**Exhibit10.1**

 

LIMITED FORBEARANCE AGREEMENT

 

THIS LIMITEDFORBEARANCE AGREEMENT (this “Agreement”) is made as of November 20,2008, by and among TVI CORPORATION, a Maryland corporation (“TVI”), CAPAMANUFACTURING CORP., a Maryland corporation (“Capa”), SAFETY TECHINTERNATIONAL, INC., a Maryland corporation (“Safety Tech”), andSIGNATURE SPECIAL EVENT SERVICES, INC., a Maryland corporation (formerly named“TVI Holdings One, Inc.”) (“Signature TVI”), jointlyand 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 and the Lender enteredinto an Amended and Restated Financing and Security Agreement datedFebruary 22, 2008 (as amended by First Amendment to Amended and RestatedFinancing and Security Agreement dated July 3, 2008 and as amended,restated, modified, substituted, extended, and renewed from time to time, the “FinancingAgreement”). Capitalized terms not otherwise defined in this Agreementshall have the meaning set forth or provided for in the Financing Agreement.

 

B.            The Financing Agreement containsagreements between the Borrowers and the Lender with respect to the “Loans”(as defined in the Financing Agreement), including (i) the RevolvingCredit Facility in the maximum principal amount of $11,000,000 and(ii) the Term Loan in the amount of $22,500,000.  Loans under the Revolving Credit Facility areevidenced by, and repaid with interest in accordance with, the terms andconditions of that certain Second Amended and Restated Revolving Credit Notedated July 3, 2008 from the Borrowers, as makers, payable to the order ofthe Lender in the maximum principal amount of the Revolving Loan (the “RevolvingCredit Note”).  The Term Loan isevidenced by, and repaid with interest in accordance with, the terms andconditions of that certain Amended and Restated Term Note datedFebruary 22, 2008 from the Borrowers, as makers, payable to the order ofthe Lender in the original principal amount of the Term Loan (the “Term Note”).  The Revolving Credit Note, the Term Note andany other instrument that now or hereafter evidences the Borrowers’ obligationto repay any part of the Obligations (all as amended, restated, modified,substituted, extended and renewed from time to time) are sometimes referred toin this Agreement as the “Notes.”

 

C.            The “Obligations” (as definedin the Financing Agreement), including, without limitation, the Loans, aresecured by, among other things (i) the “Collateral” (as defined inthe Financing Agreement, and (ii) the Collateral Assignment of Patents asSecurity (TVI Corporation), the Collateral Assignment of Patents as Security(CAPA Manufacturing Corp.), the Collateral Assignment of Trademarks as Security(TVI Corporation),  the CollateralAssignment of Trademarks as Security (TVI Holdings One, Inc.), and thePledge, Assignment and Security Agreement, each dated as of the OriginalClosing Date (as that term is defined in the Financing Agreement).

 

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D.            Events of Default (as that term isdefined in the Financing Agreement) exist under the Financing Agreement due tothe Borrowers’ failure to pay when due the October, 2008 principal and interestpayments due on the Term Note, the failure of the Borrowers to pay continuingBorrowing Base Deficiencies (as that term is defined in the FinancingAgreement), and events occurring before the date of this Agreement which eventsare known to the Lender and which alone or in the aggregate have had a MaterialAdverse Effect on any of the Borrowers or the Collateral (such Events ofDefault collectively, the “Existing Events of Default”).

 

E.             The Lender has agreed, subject tothe terms, conditions and understandings expressed in this Agreement, torefrain and forbear temporarily from exercising and enforcing its remedies withrespect to the Existing Events of Default during the Forbearance Period(defined below), provided that, among other things, the Borrowers execute anddeliver this Agreement.

 

NOW,THEREFORE, in consideration of the premises and for other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged, theLender and the Borrowers, jointly and severally, hereby agree as follows:

 

AGREEMENTS

 

1.     Forbearance.  Subject to the terms, conditions andunderstandings contained in this Agreement, and for so long as there does notexist a “Forbearance Default” under the terms of this Agreement (ashereinafter defined), the Lender hereby agrees to refrain and forbeartemporarily from exercising and enforcing any of its remedies (including,without limitation,  rights of setoffsuch as those described in Section 2.6.4 (Liens; Setoff) of the FinancingAgreement) under the Financing Agreement, under the Notes, under any of theother Financing Documents, or under applicable Laws with respect to theExisting Events of Default at any time during the period commencing on the dateof this Agreement and ending on, and including the week ending January 30,2009 (the “Forbearance Period”); provided however, that the ForbearancePeriod shall be automatically extended through and including April 30,2009 in the event that the conditions set forth in Section 4 below havebeen fully satisfied.  The Lender shallhave no obligation to refrain and forbear from exercising or enforcing any ofits rights or remedies during the Forbearance Period or at any time thereafterupon the occurrence and during the continuance of a Forbearance Default.  The Borrowers acknowledge and agree that thisAgreement applies to and governs only the Obligations relating to the Loans,and does not apply to or govern any other obligation, liability, orindebtedness of the Borrowers or any other person to the Lender.

