediately available funds during
regular business hours of the Lender at its principal office in Baltimore,
Maryland or at such other times and places as the Lender may at any time and
from time to time designate in writing to the Borrowers.

 

  6. Prepayment.

The Borrowers may prepay the Principal Sum in whole or in part at any time
without premium or penalty, provided, however, that the Borrowers are subject to
indemnification provisions applicable to prepayment pursuant to the terms of
Section 2.4.3 (Indemnity) of the Financing Agreement.

 

  7. Financing Agreement and Other Financing Documents.

This Note is the “Revolving Credit Note” described in a Financing and Security
Agreement of even date herewith by and among the Borrowers and the Lender (as
amended, modified, restated, substituted, extended and renewed at any time and
from time to time, the “Financing Agreement”). The indebtedness evidenced by
this Note is included within the meaning of the term “Obligations” as defined in
the Financing Agreement. This Note is one of the “Financing Documents” (as that
term is defined in the Financing Agreement).

 

  8. Security.

This Note is secured as provided in the Financing Agreement.

 

  9. Events of Default.

The occurrence of any one or more of the following events shall constitute an
event of default (individually, an “Event of Default” and collectively, the
“Events of Default”) under the terms of this Note:

        (a) The failure of the Borrowers to pay to the Lender when due any and
all amounts payable by the Borrowers to the Lender under the terms of this Note;
or

        (b) The occurrence of an event of default (as defined therein) under the
terms and conditions of any of the other Financing Documents.

 

2

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

  10. Remedies.

Upon the occurrence of an Event of Default, at the option of the Lender, all
amounts payable by the Borrowers to the Lender under the terms of this Note
shall immediately become due and payable by the Borrowers to the Lender without
notice to the Borrowers or any other person, and the Lender shall have all of
the rights, powers, and remedies available under the terms of this Note, any of
the other Financing Documents and all applicable laws. The Borrowers and all
endorsers, guarantors, and other parties who may now or in the future be
primarily or secondarily liable for the payment of the indebtedness evidenced by
this Note hereby severally waive presentment, protest and demand, notice of
protest, notice of demand and of dishonor and non-payment of this Note and
expressly agree that this Note or any payment hereunder may be extended from
time to time without in any way affecting the liability of the Borrowers,
guarantors and endorsers.

 

  11. Expenses.

The Borrowers promise to pay to the Lender on demand by the Lender all costs and
expenses incurred by the Lender in connection with the collection and
enforcement of this Note, including, without limitation, reasonable attorneys’
fees and expenses and all court costs.

 

  12. Notices.

Any notice, request, or demand to or upon the Borrowers or the Lender shall be
deemed to have been properly given or made when delivered in accordance with
Section 8.1 (Notices) of the Financing Agreement.

 

  13. Miscellaneous.

Each right, power, and remedy of the Lender as provided for in this Note or any
of the other Financing Documents, or now or hereafter existing under any
applicable law or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Note or any
of the other Financing Documents or now or hereafter existing under any
applicable law, and the exercise or beginning of the exercise by the Lender of
any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by the Lender of any or all such other rights,
powers, or remedies. No failure or delay by the Lender to insist upon the strict
performance of any term, condition, covenant, or agreement of this Note or any
of the other Financing Documents, or to exercise any right, power, or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant, or agreement or of any such breach, or preclude the Lender
from exercising any such right, power, or remedy at a later time or times. By
accepting payment after the due date of any amount payable under the terms of
this Note, the Lender shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under the terms of this
Note or to declare an Event of Default for the failure to effect such prompt
payment of any such other amount. No course of dealing or conduct shall be
effective to amend, modify, waive, release, or change any provisions of this
Note.

 

3

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

  14. Partial Invalidity.

In the event any provision of this Note (or any part of any provision) is held
by a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect, such invalidity, illegality, or unenforceability shall not affect
any other provision (or remaining part of the affected provision) of this Note;
but this Note shall be construed as if such invalid, illegal, or unenforceable
provision (or part thereof) had not been contained in this Note, but only to the
extent it is invalid, illegal, or unenforceable.

 

  15. Captions.

The captions herein set forth are for convenience only and shall not be deemed
to define, limit, or describe the scope or intent of this Note.

 

  16. Applicable Law.

The Borrowers acknowledge and agree that this Note shall be governed by the laws
of the State of Maryland, even though for the convenience and at the request of
the Borrowers, this Note may be executed elsewhere.

 

  17. Consent to Jurisdiction.

Each Borrower irrevocably submits to the jurisdiction of any state or federal
court sitting in the State of Maryland over any suit, action, or proceeding
arising out of or relating to this Note or any of the other Financing Documents.
Each Borrower irrevocably waives, to the fullest extent permitted by law, any
objection that such Borrower may now or hereafter have to the laying of venue of
any such suit, action, or proceeding brought in any such court and any claim
that any such suit, action, or proceeding brought in any such court has been
brought in an inconvenient forum. Final judgment in any such suit, action, or
proceeding brought in any such court shall be conclusive and binding upon each
Borrower and may be enforced in any court in which any Borrower is subject to
jurisdiction by a suit upon such judgment, provided that service of process is
effected upon the Borrower as provided in this Note or as otherwise permitted by
applicable law.

