Document:

Exhibit
10.1

 

LIMITED FORBEARANCE AGREEMENT

 

THIS LIMITED
FORBEARANCE AGREEMENT (this “Agreement”) is made as of November 20,
2008, 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
SIGNATURE SPECIAL EVENT SERVICES, INC., a Maryland corporation (formerly named
“TVI Holdings One, Inc.”) (“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 and the Lender entered
into an Amended and Restated Financing and Security Agreement dated
February 22, 2008 (as amended by First Amendment to Amended and Restated
Financing and Security Agreement dated July 3, 2008 and as amended,
restated, modified, substituted, extended, and renewed from time to time, the “Financing
Agreement”). Capitalized terms not otherwise defined in this Agreement
shall have the meaning set forth or provided for in the Financing Agreement.

 

B.            The Financing Agreement contains
agreements between the Borrowers and the Lender with respect to the “Loans”
(as defined in the Financing Agreement), including (i) the Revolving
Credit 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 are
evidenced by, and repaid with interest in accordance with, the terms and
conditions of that certain Second Amended and Restated Revolving Credit Note
dated July 3, 2008 from the Borrowers, as makers, payable to the order of
the Lender in the maximum principal amount of the Revolving Loan (the “Revolving
Credit Note”).  The Term Loan is
evidenced by, and repaid with interest in accordance with, the terms and
conditions of that certain Amended and Restated Term Note dated
February 22, 2008 from the Borrowers, as makers, payable to the order of
the Lender in the original principal amount of the Term Loan (the “Term Note”).  The Revolving Credit Note, the Term Note and
any other instrument that now or hereafter evidences the Borrowers’ obligation
to repay any part of the Obligations (all as amended, restated, modified,
substituted, extended and renewed from time to time) are sometimes referred to
in this Agreement as the “Notes.”

 

C.            The “Obligations” (as defined
in the Financing Agreement), including, without limitation, the Loans, are
secured by, among other things (i) the “Collateral” (as defined in
the Financing Agreement, and (ii) the Collateral Assignment of Patents as
Security (TVI Corporation), the Collateral Assignment of Patents as Security
(CAPA Manufacturing Corp.), the Collateral Assignment of Trademarks as Security
(TVI Corporation),  the Collateral
Assignment of Trademarks as Security (TVI Holdings One, Inc.), and the
Pledge, Assignment and Security Agreement, each dated as of the Original
Closing Date (as that term is defined in the Financing Agreement).

 

 

D.            Events of Default (as that term is
defined in the Financing Agreement) exist under the Financing Agreement due to
the Borrowers’ failure to pay when due the October, 2008 principal and interest
payments due on the Term Note, the failure of the Borrowers to pay continuing
Borrowing Base Deficiencies (as that term is defined in the Financing
Agreement), and events occurring before the date of this Agreement which events
are known to the Lender and which alone or in the aggregate have had a Material
Adverse Effect on any of the Borrowers or the Collateral (such Events of
Default collectively, the “Existing Events of Default”).

 

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

 

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

 

AGREEMENTS

 

1.     Forbearance.  Subject to the terms, conditions and
understandings contained in this Agreement, and for so long as there does not
exist a “Forbearance Default” under the terms of this Agreement (as
hereinafter defined), the Lender hereby agrees to refrain and forbear
temporarily from exercising and enforcing any of its remedies (including,
without limitation,  rights of setoff
such as those described in Section 2.6.4 (Liens; Setoff) of the Financing
Agreement) under the Financing Agreement, under the Notes, under any of the
other Financing Documents, or under applicable Laws with respect to the
Existing Events of Default at any time during the period commencing on the date
of this Agreement and ending on, and including the week ending January 30,
2009 (the “Forbearance Period”); provided however, that the Forbearance
Period shall be automatically extended through and including April 30,
2009 in the event that the conditions set forth in Section 4 below have
been fully satisfied.  The Lender shall
have no obligation to refrain and forbear from exercising or enforcing any of
its rights or remedies during the Forbearance Period or at any time thereafter
upon the occurrence and during the continuance of a Forbearance Default.  The Borrowers acknowledge and agree that this
Agreement applies to and governs only the Obligations relating to the Loans,
and does not apply to or govern any other obligation, liability, or
indebtedness of the Borrowers or any other person to the Lender.

 

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

 

(a)   During the Forbearance Period the Borrowers
may carry a Borrowing Base Deficiency only if (i) the maximum amount of
the Borrowing Base Deficiency at no time exceeds $3,543,000 (the “Borrowing
Base Deficiency Cap”) and (ii) the Aggregate Net Negative Variance at
no time exceeds $177,150, (the “Negative Variance Cap”) unless the
Lender otherwise consents in writing.  As
used in this Agreement, the term:

 

2

 

“Aggregate
Net Negative Variance” means the sum of each Weekly Borrowing Base
Variance.

 

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

 

“Weekly
Borrowing Base Variance” means the amount, determined on the last Business
Day of each week, commencing with the week ending November 14, 2008, equal
to (x) the Borrowing Base Deficiency minus (y) the Available Line.

 

By so agreeing to the Borrowing Base
Deficiency Cap and the Negative Variance Cap, the Lender is not waiving the
Existing Events of Default that exist on account of the Borrowing Base
Deficiency.  For the avoidance of doubt,
the Borrowers acknowledge that the Borrowing Base Deficiency shall be
immediately 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 Lender
agrees to make, Advances during the Forbearance Period in accordance with the
provisions of the Financing Agreement provided that:

 

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

 

(y) 
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 plus the Borrowing Base Deficiency Cap, and

 

(z) 
after giving effect to the Borrowers’ request, the aggregate Revolver Usage
would not exceed the Borrowing Base plus the Available Line plus the Negative
Variance Cap.

 

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

 

3

 

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

 

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

 

(f)      Commencing
as of the date of this Agreement and continuing throughout the Forbearance
Period, interest shall accrue on the unpaid principal balance of (i) the
Revolving Loan at the Prime Rate plus 1.50% per annum and (ii) the Term
Loan at the Prime Rate plus 2.00% per annum.

 

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

 

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

 

(a)   Within five (5) business days from the
date of the execution of this Agreement, the Borrowers shall engage a
turnaround consultant (the “Consultant”), whose experience, reputation and
otherwise is reasonably acceptable to the Lender, for an engagement period
reasonably established for the completion of the scope of the engagement.  The scope of the Consultant’s engagement
shall include assisting the Borrowers in the preparation of a cash budget and
cash 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, all
pursuant to an engagement agreement reasonably satisfactory to the Lender.