 

2.     Financing Agreements.  The Lender and the Borrowers hereby agree asfollows:

 

(a)   During the Forbearance Period the Borrowersmay carry a Borrowing Base Deficiency only if (i) the maximum amount ofthe Borrowing Base Deficiency at no time exceeds $3,543,000 (the “BorrowingBase Deficiency Cap”) and (ii) the Aggregate Net Negative Variance atno time exceeds $177,150, (the “Negative Variance Cap”) unless theLender otherwise consents in writing.  Asused in this Agreement, the term:

 

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“AggregateNet Negative Variance” means the sum of each Weekly Borrowing BaseVariance.

 

“AvailableLine” means the amount set forth in the “TVI CORPORATION - CASH FLOWFORECAST” on the Summary page in the First Budget (defined inSection 3(d) below and expressed for this definition as a positivenumber) and the Second Budget (defined in Section 3(d) below andexpressed for this definition as a positive number), if the same is accepted bythe Lender in accordance with Section 3(d) below.   The Available Line is the Borrowers’projection of the maximum Borrowing Base Deficiency for weekly periods.

 

“WeeklyBorrowing Base Variance” means the amount, determined on the last BusinessDay of each week, commencing with the week ending November 14, 2008, equalto (x) the Borrowing Base Deficiency minus (y) the Available Line.

 

By so agreeing to the Borrowing BaseDeficiency Cap and the Negative Variance Cap, the Lender is not waiving theExisting Events of Default that exist on account of the Borrowing BaseDeficiency.  For the avoidance of doubt,the Borrowers acknowledge that the Borrowing Base Deficiency shall beimmediately due and payable upon the expiration of the Forbearance Period,without the need for notice or demand by the Lender.

 

(b)   The Borrowers may request, and the Lenderagrees to make, Advances during the Forbearance Period in accordance with theprovisions of the Financing Agreement provided that:

 

(x) theLender may not terminate, limit or suspend Advances on account of the existenceof an Event of Default other than a Forbearance Default, and

 

(y) after giving effect to the Borrowers’ request, the aggregate Revolver Usagewould not exceed the lesser of (i) Revolving Credit Committed Amount or(ii) the Borrowing Base plus the Borrowing Base Deficiency Cap, and

 

(z) after giving effect to the Borrowers’ request, the aggregate Revolver Usagewould not exceed the Borrowing Base plus the Available Line plus the NegativeVariance Cap.

 

(c)   Principal installment payments on the TermNote for the months of October, November, December, 2008 and January, 2009 (andif the Forbearance Period is extended as provided below, for the months ofFebruary, March and April, 2009) are hereby deferred until the maturity ofthe Term Note (by acceleration or otherwise). For the avoidance of doubt, the Borrowers and the Lender confirm thatinterest and other payments due under the Term Note have not been deferred andthat no Existing Event of Default is waived on account of the deferral.

 

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(d)   Any Term Loan Mandatory Prepayment otherwisecoming due during the Forbearance Period (including, without limitation,  any extensions thereof) shall be deferreduntil and shall be due and payable on the date the Forbearance Period ends.

 

(e)   During the Forbearance Period, the netproceeds derived by the Borrowers from all sales of assets outside of theordinary course of business shall be applied to the Obligations in such orderas the Lender may determine in the exercise of its sole and absolute discretionfrom time to time, except to the limited extent the Lender has expressly agreedotherwise including, without limitation, each “Agreement Regarding Asset Sale”(each of which is one of the Financing Documents), related to the sales ofgoods of Signature TVI, executed and delivered by the Lender prior to the dateof this Agreement, provided, however, that to the extent any such AgreementRegarding Asset Sale includes the absence of an Event of Default as a conditionto Signature TVI’s use of sales proceeds in paying reasonable costs andexpenses (including, without limitation, reasonable attorneys’ fees) related tothe closure of Signature TVI’s Orlando, Florida facility, such condition shallbe limited during the Forbearance Period to Forbearance Defaults .

 

(f)    ****Commencingas of the date of this Agreement and continuing throughout the ForbearancePeriod, interest shall accrue on the unpaid principal balance of (i) theRevolving Loan at the Prime Rate plus 1.50% per annum and (ii) the TermLoan at the Prime Rate plus 2.00% per annum.