 

  18. Service of Process.

Each Borrower hereby consents to process being served in any suit, action, or
proceeding instituted in connection with this Note by (a) the mailing of a copy
thereof by certified mail, postage prepaid, return receipt requested, to the
Borrowers and (b) serving a copy thereof upon the registered agent for TVI as
set forth in the records of the Maryland State Department of Assessments and
Taxation, the agent hereby designated and appointed by each of the Borrowers as
each Borrower’s agent for service of process. Each Borrower irrevocably agrees
that such service shall be deemed in every respect effective service of process
upon the Borrower in any such suit, action or proceeding, and shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon the Borrower. Nothing in this Section shall affect the right of the Lender
to serve process in any manner otherwise permitted by law or limit the right of
the Lender otherwise to bring proceedings against any Borrower in the courts of
any jurisdiction or jurisdictions.

 

4

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

  19. Confessed Judgment.

UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, EACH BORROWER HEREBY AUTHORIZES ANY
ATTORNEY DESIGNATED BY THE LENDER OR ANY CLERK OF ANY COURT OF RECORD TO APPEAR
FOR SUCH BORROWER IN ANY COURT OF RECORD AND CONFESS JUDGMENT WITHOUT PRIOR
HEARING AGAINST THE BORROWER IN FAVOR OF THE LENDER FOR AND IN THE AMOUNT OF THE
UNPAID PRINCIPAL SUM, ALL INTEREST ACCRUED AND UNPAID THEREON, ALL OTHER AMOUNTS
PAYABLE BY THE BORROWER TO THE LENDER UNDER THE TERMS OF THIS NOTE OR ANY OF THE
OTHER FINANCING DOCUMENTS, COSTS OF SUIT, AND ATTORNEYS’ FEES OF FIFTEEN PERCENT
(15%) OF THE UNPAID PRINCIPAL SUM AND INTEREST THEN DUE HEREUNDER. BY ITS
ACCEPTANCE OF THIS NOTE, THE LENDER AGREES THAT IN THE EVENT THE LENDER
EXERCISES AT ANY TIME ITS RIGHT TO CONFESS JUDGMENT UNDER THIS NOTE, THE LENDER
SHALL USE ITS BEST EFFORTS TO OBTAIN LEGAL COUNSEL WHO WILL CHARGE THE LENDER
FOR ITS SERVICES ON AN HOURLY BASIS, AT ITS CUSTOMARY HOURLY RATES AND ONLY FOR
THE TIME AND REASONABLE EXPENSES INCURRED. IN NO EVENT SHALL THE LENDER ENFORCE
THE LEGAL FEES PORTION OF A CONFESSED JUDGMENT AWARD FOR AN AMOUNT IN EXCESS OF
THE FEES AND EXPENSES ACTUALLY CHARGED TO THE LENDER FOR SERVICES RENDERED BY
ITS COUNSEL IN CONNECTION WITH SUCH CONFESSION OF JUDGMENT AND/OR THE COLLECTION
OF SUMS OWED TO THE LENDER. IN THE EVENT THE LENDER RECEIVES, THROUGH EXECUTION
UPON A CONFESSED JUDGMENT, PAYMENTS ON ACCOUNT OF ATTORNEYS’ FEES IN EXCESS OF
SUCH ACTUAL ATTORNEYS’ FEES AND EXPENSES INCURRED BY THE LENDER, THEN, AFTER
FULL REPAYMENT AND SATISFACTION OF ALL OF THE OBLIGATIONS UNDER AND IN
CONNECTION WITH THIS NOTE, THE LOAN AGREEMENT AND ALL OF THE OTHER LOAN
DOCUMENTS, THE LENDER SHALL REFUND SUCH EXCESS AMOUNT TO THE BORROWERS. EACH
BORROWER HEREBY RELEASES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL ERRORS
AND ALL RIGHTS OF EXEMPTION, APPEAL, STAY OF EXECUTION, INQUISITION, AND OTHER
RIGHTS TO WHICH SUCH BORROWER MAY OTHERWISE BE ENTITLED UNDER THE LAWS OF THE
UNITED STATES OF AMERICA OR OF ANY STATE OR POSSESSION OF THE UNITED STATES OF
AMERICA NOW IN FORCE AND WHICH MAY HEREAFTER BE ENACTED. THE AUTHORITY AND POWER
TO APPEAR FOR AND ENTER JUDGMENT AGAINST ANY BORROWER SHALL NOT BE EXHAUSTED BY
ONE OR MORE EXERCISES THEREOF OR BY ANY IMPERFECT EXERCISE THEREOF AND SHALL NOT
BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO. SUCH AUTHORITY MAY BE
EXERCISED ON ONE OR MORE OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT
JURISDICTIONS AS OFTEN AS THE LENDER SHALL DEEM NECESSARY OR DESIRABLE, FOR ALL
OF WHICH THIS NOTE SHALL BE A SUFFICIENT WARRANT.