 

(b)   The Borrowers agree that the Lender may
discuss with the Consultant the affairs, finances and accounts of the Borrowers
and 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 and
other information and conclusions relating in any way to the Borrowers. Without
implying any limitation on the foregoing, the Borrowers acknowlege and agree
that, due in part to the limited duration of the Forbearance Period and the
Consultant’s engagement, such access to the Consultant is a material inducement
to the Lender to enter into this Agreement. 
The Consultant’s engagement letter shall contain the Consultant’s
agreement to cooperate fullly with the Lender in effecting such access.

 

4

 

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

 

(d)   The Borrowers have provided to the Lender a
weekly cash budget, cash flow, and Borrowing Base projections for the week
ended November 14, 2008 through and including the week ending
January 30, 2009 (the “First Budget”). On or before
December 20, 2008, the Borrowers, with the assistance of the Consultant,
shall submit a revised weekly cash budget, cash flow, Borrowing Base and the
Available Line projections for the Borrowers for the period commencing
January 1, 2009 through and including April 30, 2009, (the “Second
Budget”) which projections shall contain such detail as is reasonably
requested by the Lender, and shall be in form and substance satisfactory to the
Lender in the exercise of its reasonable discretion.   The First Budget and the Second Budget for
any applicable period being sometimes referred to as the “Budget”.  The First Budget shall be the applicable
Budget through and including the week ending January 9, 2009 and the
Second Budget shall be the applicable Budget thereafter; provided, however,
that if the Second Budget is not acceptable to the Lender in the exercise of
its reasonable discretion, the First Budget shall be the applicable Budget
until the termination of the Forbearance Period.

 

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

 

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

 

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

 

5

 

(h)   The Borrowers agree to continue their weekly
meetings 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 weekly
meetings, 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 from
the Budget commencing with the week ending November 14, 2008 and through
the end of the week immediately preceding the week in which the Variance Report
is to be furnished. No later than the scheduled weekly meeting time, but in any
event Thursday of each week, the Borrowers shall also provide a weekly report
of information (including, without limitation, the Aggregate Net Negative
Variance and Weekly Borrowing Base Variance) with respect to the current week
and projections for the immediately following week.  The Variance Report and the other weekly
report shall contain such detail as is reasonably requested by the Lender and
shall be in form and substance satisfactory to the Lender.

 

(i)    The Borrowers shall provide to the Lender an
updated 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 the
Lender.

 

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

 

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

 

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

 

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

 

(c)           There exists no Forbearance Default.

 

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

 

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

 

6

 

(b)   The Aggregate Net Negative Variance exceeds
the 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 this
Agreement and/or any other document executed and delivered in connection with
this Agreement, as and when required, which failure is not cured within any
applicable grace or cure period.

 

(d)   If 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 shall prove to have
been false or misleading when made (or, if applicable, when reaffirmed) in any
material respect.

 

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

 

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

 

6.     Remedies.  Upon the occurrence of any Forbearance
Default,  the Lender may, in the exercise
of its sole and absolute discretion from time to time and without further
notice to or consent of the Borrowers, limit, suspend or terminate Advances,
terminate the Forbearance Period and exercise and enforce any and all rights
and remedies available to the Lender under this Agreement, under any and all
documents executed and delivered in connection with this Agreement, under any
and all Financing Documents, and under applicable Laws to the same extent as
though this Agreement had never been executed, without regard to any notice or
cure period contained in any of the foregoing or otherwise available under
applicable Laws.  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.) of the Financing
Agreement, the Forbearance Period shall automatically terminate.  All rights and remedies available to the
Lender under this Agreement, under any documents executed and delivered in
connection with this Agreement, under any and all of the Financing Documents,
and under applicable laws, may be asserted, enforced and exercised
concurrently, cumulatively or successively from time to time and at any time
until such time as all of the Obligations have been indefeasibly paid in full.

 

7.     Acknowledgements, Representations and
Warranties.  In order to induce the
Lender to enter into this Agreement, each of the Borrowers and their for
respective successors and assigns, hereby acknowledge, represent, warrant and
agree as follows:

 

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

 

7

 

the effect of
which reversal shall be that the Term Loan principal balance shall be increased
and the Revolving Loan balance shall be decreased by that amount.  Accrued and unpaid interest, fees and
expenses due and owing to the Lender, including, without limitation, unpaid
attorneys’ fees and expenses incurred by the Lender in connection with the
collection and enforcement of the Obligations are also owing, but are not past
due.

 

(b)   Each Borrower (i) 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, (ii) has the corporate power to own its property and
to carry on its business as now being conducted, and (iii) 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.

 

(c)   Each Borrower has full entity power and
authority to enter into this Agreement and to incur and perform all obligations
and covenants contained herein, all of which have been duly authorized by all
proper and necessary corporate action. 
Except for consents or approvals that the Borrowers 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, 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, based
on the Borrowers’ exercise of their business judgment. The Consultant works for
the Borrowers alone, and the Borrowers retain complete control of the scope and
duration of the Consultant’s engagement, even though the Borrowers’ covenants
in this Agreement with respect to such engagement are a material inducement to
the Lender to enter into this Agreement.

 

(e)   The Borrowers are in default under and with
respect to the Obligations on account of the Existing Events of Default.  The Borrowers acknowledge and agree that such
defaults constitute material defaults under the Financing Documents and that
such defaults have not been, are not hereby and shall not be deemed to have
been, waived by the Lender, expressly, impliedly, through course of conduct or
otherwise.  The agreement of the Lender
to refrain and forbear from exercising any rights and remedies by reason of any
existing 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 otherwise
disclose any material fact or information necessary to prevent such
understanding, representation, warranty or recital from being misleading.  The Borrowers acknowledge and agree that the
Lender has been induced in part to enter into this Agreement based upon the
Lender’s justifiable reliance on the truth, accuracy, and completeness of all
understandings, representations, warranties and recitals contained in this
Agreement.  There is no fact known to the
Borrowers that the Borrowers have not disclosed to the Lender in writing or in
TVI’s filings with the Securities and Exchange Commission on or prior to the
date of this Agreement which would or could materially and

 

8

 

adversely
affect the understandings of the Lender expressed in this Agreement or any
representation, warranty or recital contained in this Agreement.

 

(g)   Each of the Financing Documents continues in
full force and effect notwithstanding the execution and delivery of this
Agreement.  The Borrowers hereby reissue,
ratify and confirm the enforceability and validity of all Financing Documents
to which it is a party and agree that this Agreement and each of the Financing
Documents 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 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.  In addition, the Borrowers
acknowledge and agree that neither the execution and delivery of this Agreement
nor any of the terms, provisions, covenants or agreements contained in this
Agreement shall, except as expressly provided in this Agreement, in any manner
release, impair, lessen, modify, waive or otherwise affect the liability and
obligations of the Borrowers under the terms of the Financing Documents.