 

(g)   At the time this Agreement is executed anddelivered, TVI shall issue to the Lender a warrant to purchase common stock ofTVI equal to 4.9% of all equity interests of TVI in substantially the formattached to this Agreement as Exhibit A

 

3.     Covenants.   The Borrowers hereby covenant and agree withthe Lender as follows:

 

(a)   Within five (5) business days from thedate of the execution of this Agreement, the Borrowers shall engage aturnaround consultant (the “Consultant”), whose experience, reputation andotherwise is reasonably acceptable to the Lender, for an engagement periodreasonably established for the completion of the scope of the engagement.  The scope of the Consultant’s engagementshall include assisting the Borrowers in the preparation of a cash budget andcash flow projections for the period through and including April 30, 2009,evaluating the Borrowers’ operations and procedures, evaluating the Borrowers’turnaround strategy, and providing recommendations for improving the same, allpursuant to an engagement agreement reasonably satisfactory to the Lender.

 

(b)   The Borrowers agree that the Lender maydiscuss with the Consultant the affairs, finances and accounts of the Borrowersand shall have complete, direct and immediate access to the representatives,employees and agents of the Consultant and its reports, projects, budgets,  work papers, recommendations, assessments andother information and conclusions relating in any way to the Borrowers. Withoutimplying any limitation on the foregoing, the Borrowers acknowlege and agreethat, due in part to the limited duration of the Forbearance Period and theConsultant’s engagement, such access to the Consultant is a material inducementto the Lender to enter into this Agreement. The Consultant’s engagement letter shall contain the Consultant’sagreement to cooperate fullly with the Lender in effecting such access.

 

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(c)   Each of the Borrowers hereby irrevocably(without the Lender’s written consent) authorizes and directs the Consultantand the representatives, employees and agents of the Consultant to exhibit anddeliver to the Lender any and all of its reports, projects, budgets,  work papers, recommendations, assessments andother information and conclusions and to discuss candidly the same with theLender.  The Lender acknowledges thatengagement of the Consultant is the sole responsibility of the Borrower and allreports, assessments and related working papers that come into the possessionof Lender are the property of the Borrowers, provided that the Borrowers andthe Consultants shall nonetheless allow the Lender unrestricted access to thesame.

 

(d)   The Borrowers have provided to the Lender aweekly cash budget, cash flow, and Borrowing Base projections for the weekended November 14, 2008 through and including the week endingJanuary 30, 2009 (the “First Budget”). On or beforeDecember 20, 2008, the Borrowers, with the assistance of the Consultant,shall submit a revised weekly cash budget, cash flow, Borrowing Base and theAvailable Line projections for the Borrowers for the period commencingJanuary 1, 2009 through and including April 30, 2009, (the “SecondBudget”) which projections shall contain such detail as is reasonablyrequested by the Lender, and shall be in form and substance satisfactory to theLender in the exercise of its reasonable discretion.   The First Budget and the Second Budget forany applicable period being sometimes referred to as the “Budget”.  The First Budget shall be the applicableBudget through and including the week ending January 9, 2009 and theSecond Budget shall be the applicable Budget thereafter; provided, however,that if the Second Budget is not acceptable to the Lender in the exercise ofits reasonable discretion, the First Budget shall be the applicable Budgetuntil the termination of the Forbearance Period.

 

(e)   On or before December 31, 2008, theConsultant shall have completed the terms of its engagement and the Borrowershall have provided to the Lender with a copy of the final report from theConsultant, which report shall validate the strategic plan of the Borrower (asthe same may be modified in consultation with the Consultant), the FirstBudget, and the Second Budget (including without limitation, the cash budget,cash flow projections, and the Available Line through and includingApril 30, 2009) and shall otherwise be acceptable to the Lender in allrespects, in the Lender’s reasonable discretion.

 

(f)    The Borrowers have advised the Lender thatthe Borrowers intend to engage an investment banker and will consider therecommendations of the Consultant, to advise the Borrowers on the feasibilityof and process by which the Company could attract either a financial orstrategic investor to restructure the Borrowers’ capital structure and agreethat prior to doing so they shall provide the Lender with the proposedengagement letter. The Borrowers agree that they will not enter into such anengagement unless the investment banker and the terms of the engagement(including, without limitation, any and all commissions, fees, and otheramounts payable, exclusivity and tail) shall be acceptable to the Lender in theexercise of its reasonable discretion.

 

(g)   All Revolving Loan credit accommodationsprovided by the Lender to the Borrowers shall be used by the Borrowers inaccordance with the Budget in all material respects.