 

  20. WAIVER OF TRIAL BY JURY.

EACH BORROWER AND THE LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO WHICH

 

5

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

SUCH BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY
PERTAINING TO (A) THIS NOTE OR (B) THE FINANCING DOCUMENTS. IT IS AGREED AND
UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS
AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST
PARTIES WHO ARE NOT PARTIES TO THIS NOTE.

THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY EACH BORROWER, AND
EACH BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE
BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY
WAY MODIFY OR NULLIFY ITS EFFECT. EACH BORROWER FURTHER REPRESENTS THAT IT HAS
BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

[Signatures Follow on Next Page]

 

6

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SIGNATURE PAGE TO REVOLVING CREDIT NOTE

IN WITNESS WHEREOF, each Borrower has caused this Note to be executed under seal
by its duly authorized representatives as of the date first written above.

 

WITNESS OR ATTEST:    

BORROWERS:

 

TVI CORPORATION

        

By:

      

(Seal)

     

Richard V. Priddy,

President and Chief Executive Officer

 

 

    CAPA MANUFACTURING CORP.         

By:

      

(Seal)

     

Richard V. Priddy,

President

 

 

    SAFETY TECH INTERNATIONAL, INC.         

By:

      

(Seal)

     

Richard V. Priddy,

President

 

 

    TVI HOLDINGS ONE, INC.         

By:

      

(Seal)

     

Richard V. Priddy,

President

 

 

7

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Exhibit A-2 Acquisition Line Note

ACQUISITION LINE REVOLVING NOTE

 

$10,000,000                                     
                                        
                                        
                                              Baltimore, Maryland

October 31, 2006

FOR VALUE RECEIVED, TVI CORPORATION, a Maryland corporation (“TVI”), CAPA
MANUFACTURING CORP., a Maryland corporation (“CAPA”), SAFETY TECH INTERNATIONAL,
INC., a Maryland corporation (“Safety Tech”) and TVI HOLDINGS ONE, INC., a
Maryland corporation (“Signature TVI”), jointly and severally (each of TVI,
CAPA, Safety Tech and Signature TVI, a “Borrower”; TVI, CAPA, Safety Tech and
Signature TVI, collectively, the “Borrowers”), promise to pay to the order of
BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation (the
“Lender”), the principal sum of TEN MILLION DOLLARS ($10,000,000) (the
“Principal Sum”), or so much thereof as has been or may be advanced/readvanced
to or for the account of the Borrowers pursuant to the terms and conditions of
the Financing Agreement (as hereinafter defined) as Acquisition Line Advances
(as defined in the Financing Agreement) that are not Acquisition Line Term
Advances (as defined in the Financing Agreement) under the Acquisition Line
Facility (as that term is defined in the Financing Agreement), together with
interest thereon at the rate or rates hereinafter provided, in accordance with
the following:

 

  1. Interest.

Commencing as of the date hereof and continuing until repayment in full of all
sums due hereunder, the unpaid Principal Sum shall bear interest in accordance
with Section 2.4 (Interest and Certain Fee Provisions) of the Financing
Agreement.

 

  2. Payments and Maturity.

The unpaid Principal Sum, together with interest thereon at the rate or rates
provided above, shall be payable as follows:

(a) Interest on the unpaid Principal Sum shall be due and payable in accordance
with Section 2.4.4 (Payment of Interest) of the Financing Agreement;

(b) Unless sooner paid, the unpaid Principal Sum, together with interest accrued
and unpaid thereon, shall be due and payable in full on the Revolving Credit
Termination Date.

The fact that the balance hereunder may be reduced to zero from time to time
pursuant to the Financing Agreement will not affect the continuing validity of
this Note or the Financing Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero.

 

  3. Default Interest.

Upon the occurrence of an Event of Default (as hereinafter defined), the unpaid
Principal Sum shall bear interest thereafter at the Post-Default Rate (as
defined in the Financing Agreement) until such Event of Default is cured.

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

  4. Late Charges.

If the Borrowers shall fail to make any payment under the terms of this Note
within ten (10) days after the date such payment is due, the Borrowers shall pay
to the Lender on demand a late charge equal to five percent (5%) of such
payment.

 

  5. Application and Place of Payments.

All payments, made on account of this Note shall be applied in accordance with
Section 2.2 (Acquisition Line Facility) of the Financing Agreement)

 

  6. Prepayment.

The Borrowers may prepay the Principal Sum in whole or in part at any time
without premium or penalty, provided, however, that the Borrowers are subject to
indemnification provisions applicable to prepayment pursuant to the terms of
Section 2.4.3 (Indemnity) of the Financing Agreement.

