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:
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“ 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.
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(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.
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(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.
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(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 Borrowe