 

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(h)   The Borrowers agree to continue their weeklymeetings with the Lender to discuss, among other things, the Borrowers’performance in comparison to the Budget. The Borrowers shall provide weekly (in time for discussion at the weeklymeetings, but in no event later than Tuesday of each week),  a cash flow report (the “Variance Report”),which Variance Report shall show actual cash flow results and variances fromthe Budget commencing with the week ending November 14, 2008 and throughthe end of the week immediately preceding the week in which the Variance Reportis to be furnished. No later than the scheduled weekly meeting time, but in anyevent Thursday of each week, the Borrowers shall also provide a weekly reportof information (including, without limitation, the Aggregate Net NegativeVariance and Weekly Borrowing Base Variance) with respect to the current weekand projections for the immediately following week.  The Variance Report and the other weeklyreport shall contain such detail as is reasonably requested by the Lender andshall be in form and substance satisfactory to the Lender.

 

(i)    The Borrowers shall provide to the Lender anupdated Perfection Certificate no later than November 25, 2008.

 

(j)    The Borrowers shall use continuing,commercially reasonable efforts to obtain a landlord waiver for the Borrowers’Glenn Dale, Maryland facility, in form and substance satisfactory to theLender.

 

(k)   To the extent the scheduled date on which theBorrowers are to provide any Budget or Loan Base Report is a not a BusinessDay, the date for providing the same shall be extended to the next BusinessDay.

 

4.     Extension of Forbearance Period. TheForbearance Period and the Revolving Credit Expiration Date shall be extendedthrough and including April 30, 2009 in the event that each of thefollowing conditions has been fully satisfied in all respects as of the closeof business on January 31, 2009:

 

(a)           The Second Budget submitted underSection 3(d) is in form and substance satisfactory to the Lender inthe exercise of its reasonable discretion;

 

(b)           The Borrower is current on allinterest payments and other payment Obligations (after giving effect to theTerm Loan principal installment payment and Term Loan Mandatory Prepaymentdeferrals described in Section 2 and the other provisions of thisAgreement) as required by the terms of this Agreement; and

 

(c)           There exists no Forbearance Default.

 

5.     Default.  The occurrence of any or more of thefollowing events or occurrences shall constitute a “Forbearance Default”under this Agreement:

 

(a)   The Borrowing Base Deficiency exceeds theBorrowing Base Deficiency Cap and such excess continues for a period of two(2) consecutive Business Days.

 

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(b)   The Aggregate Net Negative Variance exceedsthe Negative Variance Cap without the Lender’s consent in writing.

 

(c)   The failure of the Borrowers to observe,perform, or comply with any of the terms, conditions or provisions of thisAgreement and/or any other document executed and delivered in connection withthis Agreement, as and when required, which failure is not cured within anyapplicable grace or cure period.

 

(d)   If any representation or warranty made inthis Agreement or in any report, statement, schedule, certificate, opinion(including any opinion of counsel for the Borrowers), financial statement orother document furnished in connection with this Agreement shall prove to havebeen false or misleading when made (or, if applicable, when reaffirmed) in anymaterial respect.

 

(e)   The occurrence of an Event of Default otherthan the Existing Events of Default and other than an Event of Default underSection 6.1.14 (Financial Covenants).

 

(f)    If any Borrower commences, institutes, joinsor otherwise intervenes in any proceeding or action against the Lender or anymember of the Lender Group (as that term is defined below) in connection withany of the Obligations, any of the Financing Documents, this Agreement or anyof the documents executed and delivered in connection with this Agreement.

 

6.     Remedies.  Upon the occurrence of any ForbearanceDefault,  the Lender may, in the exerciseof its sole and absolute discretion from time to time and without furthernotice to or consent of the Borrowers, limit, suspend or terminate Advances,terminate the Forbearance Period and exercise and enforce any and all rightsand remedies available to the Lender under this Agreement, under any and alldocuments executed and delivered in connection with this Agreement, under anyand all Financing Documents, and under applicable Laws to the same extent asthough this Agreement had never been executed, without regard to any notice orcure period contained in any of the foregoing or otherwise available underapplicable Laws.  Further, upon theoccurrence of an Event of Default or Default specified in Sections 7.1.5(Receiver; Bankruptcy) or 7.1.6 (Involuntary Bankruptcy, etc.) of the FinancingAgreement, the Forbearance Period shall automatically terminate.  All rights and remedies available to theLender under this Agreement, under any documents executed and delivered inconnection with this Agreement, under any and all of the Financing Documents,and under applicable laws, may be asserted, enforced and exercisedconcurrently, cumulatively or successively from time to time and at any timeuntil such time as all of the Obligations have been indefeasibly paid in full.