 

  7. Financing Agreement and Other Financing Documents.

This Note is the “Acquisition Line Revolving Note” described in a Financing and
Security Agreement of even date herewith by and among the Borrowers and the
Lender (as amended, modified, restated, substituted, extended and renewed at any
time and from time to time, the “Financing Agreement”). The indebtedness
evidenced by this Note is included within the meaning of the term “Obligations”
as defined in the Financing Agreement. This Note is one of the “Financing
Documents” (as that term is defined in the Financing Agreement).

 

  8. Security.

This Note is secured as provided in the Financing Agreement.

 

  9. Events of Default.

The occurrence of any one or more of the following events shall constitute an
event of default (individually, an “Event of Default” and collectively, the
“Events of Default”) under the terms of this Note:

(a) The failure of the Borrowers to pay to the Lender when due any and all
amounts payable by the Borrowers to the Lender under the terms of this Note; or

(b) The occurrence of an event of default (as defined therein) under the terms
and conditions of any of the other Financing Documents.

 

  10. Remedies.

Upon the occurrence of an Event of Default, at the option of the Lender, all
amounts payable by the Borrowers to the Lender under the terms of this Note
shall immediately become due and payable by the Borrowers to the Lender without
notice to the Borrowers or any other

 

2

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

person, and the Lender shall have all of the rights, powers, and remedies
available under the terms of this Note, any of the other Financing Documents and
all applicable laws. The Borrowers and all endorsers, guarantors, and other
parties who may now or in the future be primarily or secondarily liable for the
payment of the indebtedness evidenced by this Note hereby severally waive
presentment, protest and demand, notice of protest, notice of demand and of
dishonor and non-payment of this Note and expressly agree that this Note or any
payment hereunder may be extended from time to time without in any way affecting
the liability of the Borrowers, guarantors and endorsers.

 

  11. Expenses.

The Borrowers promise to pay to the Lender on demand by the Lender all costs and
expenses incurred by the Lender in connection with the collection and
enforcement of this Note, including, without limitation, reasonable attorneys’
fees and expenses and all court costs.

 

  12. Notices.

Any notice, request, or demand to or upon the Borrowers or the Lender shall be
deemed to have been properly given or made when delivered in accordance with
Section 8.1 (Notices) of the Financing Agreement.

 

  13. Miscellaneous.

Each right, power, and remedy of the Lender as provided for in this Note or any
of the other Financing Documents, or now or hereafter existing under any
applicable law or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Note or any
of the other Financing Documents or now or hereafter existing under any
applicable law, and the exercise or beginning of the exercise by the Lender of
any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by the Lender of any or all such other rights,
powers, or remedies. No failure or delay by the Lender to insist upon the strict
performance of any term, condition, covenant, or agreement of this Note or any
of the other Financing Documents, or to exercise any right, power, or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant, or agreement or of any such breach, or preclude the Lender
from exercising any such right, power, or remedy at a later time or times. By
accepting payment after the due date of any amount payable under the terms of
this Note, the Lender shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under the terms of this
Note or to declare an Event of Default for the failure to effect such prompt
payment of any such other amount. No course of dealing or conduct shall be
effective to amend, modify, waive, release, or change any provisions of this
Note.

 

  14. Partial Invalidity.

In the event any provision of this Note (or any part of any provision) is held
by a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect, such invalidity, illegality, or unenforceability shall not affect
any other provision (or remaining part of the affected provision) of this Note;
but this Note shall be construed as if such invalid, illegal, or

 

3

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

unenforceable provision (or part thereof) had not been contained in this Note,
but only to the extent it is invalid, illegal, or unenforceable.

 

  15. Captions.

The captions herein set forth are for convenience only and shall not be deemed
to define, limit, or describe the scope or intent of this Note.

 

  16. Applicable Law.

The Borrowers acknowledge and agree that this Note shall be governed by the laws
of the State of Maryland, even though for the convenience and at the request of
the Borrowers, this Note may be executed elsewhere.

 

  17. Consent to Jurisdiction.

Each Borrower irrevocably submits to the jurisdiction of any state or federal
court sitting in the State of Maryland over any suit, action, or proceeding
arising out of or relating to this Note or any of the other Financing Documents.
Each Borrower irrevocably waives, to the fullest extent permitted by law, any
objection that such Borrower may now or hereafter have to the laying of venue of
any such suit, action, or proceeding brought in any such court and any claim
that any such suit, action, or proceeding brought in any such court has been
brought in an inconvenient forum. Final judgment in any such suit, action, or
proceeding brought in any such court shall be conclusive and binding upon each
Borrower and may be enforced in any court in which any Borrower is subject to
jurisdiction by a suit upon such judgment, provided that service of process is
effected upon the Borrower as provided in this Note or as otherwise permitted by
applicable law.