 

(h)   The Lender has acted in good faith and has
conducted itself in a commercially reasonable manner in its relationships with
the Borrowers in connection with this Agreement and in connection with the
Loans, the Obligations and the Financing Documents, the Borrowers hereby
waiving and releasing any claims to the contrary.  The Borrowers have no defenses, affirmative
or otherwise, rights of setoff, rights of recoupment, claims, counterclaims,
actions or causes of action of any kind or nature whatsoever against the Lender
or any past, present or future agent, attorney, legal representative,
predecessor in interest, affiliate, successor, assign, employee, director or
officer of the Lender (collectively, the “Lender Group”), directly or
indirectly, arising out of, based upon, or in any manner connected with, any
transaction, event, circumstance, action, failure to act, or occurrence of any
sort 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 by
virtue of the Obligations or any of the terms or conditions of the Financing
Documents, or which directly or indirectly relate to or arise out of or in any
manner are connected with the Obligations or any of the Financing Documents; to
the extent any such defenses, affirmative or otherwise, rights of setoff,
rights of recoupment, claims, counterclaims, actions or causes of action exist
or existed, such defenses, rights, claims, counterclaims, actions and causes of
action are hereby forever waived, discharged and released.  The Borrowers hereby acknowledge and agree
that the execution of this Agreement by the Lender shall not constitute an acknowledgment
of or admission by the Lender or any member of the Lender Group of the
existence of any claims or of liability for any matter or precedent upon which
any claim or liability may be asserted. 
The Borrowers further acknowledge and agree that, to the extent any such
claims may exist, they are of a speculative nature so as to be incapable of
objective valuation and that, in any event, the value to the Borrowers of the
covenants and obligations of the Lender contained in this Agreement and the other
documents executed and delivered in connection with this Agreement
substantially and materially exceeds any and all value of any kind or nature
whatsoever of any such claims.  The
Borrowers further acknowledge and agree that Lender is not in any way responsible
or liable for the previous, current or future condition or deterioration of the
business operations and/or financial condition of the Borrowers and that. to
TVI’s knowledge,  the Lender

 

9

 

has not breached
any agreement or commitment to loan money or otherwise make financial
accommodations available to the Borrowers or to fund any operations of the
Borrowers at any time.

 

(i)    EACH
BORROWER HEREBY ACKNOWLEDGES THAT IT HAS FREELY AND VOLUNTARILY ENTERED INTO
THIS AGREEMENT AFTER AN ADEQUATE OPPORTUNITY AND SUFFICIENT PERIOD OF TIME TO
REVIEW, ANALYZE AND DISCUSS (I) ALL TERMS AND CONDITIONS OF THIS
AGREEMENT, (II) ANY AND ALL OTHER DOCUMENTS EXECUTED AND DELIVERED IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND
(III) ALL FACTUAL AND LEGAL MATTERS RELEVANT TO THIS AGREEMENT AND/OR ANY
AND ALL SUCH OTHER DOCUMENTS, WITH COUNSEL FREELY AND INDEPENDENTLY SELECTED BY
THE BORROWERS.  EACH BORROWER FURTHER
ACKNOWLEDGES AND AGREES THAT IT HAS ACTIVELY AND WITH FULL UNDERSTANDING
PARTICIPATED IN THE NEGOTIATION OF THIS AGREEMENT AND ALL OTHER DOCUMENTS
EXECUTED AND DELIVERED IN CONNECTION WITH THIS AGREEMENT AFTER CONSULTATION AND
REVIEW WITH ITS COUNSEL, THAT ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT
AND THE OTHER DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AGREEMENT HAVE BEEN NEGOTIATED AT ARM’S-LENGTH, AND THAT THIS AGREEMENT AND ANY
ALL SUCH OTHER DOCUMENTS HAVE BEEN NEGOTIATED, PREPARED AND EXECUTED WITHOUT
FRAUD, DURESS, UNDUE INFLUENCE, OR COERCION OF ANY KIND OR NATURE WHATSOEVER
HAVING BEEN EXERTED BY OR IMPOSED UPON ANY PARTY TO THIS AGREEMENT UPON ANY
OTHER PARTY.  NO PROVISION OF THIS
AGREEMENT OR SUCH OTHER DOCUMENTS SHALL BE CONSTRUED AGAINST OR INTERPRETED TO
THE DISADVANTAGE OF ANY PARTY TO THIS AGREEMENT BY ANY COURT OR OTHER
GOVERNMENTAL OR JUDICIAL AUTHORITY BY REASON OF SUCH PARTY HAVING OR BEING
DEEMED TO HAVE STRUCTURED, DICTATED OR DRAFTED SUCH PROVISION.

 

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

 

(k)   Neither the execution, delivery and
performance of the terms of this Agreement and/or any of the other documents
executed and delivered in connection with this Agreement 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.

 

10

 

8.     Releases and Waivers.

 

Each Borrower
hereby, knowingly and voluntarily, forever releases, acquits and discharges the
Lender and the Lender Group from and of any and all claims that the Lender or
any of the Lender Group is in any way responsible for the past, current or
future condition or deterioration of the business operations and/or financial
condition of the Borrowers, and from and of any and all claims that the Lender
or any of the Lender Group breached any agreement to loan money or make other financial
accommodations available to the Borrowers or to fund any operations of the
Borrowers at the time of or at any time prior to the execution and delivery of
this Agreement.  Each Borrower further
hereby jointly and severally, knowingly and voluntarily forever releases,
acquits and discharges the Lender and the Lender Group, from and of any and all
other claims, damages, losses, actions, counterclaims, suits, judgments,
obligations, liabilities, defenses, affirmative defenses, setoffs, and demands
of any kind or nature whatsoever, in law or in equity, whether presently known
or 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 thing
whatsoever relating to, arising out of, based upon, or in any manner connected
with, any transaction, event, circumstance, action, failure to act, or
occurrence of any sort or type, whether known or unknown, which occurred,
existed, was taken, permitted, begun, or otherwise related or connected to or
with any or all of the Obligations, at the time of or at any time prior to the
execution and delivery of this Agreement, any or all of the Financing
Documents, and/or any direct or indirect action or omission of the Lender
and/or any of the Lender Group.  Each
Borrower further agrees that from and after the date hereof, it will not assert
to any person or entity that any deterioration of the business operations or
financial condition of the Borrowers was caused by any breach or wrongful act
of the Lender or any of the Lender Group which occurred or existed at the time
of or at any time prior to the execution and delivery of this Agreement.

 

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

 

10.   WAIVER OF JURY TRIAL.      EACH BORROWER AND THE LENDER EACH 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
AGREEMENT, (B) ANY OF THE DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION
WITH THIS AGREEMENT, (C) ANY OF THE OBLIGATIONS, AND (D) ANY OF 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 AGREEMENT.