 

7.     Acknowledgements, Representations andWarranties.  In order to induce theLender to enter into this Agreement, each of the Borrowers and their forrespective successors and assigns, hereby acknowledge, represent, warrant andagree as follows:

 

(a)   The unpaid principal balance as of the closeof business on November 13, 2008 (i) under the Revolving Loan is$8,411,460.46 (subject to adjustments for returned items and otherwise asprovided in the Financing Agreement); and (ii) under the Term Loan is$19,052,272.73, provided, however, following the execution and delivery of thisAgreement, the Lender shall reverse the October, 2008 payment of the Term Loanin the amount of $340,909.09, 

 

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the effect ofwhich reversal shall be that the Term Loan principal balance shall be increasedand the Revolving Loan balance shall be decreased by that amount.  Accrued and unpaid interest, fees andexpenses due and owing to the Lender, including, without limitation, unpaidattorneys’ fees and expenses incurred by the Lender in connection with thecollection and enforcement of the Obligations are also owing, but are not pastdue.

 

(b)   Each Borrower (i) is a corporation dulyorganized, existing and in good standing under the laws of the jurisdiction ofits incorporation stated in the Perfection Certificate and is organized in noother jurisdiction, (ii) has the corporate power to own its property andto carry on its business as now being conducted, and (iii) is dulyqualified to do business and is in good standing in each jurisdiction in whichthe character of the properties owned by it therein or in which the transactionof its business makes such qualification necessary.

 

(c)   Each Borrower has full entity power andauthority to enter into this Agreement and to incur and perform all obligationsand covenants contained herein, all of which have been duly authorized by allproper and necessary corporate action. Except for consents or approvals that the Borrowers have obtained, noconsent or approval of shareholders or any creditors of any Borrower, and noconsent, approval, filing or registration with or notice to any GovernmentalAuthority on the part of any Borrower, is required as a condition to theexecution, delivery, validity or enforceability of, or the performance under,this Agreement.

 

(d)   The Borrowers, independently of the Lender,determined that it was in their best interest to engage the Consultant, basedon the Borrowers’ exercise of their business judgment. The Consultant works forthe Borrowers alone, and the Borrowers retain complete control of the scope andduration of the Consultant’s engagement, even though the Borrowers’ covenantsin this Agreement with respect to such engagement are a material inducement tothe Lender to enter into this Agreement.

 

(e)   The Borrowers are in default under and withrespect to the Obligations on account of the Existing Events of Default.  The Borrowers acknowledge and agree that suchdefaults constitute material defaults under the Financing Documents and thatsuch defaults have not been, are not hereby and shall not be deemed to havebeen, waived by the Lender, expressly, impliedly, through course of conduct orotherwise.  The agreement of the Lenderto refrain and forbear from exercising any rights and remedies by reason of anyexisting default or any future default shall not constitute a waiver of,consent to, or condoning of, any existing or future default.

 

(f)    All understandings, representations,warranties and recitals contained or expressed in this Agreement are true,accurate, complete and correct in all respects; and, no such understanding,representation, warranty or recital fails or omits to state or otherwisedisclose any material fact or information necessary to prevent suchunderstanding, representation, warranty or recital from being misleading.  The Borrowers acknowledge and agree that theLender has been induced in part to enter into this Agreement based upon theLender’s justifiable reliance on the truth, accuracy, and completeness of allunderstandings, representations, warranties and recitals contained in thisAgreement.  There is no fact known to theBorrowers that the Borrowers have not disclosed to the Lender in writing or inTVI’s filings with the Securities and Exchange Commission on or prior to thedate of this Agreement which would or could materially and

 

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adverselyaffect the understandings of the Lender expressed in this Agreement or anyrepresentation, warranty or recital contained in this Agreement.

 

(g)   Each of the Financing Documents continues infull force and effect notwithstanding the execution and delivery of thisAgreement.  The Borrowers hereby reissue,ratify and confirm the enforceability and validity of all Financing Documentsto which it is a party and agree that this Agreement and each of the FinancingDocuments constitute the legal, valid and binding obligations of the Borrowers,enforceable in accordance with their respective terms, subject to bankruptcy,insolvency, reorganization, moratorium and other laws of general applicationaffecting the rights and remedies of creditors and secured parties, and generalprinciples of equity regardless of whether applied in a proceeding in equity orat law.  In addition, the Borrowersacknowledge and agree that neither the execution and delivery of this Agreementnor any of the terms, provisions, covenants or agreements contained in thisAgreement shall, except as expressly provided in this Agreement, in any mannerrelease, impair, lessen, modify, waive or otherwise affect the liability andobligations of the Borrowers under the terms of the Financing Documents.