 

  18. Service of Process.

Each Borrower hereby consents to process being served in any suit, action, or
proceeding instituted in connection with this Note by (a) the mailing of a copy
thereof by certified mail, postage prepaid, return receipt requested, to the
Borrowers and (b) serving a copy thereof upon the registered agent for TVI as
set forth in the records of the Maryland State Department of Assessments and
Taxation, the agent hereby designated and appointed by each of the Borrowers as
each Borrower’s agent for service of process. Each Borrower irrevocably agrees
that such service shall be deemed in every respect effective service of process
upon the Borrower in any such suit, action or proceeding, and shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon the Borrower. Nothing in this Section shall affect the right of the Lender
to serve process in any manner otherwise permitted by law or limit the right of
the Lender otherwise to bring proceedings against any Borrower in the courts of
any jurisdiction or jurisdictions.

 

  19. Confessed Judgment.

UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, EACH BORROWER HEREBY AUTHORIZES ANY
ATTORNEY DESIGNATED BY THE LENDER OR ANY CLERK OF ANY COURT OF RECORD TO APPEAR
FOR SUCH BORROWER IN ANY

 

4

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

COURT OF RECORD AND CONFESS JUDGMENT WITHOUT PRIOR HEARING AGAINST THE BORROWER
IN FAVOR OF THE LENDER FOR AND IN THE AMOUNT OF THE UNPAID PRINCIPAL SUM, ALL
INTEREST ACCRUED AND UNPAID THEREON, ALL OTHER AMOUNTS PAYABLE BY THE BORROWER
TO THE LENDER UNDER THE TERMS OF THIS NOTE OR ANY OF THE OTHER FINANCING
DOCUMENTS, COSTS OF SUIT, AND ATTORNEYS’ FEES OF FIFTEEN PERCENT (15%) OF THE
UNPAID PRINCIPAL SUM AND INTEREST THEN DUE HEREUNDER. BY ITS ACCEPTANCE OF THIS
NOTE, THE LENDER AGREES THAT IN THE EVENT THE LENDER EXERCISES AT ANY TIME ITS
RIGHT TO CONFESS JUDGMENT UNDER THIS NOTE, THE LENDER SHALL USE ITS BEST EFFORTS
TO OBTAIN LEGAL COUNSEL WHO WILL CHARGE THE LENDER FOR ITS SERVICES ON AN HOURLY
BASIS, AT ITS CUSTOMARY HOURLY RATES AND ONLY FOR THE TIME AND REASONABLE
EXPENSES INCURRED. IN NO EVENT SHALL THE LENDER ENFORCE THE LEGAL FEES PORTION
OF A CONFESSED JUDGMENT AWARD FOR AN AMOUNT IN EXCESS OF THE FEES AND EXPENSES
ACTUALLY CHARGED TO THE LENDER FOR SERVICES RENDERED BY ITS COUNSEL IN
CONNECTION WITH SUCH CONFESSION OF JUDGMENT AND/OR THE COLLECTION OF SUMS OWED
TO THE LENDER. IN THE EVENT THE LENDER RECEIVES, THROUGH EXECUTION UPON A
CONFESSED JUDGMENT, PAYMENTS ON ACCOUNT OF ATTORNEYS’ FEES IN EXCESS OF SUCH
ACTUAL ATTORNEYS’ FEES AND EXPENSES INCURRED BY THE LENDER, THEN, AFTER FULL
REPAYMENT AND SATISFACTION OF ALL OF THE OBLIGATIONS UNDER AND IN CONNECTION
WITH THIS NOTE, THE LOAN AGREEMENT AND ALL OF THE OTHER LOAN DOCUMENTS, THE
LENDER SHALL REFUND SUCH EXCESS AMOUNT TO THE BORROWERS. EACH BORROWER HEREBY
RELEASES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL ERRORS AND ALL RIGHTS
OF EXEMPTION, APPEAL, STAY OF EXECUTION, INQUISITION, AND OTHER RIGHTS TO WHICH
SUCH BORROWER MAY OTHERWISE BE ENTITLED UNDER THE LAWS OF THE UNITED STATES OF
AMERICA OR OF ANY STATE OR POSSESSION OF THE UNITED STATES OF AMERICA NOW IN
FORCE AND WHICH MAY HEREAFTER BE ENACTED. THE AUTHORITY AND POWER TO APPEAR FOR
AND ENTER JUDGMENT AGAINST ANY BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF OR BY ANY IMPERFECT EXERCISE THEREOF AND SHALL NOT BE
EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO. SUCH AUTHORITY MAY BE
EXERCISED ON ONE OR MORE OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT
JURISDICTIONS AS OFTEN AS THE LENDER SHALL DEEM NECESSARY OR DESIRABLE, FOR ALL
OF WHICH THIS NOTE SHALL BE A SUFFICIENT WARRANT.

 

  20. WAIVER OF TRIAL BY JURY.

EACH BORROWER AND THE LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO WHICH SUCH BORROWER AND THE LENDER MAY BE
PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE
FINANCING DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL

 

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PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE
NOT PARTIES TO THIS NOTE.

THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY EACH BORROWER, AND
EACH BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE
BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY
WAY MODIFY OR NULLIFY ITS EFFECT. EACH BORROWER FURTHER REPRESENTS THAT IT HAS
BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

[Signatures Follow on Next Page]

 

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SIGNATURE PAGE TO ACQUISITION LINE REVOLVING NOTE

IN WITNESS WHEREOF, each Borrower has caused this Note to be executed under seal
by its duly authorized representatives as of the date first written above.