 

THIS
WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY EACH BORROWER AND THE LENDER,
AND EACH BORROWER AND THE LENDER HEREBY REPRESENT AND WARRANT THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE

 

11

 

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 AGREEMENT AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT
IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

 

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

 

(a)   This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Maryland.

 

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

 

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

 

(d)   This Agreement may be
amended, modified or supplemented only by written agreement of the parties
hereto.  No provision of this Agreement
may be waived except in writing signed by the party against whom such waiver is
sought to be enforced.

 

(e)   As used in this Agreement,
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 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.

 

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

 

(g)   Time is of the essence of
this Agreement.

 

(h)   This Agreement shall be
binding upon and inure to the benefit of the Borrowers, the Lender and each of
their respective heirs, personal representatives, successors, and assigns. The
Borrowers shall not, however, assign any of their respective rights or
obligations under this Agreement.

 

(i)    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

 

12

 

and all taken
together shall constitute but one and the same agreement.  Each party to this Agreement agrees that the
respective signatures of the parties may be delivered by fax, “.pdf,” or other
electronic means acceptable to the Lender and that the parties may rely on a
signature so delivered as an original. 
Any party who chooses to deliver its signature in such manner agrees to
provide promptly to the other parties a copy of this Agreement with its inked
signature, but the party’s failure to deliver a copy of this Agreement with its
inked signature shall not affect the validity, enforceability and binding
effect of this Agreement.

 

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

 

13

 

BORROWERS’ SIGNATURE PAGE TO

 

LIMITED FORBEARANCE 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/ 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

  	
   

  

 

 

LENDER’S SIGNATURE PAGE TO

 

LIMITED FORBEARANCE 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

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Lauren
  Williams

  	
   

  	
  By:

  	
  /s/ Derek T.
  Whitwer

  	
  (Seal)

  
	
  Lauren
  Williams

  	
   

  	
   

  	
  Derek T.
  Whitwer,

  	
   

  
	
   

  	
   

  	
   

  	
  Senior Vice
  President

  	
   

  

 

 

EXHIBIT A TO LIMITED FORBEARANCE AGREEMENT

 

See Form of Warrant AttachedExhibit 10.2

 

WARRANT
TO PURCHASE COMMON STOCK

 

NEITHER THE SECURITIES REPRESENTED BY THIS INSTRUMENT NOR THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS INSTRUMENT HAS BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
NONE OF SUCH SECURITIES MAY BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF
EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT OR SUCH LAWS. THE SECURITIES REPRESENTED BY THIS
INSTRUMENT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS INSTRUMENT MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SUCH ACT AND SUCH
LAWS. ANY SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH SUCH ACT AND SUCH LAWS
WILL BE VOID.

 

WARRANT

to
purchase

Up to
1,683,952

Shares
of Common Stock

 

of TVI
CORPORATION

 

Issue Date: November 20,
2008

 

1.                                       Definitions.
Unless the context otherwise requires, when used herein the following terms
shall have the meanings indicated.

 

“Board of Directors”
means the board of directors of the Company, including any duly authorized
committee thereof.

 

“Business Combination”
means a merger, consolidation, statutory share exchange or similar transaction
with unaffiliated third parties or party that requires the approval of the
Company’s stockholders.

 

“business day” means any
day except Saturday, Sunday and any day on which banking institutions in the
State of New York generally are authorized or required by law or other
governmental actions to close.

 

“Charter” means the
charter of the Company, as amended or supplemented from time to time.

 

“Common Stock” means the
common stock of the Company, par value $0.01 per share.

 

“Company” means TVI
Corporation, a Maryland corporation.

 

“Exchange Act” means the
Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.

 

“Exercise Price” has the
meaning set forth in Section 2.

 

“Expiration Time” has the
meaning set forth in Section 3.

 

“Financing Agreement”
means that certain Amended and Restated Financing and Security Agreement dated February 22,
2008 (as amended by First Amendment to Amended and Restated Financing and
Security Agreement dated July 3, 2008 and as amended, restated, modified,
substituted, extended, and renewed from time to time) by and among the Company,
Capa Manufacturing Corp, Safety Tech International, Inc., Signature
Special Event Services, Inc., and Branch Banking and Trust Company.

 

“Forbearance Agreement”
means that certain Limited Forbearance Agreement, dated as of November 20,
2008, as amended, restated, modified, substituted, extended and renewed from
time to time, by and among the Company, Capa Manufacturing Corp, Safety Tech
International, Inc., Signature Special Event Services,

 

 

Inc., and Branch Banking and Trust Company.

 

“Issue Date” means the
date of this Warrant.

 

“Market Price” means,
with respect to shares of Common Stock, on any given day, the last reported
sale price regular way or, in case no such reported sale takes place on such
day, the average of the last closing bid and ask prices regular way, in either
case on the principal national securities exchange on which shares of Common
Stock are listed or admitted to trading, or if not listed or admitted to
trading on any national securities exchange, the average of the closing bid and
ask prices as furnished by two members of the Financial Industry Regulatory
Authority, Inc. selected from time to time by the Company for that
purpose. “Market Price” shall be determined without reference to after hours or
extended hours trading. If shares of Common Stock are not listed and traded in
a manner that the quotations referred to above are available for the period
required hereunder, the Market Price per share of Common Stock shall be deemed
to be the fair market value per share of such security as determined in good
faith by the Board of Directors which determination shall be conclusive
evidence of such fair market value. For the purposes of determining the Market
Price on the “trading day” preceding, on or following the occurrence of an
event, (i) that trading day shall be deemed to commence immediately after
the regular scheduled closing time of trading on the New York Stock Exchange
or, if trading is closed at an earlier time, such earlier time and (ii) that
trading day shall end at the next regular scheduled closing time, or if trading
is closed at an earlier time, such earlier time (for the avoidance of doubt,
and as an example, if the Market Price is to be determined as of the last
trading day preceding a specified event and the closing time of trading on a
particular day is 4:00 p.m. and the specified event occurs at 5:00 p.m.
on that day, the Market Price would be determined by reference to such 4:00 p.m.
closing price).

 

“Obligations” has the
meaning ascribed to it in the Financing Agreement.

 

“Person” has the meaning
given to it in Section 3(a)(9) of the Exchange Act and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act.

 

“SEC” means the U.S.
Securities and Exchange Commission.

 

“Securities Act” means
the Securities Act of 1933, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.

 

“Shares” has the meaning
set forth in Section 2.

 

“Term Loan” has the
meaning ascribed to it in the Financing Agreement.