 

(h)   The Lender has acted in good faith and hasconducted itself in a commercially reasonable manner in its relationships withthe Borrowers in connection with this Agreement and in connection with theLoans, the Obligations and the Financing Documents, the Borrowers herebywaiving and releasing any claims to the contrary.  The Borrowers have no defenses, affirmativeor otherwise, rights of setoff, rights of recoupment, claims, counterclaims,actions or causes of action of any kind or nature whatsoever against the Lenderor any past, present or future agent, attorney, legal representative,predecessor in interest, affiliate, successor, assign, employee, director orofficer of the Lender (collectively, the “Lender Group”), directly orindirectly, arising out of, based upon, or in any manner connected with, anytransaction, event, circumstance, action, failure to act, or occurrence of anysort or type, whether known or unknown, which occurred, existed, was taken,permitted, or begun prior to the execution of this Agreement and occurred,existed, was taken, permitted or begun in accordance with, pursuant to, or byvirtue of the Obligations or any of the terms or conditions of the FinancingDocuments, or which directly or indirectly relate to or arise out of or in anymanner are connected with the Obligations or any of the Financing Documents; tothe extent any such defenses, affirmative or otherwise, rights of setoff,rights of recoupment, claims, counterclaims, actions or causes of action existor existed, such defenses, rights, claims, counterclaims, actions and causes ofaction are hereby forever waived, discharged and released.  The Borrowers hereby acknowledge and agreethat the execution of this Agreement by the Lender shall not constitute an acknowledgmentof or admission by the Lender or any member of the Lender Group of theexistence of any claims or of liability for any matter or precedent upon whichany claim or liability may be asserted. The Borrowers further acknowledge and agree that, to the extent any suchclaims may exist, they are of a speculative nature so as to be incapable ofobjective valuation and that, in any event, the value to the Borrowers of thecovenants and obligations of the Lender contained in this Agreement and the otherdocuments executed and delivered in connection with this Agreementsubstantially and materially exceeds any and all value of any kind or naturewhatsoever of any such claims.  TheBorrowers further acknowledge and agree that Lender is not in any way responsibleor liable for the previous, current or future condition or deterioration of thebusiness operations and/or financial condition of the Borrowers and that. toTVI’s knowledge,  the Lender

 

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has not breachedany agreement or commitment to loan money or otherwise make financialaccommodations available to the Borrowers or to fund any operations of theBorrowers at any time.

 

(i)    **EACHBORROWER HEREBY ACKNOWLEDGES THAT IT HAS FREELY AND VOLUNTARILY ENTERED INTOTHIS AGREEMENT AFTER AN ADEQUATE OPPORTUNITY AND SUFFICIENT PERIOD OF TIME TOREVIEW, ANALYZE AND DISCUSS (I) ALL TERMS AND CONDITIONS OF THISAGREEMENT, (II) ANY AND ALL OTHER DOCUMENTS EXECUTED AND DELIVERED INCONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND(III) ALL FACTUAL AND LEGAL MATTERS RELEVANT TO THIS AGREEMENT AND/OR ANYAND ALL SUCH OTHER DOCUMENTS, WITH COUNSEL FREELY AND INDEPENDENTLY SELECTED BYTHE BORROWERS.  EACH BORROWER FURTHERACKNOWLEDGES AND AGREES THAT IT HAS ACTIVELY AND WITH FULL UNDERSTANDINGPARTICIPATED IN THE NEGOTIATION OF THIS AGREEMENT AND ALL OTHER DOCUMENTSEXECUTED AND DELIVERED IN CONNECTION WITH THIS AGREEMENT AFTER CONSULTATION ANDREVIEW WITH ITS COUNSEL, THAT ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENTAND THE OTHER DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THISAGREEMENT HAVE BEEN NEGOTIATED AT ARM’S-LENGTH, AND THAT THIS AGREEMENT AND ANYALL SUCH OTHER DOCUMENTS HAVE BEEN NEGOTIATED, PREPARED AND EXECUTED WITHOUTFRAUD, DURESS, UNDUE INFLUENCE, OR COERCION OF ANY KIND OR NATURE WHATSOEVERHAVING BEEN EXERTED BY OR IMPOSED UPON ANY PARTY TO THIS AGREEMENT UPON ANYOTHER PARTY.  NO PROVISION OF THISAGREEMENT OR SUCH OTHER DOCUMENTS SHALL BE CONSTRUED AGAINST OR INTERPRETED TOTHE DISADVANTAGE OF ANY PARTY TO THIS AGREEMENT BY ANY COURT OR OTHERGOVERNMENTAL OR JUDICIAL AUTHORITY BY REASON OF SUCH PARTY HAVING OR BEINGDEEMED TO HAVE STRUCTURED, DICTATED OR DRAFTED SUCH PROVISION.**

 

(j)    Except as otherwise disclosed in TVI’s filingswith the Securities and Exchange Commission prior to the date of this Agreement, there are no proceedings or investigations pending or, so far as theBorrowers know, threatened before any court or arbitrator or before or by, anygovernmental, administrative or judicial authority or agency, or arbitrator,against the Borrowers.