 

WITNESS OR ATTEST:    

BORROWERS:

 

TVI CORPORATION

        

By:

      

(Seal)

     

Richard V. Priddy,

President and Chief Executive Officer

 

 

    CAPA MANUFACTURING CORP.         

By:

      

(Seal)

     

Richard V. Priddy,

President

 

 

    SAFETY TECH INTERNATIONAL, INC.         

By:

      

(Seal)

     

Richard V. Priddy,

President

 

 

    TVI HOLDINGS ONE, INC.         

By:

      

(Seal)

     

Richard V. Priddy,

President

 

 

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Exhibit A-3 Acquisition Line Term Note

ACQUISITION LINE TERM NOTE

 

$5,000,000                                     
                                        
                                        
                                               Baltimore, Maryland

October 31, 2006

FOR VALUE RECEIVED, TVI CORPORATION, a Maryland corporation (“TVI”), CAPA
MANUFACTURING CORP., a Maryland corporation (“CAPA”), SAFETY TECH INTERNATIONAL,
INC., a Maryland corporation (“Safety Tech”) and TVI HOLDINGS ONE, INC., a
Maryland corporation (“Signature TVI”), jointly and severally (each of TVI,
CAPA, Safety Tech and Signature TVI, a “Borrower”; TVI, CAPA, Safety Tech and
Signature TVI, collectively, the “Borrowers”), promise to pay to the order of
BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation (the
“Lender”), the principal sum of FIVE MILLION DOLLARS ($5,000,000) (the
“Principal Sum”), together with interest thereon at the rate or rates
hereinafter provided, in accordance with the following:

 

  1. Interest.

Commencing as of the date hereof and continuing until repayment in full of all
sums due hereunder, the unpaid Principal Sum shall bear interest in accordance
with Section 2.4 (Interest and Certain Fee Provisions) of the Financing
Agreement.

 

  2. Payments and Maturity.

The unpaid Principal Sum, together with interest thereon at the rate or rates
provided above, shall be payable as follows:

        (a) Interest on the unpaid Principal Sum shall be due and payable in
accordance with Section 2.4.4 (Payment of Interest) of the Financing Agreement;

        (b) Principal payments on the outstanding Principal Sum shall be due and
payable in twenty-three (23) equal monthly installments of $208,333, beginning
on December 1, 2006 and continuing on the first day of each and every month
thereafter to and including October 1, 2008;

        (c) Notwithstanding anything contained herein to the contrary, the
Borrowers shall pay to the Lender the Acquisition Line Mandatory Prepayments set
forth in Section 2.2.6 (Mandatory Prepayments of the Acquisition Line) of the
Financing Agreement; and

        (d) Unless sooner paid, the unpaid Principal Sum, together with interest
accrued and unpaid thereon, shall be due and payable in full on the earlier of
(i) October 30, 2008 or (ii) the Revolving Credit Termination Date.

 

  3. Default Interest.

Upon the occurrence of an Event of Default (as hereinafter defined), the unpaid
Principal Sum shall bear interest thereafter at the Post-Default Rate (as
defined in the Financing Agreement) until such Event of Default is cured.

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

  4. Late Charges.

If the Borrowers shall fail to make any payment under the terms of this Note
within ten (10) days after the date such payment is due, the Borrowers shall pay
to the Lender on demand a late charge equal to five percent (5%) of such
payment.

 

  5. Application and Place of Payments.

All payments, made on account of this Note shall be applied in accordance with
Section 2.2 (Acquisition Line Facility) of the Financing Agreement)

 

  6. Prepayment.

The Borrowers may prepay the Principal Sum in whole or in part at any time
without premium or penalty, provided, however, that the Borrowers are subject to
indemnification provisions applicable to prepayment pursuant to the terms of
Section 2.4.3 (Indemnity) of the Financing Agreement.

 

  7. Financing Agreement and Other Financing Documents.

This Note is an “Acquisition Line Term Note” described in a Financing and
Security Agreement of even date herewith by and among the Borrowers and the
Lender (as amended, modified, restated, substituted, extended and renewed at any
time and from time to time, the “Financing Agreement”). The indebtedness
evidenced by this Note is included within the meaning of the term “Obligations”
as defined in the Financing Agreement. This Note is one of the “Financing
Documents” (as that term is defined in the Financing Agreement).

 

  8. Security.

This Note is secured as provided in the Financing Agreement.

 

  9. Events of Default.

The occurrence of any one or more of the following events shall constitute an
event of default (individually, an “Event of Default” and collectively, the
“Events of Default”) under the terms of this Note:

        (a) The failure of the Borrowers to pay to the Lender when due any and
all amounts payable by the Borrowers to the Lender under the terms of this Note;
or

        (b) The occurrence of an event of default (as defined therein) under the
terms and conditions of any of the other Financing Documents.