 

“trading day” means (A) if
the shares of Common Stock are not traded on any national or regional
securities exchange or association or over-the-counter market, a business day
or (B) if the shares of Common Stock are traded on any national or
regional securities exchange or association or over-the-counter market, a
business day on which such relevant exchange or quotation system is scheduled
to be open for business and on which the shares of Common Stock (i) are
not suspended from trading on any national or regional securities exchange or
association or over-the-counter market for any period or periods aggregating
one half hour or longer, and (ii) have traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of the shares of Common
Stock.

 

“Vesting Date” has the
meaning set forth in Section 13(A).

 

“Warrantholder” has the
meaning set forth in Section 2.

 

“Warrant” means this
Warrant, issued pursuant to the Forbearance Agreement.

 

2.                                      Number
of Shares; Exercise Price. This certifies that, for value received, the
Branch Banking and Trust Company, a North Carolina banking corporation, or its
permitted assigns (the “Warrantholder “) is entitled, upon the terms and
subject to the conditions hereinafter set forth, to acquire from the Company,
in whole or in part, up to an aggregate of 1,683,952 fully paid and
nonassessable shares of Common Stock, at a purchase price per share

 

2

 

of Common Stock equal to $0.164 per share (the “Exercise Price”).  The number of shares of Common Stock that are
issuable upon exercise of this Warrant (the “Shares”) and the Exercise Price
are subject to adjustment as provided herein, and all references to “Common
Stock,” “Shares” and “Exercise Price” herein shall be deemed to include any
such adjustment or series of adjustments.

 

3.                                      Exercise
of Warrant; Term. Subject to Section 2, the right to purchase the
Shares represented by this Warrant is exercisable, in whole or in part by the
Warrantholder, at any time or from time to time after the first business day
immediately following the Vesting Date, but in no event later than 5:00 p.m.,
Eastern time on the tenth anniversary of the Vesting Date (the “Expiration Time”),
by (A) the surrender of this Warrant and Notice of Exercise annexed
hereto, duly completed and executed on behalf of the Warrantholder, at the
principal executive office of the Company located at the address set forth in Section 20
(or such other office or agency of the Company in the United States as it may
designate by notice in writing to the Warrantholder at the address of the
Warrantholder appearing on the books of the Company), and (B) payment of
the Exercise Price for the Shares thereby purchased:

 

(i)                      with the
consent of the Company (except as otherwise provided in this subparagraph (i) below),
by having the Company withhold, from the shares of Common Stock that would
otherwise be delivered to the Warrantholder upon such exercise, shares of
Common Stock issuable upon exercise of the Warrant equal in value to the
aggregate Exercise Price as to which this Warrant is so exercised based on the
Market Price of the Common Stock on the trading day on which this Warrant is
exercised and the Notice of Exercise is delivered to the Company pursuant to
this Section 3; provided, however,
that such consent of the Company shall not be required if a registration statement
under the Securities Act registering for resale the shares of Common Stock
issuable upon such exercise either (A) is not effective on the date of
such exercise or (B) if such registration statement is not effective on
the date of such exercise then, in addition to such failure to be effective,
such registration statement has not been effective for at least twenty (20) of
the thirty (30) business days immediately preceding the date of such exercise,
or

 

(ii)                       by
tendering in cash, by certified or cashier’s check payable to the order of the
Company, or by wire transfer of immediately available funds to an account
designated by the Company.

 

If the Warrantholder does
not exercise this Warrant in its entirety, the Warrantholder will be entitled
to receive from the Company within a reasonable time, and in any event not
exceeding three business days, a new warrant in substantially identical form
for the purchase of that number of Shares equal to the difference between the
number of Shares subject to this Warrant and the number of Shares as to which
this Warrant is so exercised.

 

4.                                      Issuance
of Shares; Authorization; Listing. Certificates for Shares issued upon
exercise of this Warrant will be issued in such name or names as the
Warrantholder may designate, subject (with respect to transfers of this
Warrant) to the limitations on transfer provided in Section 8, and will be
delivered to such named Person or Persons within a reasonable time, not to
exceed three business days after the date on which this Warrant has been duly
exercised in accordance with the terms of this Warrant. The Company hereby
represents and warrants that any Shares issued upon the exercise of this
Warrant in accordance with the provisions of Section 3 will be duly and
validly authorized and issued, fully paid and nonassessable and free from all
taxes, liens and charges (other than liens or charges created by the
Warrantholder, income and franchise taxes incurred in connection with the
exercise of this Warrant or taxes in respect of any transfer occurring
contemporaneously therewith). The Company agrees that the Shares so issued will
be deemed to have been issued to the Warrantholder as of the close of business
on the date on which this Warrant and payment of the Exercise Price are
delivered to the Company in accordance with the terms of this Warrant,
notwithstanding that the stock transfer books of the Company may then be closed
or certificates representing such Shares may not be actually delivered on such
date. The Company will take all actions necessary to make available the Shares
issuable upon exercise of this Warrant at any time, including amending its
Charter to increase the number of authorized shares of Common Stock.  The Company will procure, at its sole
expense, the listing of the Shares issuable upon exercise of this Warrant at
any time, subject to issuance or notice of issuance, on all principal stock
exchanges, if any, on which the Common Stock is then listed or traded.

 

5.                                      No
Fractional Shares or Scrip. No fractional Shares or scrip representing
fractional Shares shall be issued upon any exercise of this Warrant. In lieu of
any fractional Share to which the Warrantholder would otherwise be entitled,
the Warrantholder shall be entitled to receive a cash payment equal to the
Market Price of the Common Stock on the last trading day preceding the date of
exercise less the pro-rated Exercise Price for such

 

3

 

fractional share.

 

6.                                      No
Rights as Stockholders; Transfer Books. This Warrant does not entitle the
Warrantholder to any voting rights or other rights as a stockholder of the
Company prior to the date of exercise hereof. The Company will at no time close
its transfer books against transfer of this Warrant in any manner which
interferes with the timely exercise of this Warrant.

 

7.                                      Charges,
Taxes and Expenses. Issuance of certificates for Shares to the
Warrantholder upon the exercise of this Warrant shall be made without charge to
the Warrantholder for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificates, all of which taxes and expenses
shall be paid by the Company.

 

8.                                      Transfer/Assignment.

 

(A)                              Subject
to compliance with clauses (B) and (C) of this Section 8, this
Warrant and all rights hereunder are transferable, in whole or in part
(provided that in the case of a partial transfer of this Warrant, the number of
Shares subject to the partial transfer shall not be less than 420,988), upon
the books of the Company by the registered holder hereof in person or by duly
authorized attorney, and a new warrant shall be made and delivered by the
Company, of the same tenor and date as this Warrant but registered in the name
of the transferee, upon surrender of this Warrant, duly endorsed, to the
principal executive office of, or agency designated by, the Company set forth
in Section 19. All expenses (other than stock transfer taxes) and other
charges payable in connection with the preparation, execution and delivery of
the new warrants pursuant to this Section 8 shall be paid by the Company.