 

(k)   Neither the execution, delivery andperformance of the terms of this Agreement and/or any of the other documentsexecuted and delivered in connection with this Agreement by any Borrower northe consummation of the transactions contemplated by this Agreement willconflict with, violate or be prevented by (a) any Borrower’sOrganizational Documents, (b) any existing mortgage, indenture, contractor agreement binding on any Borrower or affecting its property, or (c) anyLaws.

 

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8.     Releases and Waivers.

 

Each Borrowerhereby, knowingly and voluntarily, forever releases, acquits and discharges theLender and the Lender Group from and of any and all claims that the Lender orany of the Lender Group is in any way responsible for the past, current orfuture condition or deterioration of the business operations and/or financialcondition of the Borrowers, and from and of any and all claims that the Lenderor any of the Lender Group breached any agreement to loan money or make other financialaccommodations available to the Borrowers or to fund any operations of theBorrowers at the time of or at any time prior to the execution and delivery ofthis Agreement.  Each Borrower furtherhereby jointly and severally, knowingly and voluntarily forever releases,acquits and discharges the Lender and the Lender Group, from and of any and allother claims, damages, losses, actions, counterclaims, suits, judgments,obligations, liabilities, defenses, affirmative defenses, setoffs, and demandsof any kind or nature whatsoever, in law or in equity, whether presently knownor unknown, which such Borrower may have had, now have, or which they can,shall or may have for, upon, or by reason of any matter, course or thingwhatsoever relating to, arising out of, based upon, or in any manner connectedwith, any transaction, event, circumstance, action, failure to act, oroccurrence of any sort or type, whether known or unknown, which occurred,existed, was taken, permitted, begun, or otherwise related or connected to orwith any or all of the Obligations, at the time of or at any time prior to theexecution and delivery of this Agreement, any or all of the FinancingDocuments, and/or any direct or indirect action or omission of the Lenderand/or any of the Lender Group.  EachBorrower further agrees that from and after the date hereof, it will not assertto any person or entity that any deterioration of the business operations orfinancial condition of the Borrowers was caused by any breach or wrongful actof the Lender or any of the Lender Group which occurred or existed at the timeof or at any time prior to the execution and delivery of this Agreement.

 

9.     Expenses.  The Borrowers shall pay at the time thisAgreement is executed and delivered all fees, commissions, costs, charges,taxes and other expenses incurred by the Lender and its counsel in connectionwith this Agreement, including, but not limited to, reasonable fees andexpenses of the Lender’s counsel and all recording fees, taxes and charges.  All of the foregoing are part of theEnforcement Costs and are payable upon demand.

 

10.   **WAIVER OF JURY TRIAL.      EACH BORROWER AND THE LENDER EACH HEREBYWAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH SUCH BORROWER AND THELENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THISAGREEMENT, (B) ANY OF THE DOCUMENTS EXECUTED AND DELIVERED IN CONNECTIONWITH THIS AGREEMENT, (C) ANY OF THE OBLIGATIONS, AND (D) ANY OF THEFINANCING DOCUMENTS.  IT IS AGREED ANDUNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMSAGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINSTPARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT**.

** **

**THISWAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY EACH BORROWER AND THE LENDER,AND EACH BORROWER AND THE LENDER HEREBY REPRESENT AND WARRANT THAT NOREPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE**

 

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**THISWAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.  EACH BORROWER FURTHER REPRESENTS THAT IT HASBEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THISWAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THATIT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.**

 

11.   Other Agreements.  The parties to this Agreement further agree:

 

(a)   This Agreement shall begoverned by, and construed in accordance with, the laws of the State ofMaryland.

 

(b)   In case one or moreprovisions contained in this Agreement shall be invalid, illegal, orunenforceable in any respect under any law, the validity, legality andenforceability of the remaining provisions contained in this Agreement shallremain effective and binding and shall not be affected or impaired thereby.

 

(c)   This Agreement is one of theFinancing Documents.  If there is anyconflict between the terms of this Agreement, any of the documents executed anddelivered in connection with this Agreement, and any of the other Financing Documents,the terms of this Agreement shall prevail.

 

(d)   This Agreement may beamended, modified or supplemented only by written agreement of the partieshereto.  No provision of this Agreementmay be waived except in writing signed by the party against whom such waiver issought to be enforced.