 

  10. Remedies.

Upon the occurrence of an Event of Default, at the option of the Lender, all
amounts payable by the Borrowers to the Lender under the terms of this Note
shall immediately become due and payable by the Borrowers to the Lender without
notice to the Borrowers or any other

 

2

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person, and the Lender shall have all of the rights, powers, and remedies
available under the terms of this Note, any of the other Financing Documents and
all applicable laws. The Borrowers and all endorsers, guarantors, and other
parties who may now or in the future be primarily or secondarily liable for the
payment of the indebtedness evidenced by this Note hereby severally waive
presentment, protest and demand, notice of protest, notice of demand and of
dishonor and non-payment of this Note and expressly agree that this Note or any
payment hereunder may be extended from time to time without in any way affecting
the liability of the Borrowers, guarantors and endorsers.

 

  11. Expenses.

The Borrowers promise to pay to the Lender on demand by the Lender all costs and
expenses incurred by the Lender in connection with the collection and
enforcement of this Note, including, without limitation, reasonable attorneys’
fees and expenses and all court costs.

 

  12. Notices.

Any notice, request, or demand to or upon the Borrowers or the Lender shall be
deemed to have been properly given or made when delivered in accordance with
Section 8.1 (Notices) of the Financing Agreement.

 

  13. Miscellaneous.

Each right, power, and remedy of the Lender as provided for in this Note or any
of the other Financing Documents, or now or hereafter existing under any
applicable law or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Note or any
of the other Financing Documents or now or hereafter existing under any
applicable law, and the exercise or beginning of the exercise by the Lender of
any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by the Lender of any or all such other rights,
powers, or remedies. No failure or delay by the Lender to insist upon the strict
performance of any term, condition, covenant, or agreement of this Note or any
of the other Financing Documents, or to exercise any right, power, or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant, or agreement or of any such breach, or preclude the Lender
from exercising any such right, power, or remedy at a later time or times. By
accepting payment after the due date of any amount payable under the terms of
this Note, the Lender shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under the terms of this
Note or to declare an Event of Default for the failure to effect such prompt
payment of any such other amount. No course of dealing or conduct shall be
effective to amend, modify, waive, release, or change any provisions of this
Note.

 

  14. Partial Invalidity.

In the event any provision of this Note (or any part of any provision) is held
by a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect, such invalidity, illegality, or unenforceability shall not affect
any other provision (or remaining part of the affected provision) of this Note;
but this Note shall be construed as if such invalid, illegal, or

 

3

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unenforceable provision (or part thereof) had not been contained in this Note,
but only to the extent it is invalid, illegal, or unenforceable.

 

  15. Captions.

The captions herein set forth are for convenience only and shall not be deemed
to define, limit, or describe the scope or intent of this Note.

 

  16. Applicable Law.

The Borrowers acknowledge and agree that this Note shall be governed by the laws
of the State of Maryland, even though for the convenience and at the request of
the Borrowers, this Note may be executed elsewhere.

 

  17. Consent to Jurisdiction.

Each Borrower irrevocably submits to the jurisdiction of any state or federal
court sitting in the State of Maryland over any suit, action, or proceeding
arising out of or relating to this Note or any of the other Financing Documents.
Each Borrower irrevocably waives, to the fullest extent permitted by law, any
objection that such Borrower may now or hereafter have to the laying of venue of
any such suit, action, or proceeding brought in any such court and any claim
that any such suit, action, or proceeding brought in any such court has been
brought in an inconvenient forum. Final judgment in any such suit, action, or
proceeding brought in any such court shall be conclusive and binding upon each
Borrower and may be enforced in any court in which any Borrower is subject to
jurisdiction by a suit upon such judgment, provided that service of process is
effected upon the Borrower as provided in this Note or as otherwise permitted by
applicable law.

 

  18. Service of Process.

Each Borrower hereby consents to process being served in any suit, action, or
proceeding instituted in connection with this Note by (a) the mailing of a copy
thereof by certified mail, postage prepaid, return receipt requested, to the
Borrowers and (b) serving a copy thereof upon the registered agent for TVI as
set forth in the records of the Maryland State Department of Assessments and
Taxation, the agent hereby designated and appointed by each of the Borrowers as
each Borrower’s agent for service of process. Each Borrower irrevocably agrees
that such service shall be deemed in every respect effective service of process
upon the Borrower in any such suit, action or proceeding, and shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon the Borrower. Nothing in this Section shall affect the right of the Lender
to serve process in any manner otherwise permitted by law or limit the right of
the Lender otherwise to bring proceedings against any Borrower in the courts of
any jurisdiction or jurisdictions.