 

(B)                                Unless
the Company has failed to pay Obligations (as that term is defined in the
Financing Agreement) in full upon the acceleration of the Obligations or upon
the maturity of the Obligations (in the case of which failure, this clause (B) does
not apply), if the Warrantholder proposes to transfer this Warrant, in whole or
in part, the Warrantholder shall promptly give written notice (the “Transfer
Notice”) to the Company of such transfer. 
The Transfer Notice shall describe in reasonable detail the proposed
transfer including, without limitation, the number of shares covered by the
portion of the Warrant to be transferred, the nature of such transfer, the
form, amount and timing of the consideration to be paid, and the name and
address of each prospective purchaser or transferee.  For a period of ten (10) business days
following receipt of the Transfer Notice, the Company shall have the right to
purchase the Warrant, or the part thereof, subject to such notice on the same
terms and conditions as set forth therein. 
The Company’s purchase right shall be exercised by written notice signed
by an officer of the Company (the “Company Notice”) and delivered to the
Warrantholder within such ten (10) business day period.  The Company shall effect the purchase of the
Warrant or part thereof to be transferred on the terms set forth in the
Transfer Notice. If Company does not deliver the Company Notice within such ten
(10) business day period or if the Company fails to effect the purchase as
required, then the Warrantholder within such ten (10) business day
thereafter shall effect the transfer strictly in the manner set forth in the
Transfer Notice or, if it does not, the Transfer Notice shall be null and void
and no other transfer of the Warrant or part thereof shall be made unless the
requirement of this clause (B) have been met with respect to such other
transfer.

 

(C)                                Neither
the securities represented by this Warrant nor the securities issuable upon
exercise of this Warrant have been registered under the Securities Act and such
securities may be resold only if registered pursuant to the Securities Act or
if an exemption from registration is available. Further, the securities
issuable upon exercise of this Warrant may be issued and sold to the holder
hereof only if the issuance thereof has been registered under the Securities
Act or an exemption from registration is available.

 

9.                                      Exchange
and Registry of Warrant. This Warrant is exchangeable, upon the surrender
hereof by the Warrantholder to the Company, for a new warrant or warrants of
like tenor and representing the right to purchase the same aggregate number of
Shares. The Company shall maintain a registry showing the name and address of
the Warrantholder as the registered holder of this Warrant. This Warrant may be
surrendered for exchange or exercise in accordance with its terms, at the
principal executive office of the Company, and the Company shall be entitled to
rely in all respects, prior to written notice to the contrary, upon such
registry.

 

10.                                Loss,
Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of
evidence 

 

4

 

reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and in the
case of any such loss, theft or destruction, upon receipt of a bond, indemnity
or security reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Warrant, the Company shall
make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant,
a new Warrant of like tenor and representing the right to purchase the same
aggregate number of Shares as provided for in such lost, stolen, destroyed or
mutilated Warrant.

 

11.                                Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein shall not be a
business day, then such action may be taken or such right may be exercised on
the next succeeding day that is a business day.

 

12.                                Public
Information.   The Company covenants
that it will use its commercially reasonable efforts to timely file all reports
and other documents required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations promulgated by the SEC
thereunder unless the Company is not required to file such reports.  The Company shall have no obligation to
maintain the listing of its Common Stock on any exchange or quotation system or
to continue to remain subject to the reporting requirements of the Exchange
Act. The Company will use commercially reasonable efforts to take such further
action as any Warrantholder may reasonably request, in each case to the extent
required from time to time to enable such holder to, if permitted by the terms
of this Warrant, sell this Warrant without registration under the Securities
Act within the limitation of the exemptions provided by (A) Rule 144
under the Securities Act, as such rule may be amended from time to time,
or (B) any successor rule or regulation hereafter adopted by the
SEC.  If the Company is not required to
file reports under the Exchange Act, the Company will deliver to the
Warrantholder (a) within 120 days after each fiscal year end, annual
financial statements and (b) within forty five (45) days after the close
of each fiscal quarter of the Company, 
quarterly financial statements, which financial statements shall be meet
the requirements for financial statements set forth in Section 6.1.1 (a) and
(c) of the Financing Agreement (even though the Financing Agreement may no
longer be in effect).

 

13.                                Adjustments
and Other Rights. The Exercise Price and the number of Shares issuable upon
exercise of this Warrant shall be subject to adjustment from time to time as
follows:

 

(A)                              Adjustments
Related to the Term Loan.  The number
of Shares issuable upon exercise of this Warrant shall be reduced by (i) 420,988
shares if the Term Loan balance is reduced by 50% of the balance on the Issue
Date on or before July 31, 2009, (ii) 841,976 shares (including any
prior reduction under clause (i)) if the Term Loan balance is paid in full on
or before October 31, 2009, or (iii) 100% if the Obligations are paid
in full on or before April 30, 2010 (the “Vesting Date”); provided, however, that the Warrantholder
shall not be entitled to the reductions under clause (i) or clause (ii) unless
on the date of determination (x) no Event of Default (as defined in the
Financing Agreement) exists and (y) the Warrantholder has positive Availability
(as that term is defined in the Financing Agreement) after excluding from the
Borrowing Base (as that term is defined in the Financing Agreement) accounts
and inventory that were not of the type eligible for inclusion in Eligible
Receivables and Eligible Inventory (as such terms are defined in the Financing
Agreement), respectively, on the Closing Date (as defined in the Financing
Agreement).

 

(B)                                Stock
Splits, Subdivisions, Reclassifications or Combinations. If, after the
Issue Date, the Company shall (i) declare and pay a dividend or make a
distribution on its Common Stock in shares of Common Stock, (ii) subdivide
or reclassify the outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify the outstanding shares of Common
Stock into a smaller number of shares, the number of Shares issuable upon
exercise of this Warrant at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Warrantholder
after such date shall be entitled to purchase the number of shares of Common
Stock that such holder would have owned or been entitled to receive in respect
of the shares of Common Stock subject to this Warrant after such date had this
Warrant been exercised immediately prior to such date. In such event, the
Exercise Price in effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be adjusted to the number obtained by dividing (x) the
product of (1) the number of Shares issuable upon the exercise of this
Warrant before such adjustment and (2) the Exercise Price in effect
immediately prior to

 

5

 

the record or effective date, as the case may be, for
the dividend, distribution, subdivision, combination or reclassification giving
rise to this adjustment by (y) the new number of Shares issuable upon
exercise of this Warrant determined pursuant to the immediately preceding
sentence.

 

(C)                                Adjustments
for Certain Dilutive Issuances.