 

(e)   As used in this Agreement,the singular number shall include the plural, the plural the singular and theuse of the masculine, feminine or neuter gender shall include all genders, asthe context may require.  Reference inthis Agreement and the other Financing Documents to the “Borrower”, the“Borrowers”, “each Borrower” or otherwise with respect to any oneor more of the Borrowers shall mean each and every Borrower and any one or moreof the Borrowers, jointly and severally, unless a specific Borrower isexpressly identified.

 

(f)    The Recitals are part ofthis Agreement.  The headings, titles andcaptions of this Agreement are for the convenience only and are not part ofthis Agreement.  Capitalized terms not otherwisedefined in this Agreement shall have the meaning set forth or provided for inthe Financing Agreement.

 

(g)   Time is of the essence ofthis Agreement.

 

(h)   This Agreement shall bebinding upon and inure to the benefit of the Borrowers, the Lender and each oftheir respective heirs, personal representatives, successors, and assigns. TheBorrowers shall not, however, assign any of their respective rights orobligations under this Agreement.

 

(i)    This Agreement may beexecuted in any number of duplicate originals or counterparts, each of suchduplicate originals or counterparts shall be deemed to be an original

 

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and all takentogether shall constitute but one and the same agreement.  Each party to this Agreement agrees that therespective signatures of the parties may be delivered by fax, “.pdf,” or otherelectronic means acceptable to the Lender and that the parties may rely on asignature so delivered as an original. Any party who chooses to deliver its signature in such manner agrees toprovide promptly to the other parties a copy of this Agreement with its inkedsignature, but the party’s failure to deliver a copy of this Agreement with itsinked signature shall not affect the validity, enforceability and bindingeffect of this Agreement.

 

Signatures begin on the following page. The rest of this page is intentionally left blank.

 

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BORROWERS’ SIGNATURE PAGE TO

 

LIMITED FORBEARANCE AGREEMENT

 

(Page 1 of 2 Signature Pages)

 

IN WITNESSWHEREOF, each of the parties hereto have executed and delivered this Agreementunder their respective seals as of the day and year first written above.

 

 
| ATTEST:             |   | TVI  CORPORATION                       |                                   |
|---------------------|--------|----------------------------------------|----------------------------------------|
|                |   |                                   |                                   |
|                |   |                                   |                                   |
| /s/ Sherri  Voelkel |   | By:                                    | /s/ Harley  A. Hughes                  | (Seal) |
|                |   |                                   | Harley A.  Hughes                      |   |
| Secretary           |   |                                   | President  and Chief Executive Officer |   |
|                |   |                                   |                                   |
|                |   |                                   |                                   |
| ATTEST:             |   | CAPA  MANUFACTURING CORP.              |                                   |
|                |   |                                   |                                   |
|                |   |                                   |                                   |
| /s/ Sherri  Voelkel |   | By:                                    | /s/ Harley  A. Hughes                  | (Seal) |
|                |   |                                   | Harley A.  Hughes,                     |   |
| Secretary           |   |                                   | President                              |   |
|                |   |                                   |                                   |
|                |   |                                   |                                   |
| ATTEST:             |   | SAFETY TECH  INTERNATIONAL, INC.       |                                   |
|                |   |                                   |                                   |
|                |   |                                   |                                   |
| /s/ Sherri  Voelkel |   | By:                                    | /s/ Harley  A. Hughes                  | (Seal) |
|                |   |                                   | Harley A.  Hughes,                     |   |
| Secretary           |   |                                   | President                              |   |
|                |   |                                   |                                   |   |
| ATTEST:             |   | SIGNATURE  SPECIAL EVENT SERVICES, INC |                                   |
|                |   |                                   |                                   |
|                |   |                                   |                                   |
| /s/ Sherri  Voelkel |   | By:                                    | /s/ Harley  A. Hughes                  | (Seal) |
|                |   |                                   | Harley A.  Hughes,                     |   |
| Secretary           |   |                                   | President                              |   |

 

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LENDER’S SIGNATURE PAGE TO

 

LIMITED FORBEARANCE AGREEMENT

 

(Page 2 of 2 Signature Pages)

 

IN WITNESSWHEREOF, each of the parties hereto have executed and delivered this Agreementunder their respective seals as of the day and year first written above.

 

 
| WITNESS:             |   | BRANCH  BANKING AND TRUST COMPANY |                   |
|----------------------|--------|-----------------------------------|------------------------|
|                 |   |                              |                   |
|                 |   |                              |                   |
| /s/ Lauren  Williams |   | By:                               | /s/ Derek T.  Whitwer  | (Seal) |
| Lauren  Williams     |   |                              | Derek T.  Whitwer,     |   |
|                 |   |                              | Senior Vice  President |   |

 

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EXHIBIT A TO LIMITED FORBEARANCE AGREEMENT

 

See Form of Warrant Attached

 

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