 

  19. Confessed Judgment.

UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, EACH BORROWER HEREBY AUTHORIZES ANY
ATTORNEY DESIGNATED BY THE LENDER OR ANY CLERK OF ANY COURT OF RECORD TO APPEAR
FOR SUCH BORROWER IN ANY

 

4

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COURT OF RECORD AND CONFESS JUDGMENT WITHOUT PRIOR HEARING AGAINST THE BORROWER
IN FAVOR OF THE LENDER FOR AND IN THE AMOUNT OF THE UNPAID PRINCIPAL SUM, ALL
INTEREST ACCRUED AND UNPAID THEREON, ALL OTHER AMOUNTS PAYABLE BY THE BORROWER
TO THE LENDER UNDER THE TERMS OF THIS NOTE OR ANY OF THE OTHER FINANCING
DOCUMENTS, COSTS OF SUIT, AND ATTORNEYS’ FEES OF FIFTEEN PERCENT (15%) OF THE
UNPAID PRINCIPAL SUM AND INTEREST THEN DUE HEREUNDER. BY ITS ACCEPTANCE OF THIS
NOTE, THE LENDER AGREES THAT IN THE EVENT THE LENDER EXERCISES AT ANY TIME ITS
RIGHT TO CONFESS JUDGMENT UNDER THIS NOTE, THE LENDER SHALL USE ITS BEST EFFORTS
TO OBTAIN LEGAL COUNSEL WHO WILL CHARGE THE LENDER FOR ITS SERVICES ON AN HOURLY
BASIS, AT ITS CUSTOMARY HOURLY RATES AND ONLY FOR THE TIME AND REASONABLE
EXPENSES INCURRED. IN NO EVENT SHALL THE LENDER ENFORCE THE LEGAL FEES PORTION
OF A CONFESSED JUDGMENT AWARD FOR AN AMOUNT IN EXCESS OF THE FEES AND EXPENSES
ACTUALLY CHARGED TO THE LENDER FOR SERVICES RENDERED BY ITS COUNSEL IN
CONNECTION WITH SUCH CONFESSION OF JUDGMENT AND/OR THE COLLECTION OF SUMS OWED
TO THE LENDER. IN THE EVENT THE LENDER RECEIVES, THROUGH EXECUTION UPON A
CONFESSED JUDGMENT, PAYMENTS ON ACCOUNT OF ATTORNEYS’ FEES IN EXCESS OF SUCH
ACTUAL ATTORNEYS’ FEES AND EXPENSES INCURRED BY THE LENDER, THEN, AFTER FULL
REPAYMENT AND SATISFACTION OF ALL OF THE OBLIGATIONS UNDER AND IN CONNECTION
WITH THIS NOTE, THE LOAN AGREEMENT AND ALL OF THE OTHER LOAN DOCUMENTS, THE
LENDER SHALL REFUND SUCH EXCESS AMOUNT TO THE BORROWERS. EACH BORROWER HEREBY
RELEASES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL ERRORS AND ALL RIGHTS
OF EXEMPTION, APPEAL, STAY OF EXECUTION, INQUISITION, AND OTHER RIGHTS TO WHICH
SUCH BORROWER MAY OTHERWISE BE ENTITLED UNDER THE LAWS OF THE UNITED STATES OF
AMERICA OR OF ANY STATE OR POSSESSION OF THE UNITED STATES OF AMERICA NOW IN
FORCE AND WHICH MAY HEREAFTER BE ENACTED. THE AUTHORITY AND POWER TO APPEAR FOR
AND ENTER JUDGMENT AGAINST ANY BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF OR BY ANY IMPERFECT EXERCISE THEREOF AND SHALL NOT BE
EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO. SUCH AUTHORITY MAY BE
EXERCISED ON ONE OR MORE OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT
JURISDICTIONS AS OFTEN AS THE LENDER SHALL DEEM NECESSARY OR DESIRABLE, FOR ALL
OF WHICH THIS NOTE SHALL BE A SUFFICIENT WARRANT.

 

  20. WAIVER OF TRIAL BY JURY.

EACH BORROWER AND THE LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO WHICH SUCH BORROWER AND THE LENDER MAY BE
PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE
FINANCING DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL

 

5

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PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE
NOT PARTIES TO THIS NOTE.

THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY EACH BORROWER, AND
EACH BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE
BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY
WAY MODIFY OR NULLIFY ITS EFFECT. EACH BORROWER FURTHER REPRESENTS THAT IT HAS
BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

[Signatures Follow on Next Page]

 

6

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SIGNATURE PAGE TO ACQUISITION LINE TERM NOTE

IN WITNESS WHEREOF, each Borrower has caused this Note to be executed under seal
by its duly authorized representatives as of the date first written above.

 

WITNESS OR ATTEST:    

BORROWERS:

 

TVI CORPORATION

        

By:

      

(Seal)

     

Richard V. Priddy,

President and Chief Executive Officer

 

 

    CAPA MANUFACTURING CORP.         

By:

      

(Seal)

     

Richard V. Priddy,

President

 

 

    SAFETY TECH INTERNATIONAL, INC.         

By:

      

(Seal)

     

Richard V. Priddy,

President

 

 

    TVI HOLDINGS ONE, INC.         

By:

      

(Seal)

     

Richard V. Priddy,

President

 

 

7