 

(i)                                    (X)                               If
the Company shall issue, after the Issue Date, any Additional Stock (as defined
below) for a consideration per share less than the Exercise Price in effect
immediately prior to the issuance of such Additional Stock, the Exercise Price
in effect immediately prior to each such issuance shall forthwith (except as
otherwise provided in this clause (i)) be adjusted to a price equal to the
price paid per share for such Additional Stock.

 

(Y)                                In
the case of the issuance of Common Stock for cash, the consideration shall be
deemed to be the amount of cash paid therefore before deducting any reasonable
discounts, commissions or other expenses allowed, paid or incurred by the
Company for any underwriting or otherwise in connection with the issuance and
sale thereof.  In the case of the
issuance of the Common Stock for a consideration in whole or in part other than
cash, the consideration other than cash shall be deemed to be the fair value
thereof as determined by the Board of Directors irrespective of any accounting
treatment.

 

(Z)                                In
the case of the issuance (whether before, on or after the Issue Date) of
options to purchase or rights to subscribe for Common Stock, securities by
their terms convertible into or exchangeable for Common Stock or options to
purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of this
subsection 13(C)(i):

 

(1)                                  The
shares of Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subsections 13(C)(i)(Y)),
if any, received by the Company upon the issuance of such options or rights
plus the minimum exercise price provided in such options or rights for the
Common Stock covered thereby.

 

(2)                                   The
shares of Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
the Company for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the Company
upon the conversion or exchange of such securities or other exercise of any
related options or rights (the consideration in each case to be determined in
the manner provided in subsections 13(C)(i)(Y)).

 

(ii)                                      “Additional
Stock” shall mean any shares of Common Stock issued (or deemed to have been issued
pursuant to subsection 13(C)(i)(Z)) by the Company after the Issue Date other
than shares of Common Stock issuable or issued to employees, directors, and
consultants of the Company directly or pursuant to a stock option plan,
restricted stock plan or other equity incentive plan approved by Board of
Directors of the Company.

 

(D)                                Other
Distributions.  In the event the
Company shall declare a distribution payable to holders of Common Stock in any
of its assets or debt securities or any rights or warrants to purchase debt
securities, assets, or other securities of the Company, the Exercise Price
shall be adjusted as follows: the Exercise Price immediately before such
distribution shall be multiplied by a fraction, the numerator of which shall be
(1) the current Market Price per share of Common Stock on the record date
of the other distribution (“Other Distribution Record Date”) minus (2) the
fair market value on the Other Distribution Record Date of the assets,
securities, rights or warrants applicable to one share of Common Stock; the 

 

6

 

denominator of which shall be the current Market Price
per share of Common Stock on the Other Distribution Record Date.  The Board of Directors of the Company shall
make a reasonable determination of the fair market value.  This subsection (D) does not apply to
any transactions referred to in subsection (B) of this Section 13.

 

(E)                                  Notice
of Business Combinations. If the Company shall to propose to enter into
a Business Combination, at the same time the Company gives any notice to
shareholders of, and in any event least ten (10) days before, the closing
of the proposed Business Combination, the Company shall provide the
Warrantholder with written notice thereof. 
This notice shall set forth:  (i) the
name and address of the proposed parties in the transaction; (ii) the
proposed structure of the Business Combination; (iii) the proposed kind
and amount of stock, securities or the property receivable and the terms and
conditions of payment in connection with the Business Combination; (iv) the
number of outstanding shares of capital stock of the Company at such time, and (v) such
facts with respect to the Business Combination as shall be reasonably necessary
to indicate the kind and amount of stock, securities or the property receivable
as a result of such Business Combination if the Warrantholder were to exercise
its rights under this Warrant.

 

(F)                                  Rounding
of Calculations; Minimum Adjustments. All calculations under this Section 13
shall be made to the nearest one-tenth (1/10th) of a cent or to the
nearest one-hundredth (1/100th) of a share, as the case may be. Any
provision of this Section 13 to the contrary notwithstanding, no
adjustment in the Exercise Price or the number of Shares into which this
Warrant is exercisable shall be made if the amount of such adjustment would be
less than $0.01 or one-tenth (1/10th) of a share of Common Stock, but any
such amount shall be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried forward,
shall aggregate $0.01 or one-tenth (1/10th) of a share of Common Stock, or
more.

 

(G)                                 Timing
of Issuance of Additional Common Stock Upon Certain Adjustments. In any
case in which the provisions of this Section 13 shall require that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (i) issuing to
the Warrantholder of this Warrant exercised after such record date and before
the occurrence of such event the additional shares of Common Stock issuable
upon such exercise by reason of the adjustment required by such event over and
above the shares of Common Stock issuable upon such exercise before giving
effect to such adjustment and (ii) paying to such Warrantholder any amount
of cash in lieu of a fractional share of Common Stock; provided,
however, that the Company upon request shall deliver to such
Warrantholder a due bill or other appropriate instrument evidencing such
Warrantholder’s right to receive such additional shares, and such cash, upon
the occurrence of the event requiring such adjustment.

 

(H)                                Statement
Regarding Adjustments. Whenever the Exercise Price or the number of Shares
into which this Warrant is exercisable shall be adjusted as provided in this Section 13,
the Company shall forthwith file at the principal executive office of the
Company a statement showing in reasonable detail the facts requiring such
adjustment and the Exercise Price that shall be in effect and the number of
Shares into which this Warrant shall be exercisable after such adjustment, and
the Company shall also cause a copy of such statement to be sent by mail, first
class postage prepaid, to each Warrantholder at the address appearing in the
Company’s records.

 

(I)                                     Notice
of Adjustment Event. In the event that the Company shall propose to take
any action of the type described in this Section 13 (but only if the
action of the type described in this Section 13 would result in an
adjustment in the Exercise Price or the number of Shares into which this
Warrant is exercisable or a change in the type of securities or property to be
delivered upon exercise of this Warrant), the Company shall give notice to the
Warrantholder, in the manner set forth in Section 13(I), which notice
shall specify the record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice shall also
set forth the facts with respect thereto as shall be reasonably necessary to
indicate the effect on the Exercise Price and the number, kind or class of
shares or other securities or property that shall be deliverable upon exercise
of this Warrant. In the case of any action that would require the fixing of a
record date, such notice shall be given at least 10 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 15
days prior to the taking of such

 

7

 

proposed action. Failure
to give such notice, or any defect therein, shall not affect the legality or
validity of any such action.

 

(J)                                      Proceedings
Prior to Any Action Requiring Adjustment. As a condition precedent to the
taking of any action that would require an adjustment pursuant to this Section 13,
the Company shall take any action that may be necessary, including obtaining
regulatory, securities exchange or stockholder approvals or exemptions, in
order that the Company may thereafter validly and legally issue as fully paid
and nonassessable all shares of Common Stock that the Warrantholder is entitled
to receive upon exercise of this Warrant pursuant to this Section 13.

 

(K)                                  Adjustment
Rules. Any adjustments pursuant to this Section 13 shall be made
successively whenever an event referred to herein shall occur. If an adjustment
in Exercise Price made hereunder would reduce the Exercise Price to an amount
below par value of the Common Stock, then such adjustment in Exercise Price
made hereunder shall reduce the Exercise Price to the par value of the Common
Stock.

 

14.                                 No
Avoidance. The Company will not, by amendment of its Charter or through any
reorganization, transfer of all or substantially all of the assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company; provided,
for the sake of clarity, a Business Combination for which the Company has
complied with the requirements of Section 13(E) (Business
Combinations) does not violate this Section.

 

15.                                 Governing
Law. This Warrant will be governed by and
construed in accordance with the laws of the State of Maryland. To the extent
permitted by applicable law, each of the Company and the Warrantholder hereby
unconditionally waives trial by jury in any legal action or proceeding relating
to this Warrant or the transactions contemplated hereby or thereby.

 

16.                                 Binding
Effect. This Warrant shall be binding upon any successors or assigns of the
Company.

 

17.                                 Amendments.
This Warrant may be amended and the observance of any term of this Warrant may
be waived only with the written consent of the Company and the Warrantholder.

 

18.                                 Prohibited
Actions. The Company agrees that it will not take any action that would
entitle the Warrantholder to an adjustment of the Exercise Price if the total
number of shares of Common Stock issuable after such action upon exercise of
this Warrant, together with all shares of Common Stock then outstanding and all
shares of Common Stock then issuable upon the exercise of all outstanding
options, warrants, conversion and other rights, would exceed the total number
of shares of Common Stock then authorized by its Charter.

 

19.                                 Notices.
Any notice, request, instruction or other document to be given hereunder by any
party to the other will be in writing and will be deemed to have been duly
given (a) on the date of delivery if delivered personally, or by
facsimile, upon confirmation of receipt, or (b) on the second business day
following the date of dispatch if delivered by a recognized next day courier
service. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the
party to receive such notice:

 

	
  (A)

  	
  if to the Company:

  
	
   

  	
   

  
	
   

  	
   

  	
  TVI Corporation

  
	
   

  	
   

  	
  7100 Holladay-Tyler Road

  
	
   

  	
   

  	
  Glenn Dale, MD 20769

  
	
   

  	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
   

  	
  Facsimile: (301) 352-8818

  

 

8

 

	
   

  	
   

  	
  With copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Duane Morris LLP

  
	
   

  	
   

  	
  30 South 17th Street

  
	
   

  	
   

  	
  Philadelphia, Pennsylvania 19010

  
	
   

  	
   

  	
  Richard A. Silfen, Esq.

  
	
   

  	
   

  	
  Facsimile: (215) 689-4385

  
	
   

  	
   

  	
   

  
	
  (B)

  	
  if to the Warrantholder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Branch Banking and Trust Company

  
	
   

  	
   

  	
  8200 Greensboro Drive, Suite 800

  
	
   

  	
   

  	
  McLean, Virginia 22102

  
	
   

  	
   

  	
  Attention:                                         Derek T.
  Whitwer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Miles & Stockbridge P.C.

  
	
   

  	
   

  	
  10 Light Street

  
	
   

  	
   

  	
  Baltimore, MD 21202

  
	
   

  	
   

  	
  Attn:                    Frederick W. Runge, Jr.

  

 

20.                                Entire
Agreement. This Warrant and the Forbearance Agreement (including all
documents incorporated therein), contain the entire agreement between the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous arrangements or undertakings with respect thereto.

 

The Company’s signature
is on the following page.  The rest of
this page is intentionally left blank.

 

9

 

COMPANY’S SIGNATURE PAGE
TO

WARRANT TO PURCHASE COMMON STOCK

 

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

 

Dated:  November 20, 2008

 

 

	
  TVI CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Harley Hughes

  	
   

  
	
  Name: Harley Hughes

  	
   

  
	
  Title: President and Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    /s/ Sherri Voelkel

  	
   

  
	
  Name: Sherri Voelkel

  	
   

  
	
  Title: Senior Vice President, Chief Financial
  Officer and Secretary

  	
   

  
				

 

[Signature
Page to Warrant]

 

 

[Form of
Notice of Exercise]

 

Date:              

 

TO: TVI Corporation (the “Company”)

 

RE: Election to Purchase Common Stock

 

The undersigned, pursuant
to the provisions set forth in the attached Warrant, hereby subscribes for and
purchases the number of shares of the Common Stock set forth below covered by
such Warrant, or for all of the shares issuable on the date hereof upon
exercise of such Warrant if this Notice of Exercise does not specify the number
of shares of Common Stock for which the undersigned so subscribes and
purchases. The undersigned, in accordance with Section 3 of the Warrant,
hereby agrees to pay the aggregate Exercise Price for such shares of Common
Stock in the manner set forth below.  To
the extent that the Exercise Price A new warrant evidencing the remaining
shares of Common Stock covered by such Warrant, but not yet subscribed for and
purchased, if any, should be issued in the name set forth below.

 

Number of Shares of Common Stock:

 

Method of Payment of Exercise Price:

 

(Check
the appropriate box below to indicate method of payment of Exercise Price.  If no box is checked, then such Warrant shall
be deemed to have been exercised pursuant to Section 3(ii) of Such
Warrant; provided, however, that
no exercise of such Warrant shall be effective unless and until the Company has
received payment in full, in the manner prescribed by Section 3(ii) of
such Warrant, of the aggregate Exercise Price payable with respect to the
number of shares of Common Stock subscribed for and purchased by this Notice of
Exercise.)

 

o                                   Cashless
exercise pursuant to Section 3(i) of such Warrant; or

 

Note:                  If the undersign
indicates “cashless exercise” pursuant to Section 3(i) of such
Warrant, then the Warrant shall not be
effective unless and until consent of the Company to such method of
payment is indicated by execution of this Notice of Exercise on behalf of the
Company in the space provided below, unless such consent of the Company is not
required by Section 3(i) of such Warrant.

 

o                                   Cash
exercise pursuant to Section 3(ii) of such Warrant.

 

[Signature
page follows]

 

11

 

The undersigned hereby
represents that the undersigned is an “accredited investor” as defined in
Regulation D under the Securities Act of 1933, as amended.

 

	
  Holder:

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 

[Consent by the Company to “Cashless Exercise” of such Warrant pursuant
to Section 3(i) of such Warrant (to the Extent Required by Section 3(i) of
such Warrant):

TVI CORPORATION

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
  ]

  

 

12

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