CREDIT AND SECURITY AGREEMENT

Exhibit 10.6

CREDIT AND SECURITY AGREEMENT

THIS CREDIT AND SECURITY AGREEMENT (this “ Agreement ”) is made as of December 29, 2005 between TVI CORPORATION, a Maryland corporation (“TVI”), CAPA MANUFACTURING CORP., a Maryland corporation, SAFETY TECH INTERNATIONAL, INC., a Maryland corporation and TVI AIR SHELTERS, LLC, a Maryland limited liability company (together with TVI, collectively, the “ Borrowers ”) and BANK OF AMERICA, N.A., a national banking association (the “ Lender ”).

RECITALS

The Borrowers have requested that the Lender make available to the Borrowers a revolving credit facility pursuant to which the Lender will make advances to the Borrowers from time to time in an aggregate principal amount not to exceed Ten Million Dollars ($10,000,000) at any one time outstanding. The Lender has agreed to make such credit facility available to the Borrowers, subject to and upon the terms and conditions hereinafter set forth.

AGREEMENTS

SECTION 1. The Credit Facilities .

1.1. Definitions . All capitalized terms used herein and not otherwise defined shall have the following meanings:

“Account Debtor” means any Person who may become obligated to either of the Borrowers under, with respect to, or on account of, an Account, Chattel Paper or General Intangibles (including a Payment Intangible).

“Accounts” has the meaning given to such term in the UCC.

“Additional Financing Documents” has the meaning given to such term in Section 1.3(e) hereof.

“Advances” means advances made by the Lender to the Borrowers under the Revolving Credit Facility.

“Applicable Margin” shall mean the margin added to the LIBOR Rate to obtain the interest rate for the outstanding Advances under the Revolving Credit Facilities set forth in the Table attached hereto as Attachment I . The Applicable Margin during any calendar quarter shall be set based upon the Borrowers’ ratio of Total Funded Debt to EBITDA as of the last day of the immediately prior calendar quarter, and the Applicable Margin shall be determined and adjusted quarterly on the first day of the first month after the date by which the annual and quarterly compliance certificates and related financial statements and information are required in accordance with the provisions of this Agreement.

“AutoBorrow Service Agreement” means any AutoBorrow Service Agreement in effect from time to time between the Borrowers and the Lender.

“Board” means the Board of Governors of the Federal Reserve System of the United States.

“Borrowers” shall mean, collectively, TVI, CAPA Manufacturing Corp., a Maryland corporation, Safety Tech International, Inc., a Maryland corporation and TVI Air Shelters, LLC, a Maryland limited liability company.

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

“Capital Lease” means any lease that has been or should be capitalized on the books of the Borrowers in accordance with GAAP.

“Chattel Paper” has the meaning given to such term in the UCC.

“Claim” has the meaning given to such term in Section 7.9(a).

“Closing Date” means the date on which all conditions to closing as set forth in Section 2.1 of this Agreement are satisfied.

“Collateral” means all of the Borrowers’ personal property, both now owned and hereafter acquired, including, insofar as any of the following are applicable, but not limited to:

 

(a)

Accounts, including, without limitation, all collateral security of any kind given to any Account Debtor or other Person with respect to any Account;

 

(b)

As-extracted collateral;

 

(c)

Chattel Paper;

 

(d)

Commodity Accounts;

 

(e)

Commodity Contracts;

 

(f)

Deposit Accounts;

 

(g)

Documents;

 

(h)

Equipment;

 

(i)

Farm Products;

 

(j)

Fixtures;

 

(k)

General Intangibles, including, but not limited to, (i) all patents, and all unpatented or unpatentable inventions; (ii) all trademarks, service marks, and trade names; (iii) all copyrights and literary rights; (iv) all computer software programs; (v) all mask works of semiconductor chip products; (vi) all trade secrets, proprietary information, customer lists, manufacturing, engineering and production plans, drawings, specifications, processes and systems;

 

(l)

Goods, and all accessions thereto and goods with which the Goods are commingled;

 

(m)

Health Care Insurance Receivables;

 

(n)

Instruments;

(o)

Inventory;

 

(p)

Investment Property;

 

(q)

Letter-of-Credit Rights;

 

(r)

Payment Intangibles;

 

(s)

Promissory Notes;

 

(t)

Software;

 

(u)

The commercial tort claims specifically described on Schedule 1.1, if any.

 

(v)

Letters patent, applications for letters patent, trademarks, applications for trademarks, service marks, trade names, and copyrights, whether registered or unregistered, together with all royalties, fees, and other payments made or to be made with respect to any of the foregoing, and all rights, interests, claims, and demands that the Borrowers have or may have and existing and future profits and damages for past or future infringement thereof; and

 

(w)

all proceeds and products of any of the foregoing.

“Collateral Account” has the meaning set forth in Section 7.5 of this Agreement.

“Collection Account” means the collection account established pursuant to this Agreement.

“Commodity Accounts” has the meaning given to such term in the UCC.

“Commodity Contracts” has the meaning given to such term in the UCC.

“Credit Facilities” means the Revolving Credit Facility, as amended, modified, or supplemented from time to time.

“Default” has the meaning set forth in Section 6 of this Agreement.

“Default Rate” means a floating and fluctuating per annum rate of interest calculated by adding the sum of four percent (4.0%) to the rate of interest otherwise then in effect.

“Deposit Accounts” has the meaning given to such term in the UCC.

“Documents” has the meaning given to such term in the UCC.

“Earn-Out Obligations” means the deferred purchase price payments due from time to time to Persons or their businesses acquired by the Borrowers upon satisfaction of certain performance or other contingencies.

“EBITDA” shall mean (a) net income, after income tax, (b) less income or plus loss from discontinued operations and extraordinary items, (c) plus interest expense on all operations, (d) plus taxes, (e) plus depreciation, (f) plus depletion, and (g) plus amortization (and other non-cash charges), calculated on a trailing twelve-month basis.

“Enforcement Costs” means all reasonable expenses, charges, recordation or other taxes, costs and fees (including reasonable attorneys’ fees and expenses) of any nature whatsoever advanced, paid or incurred by or on behalf of the Lender in connection with (a) the collection or enforcement of this Agreement or any of the other Financing Documents, (b) the creation, perfection, maintenance, preservation, defense, protection, realization upon, disposition, collection, sale or enforcement of all or any part of the Collateral, and (c) the exercise by the Lender of any rights or remedies available to it under the provisions of this Agreement, or any of the other Financing Documents.

“Environmental Laws” means all laws, statutes, rules, regulations or ordinances which relate to Hazardous Materials and/or the protection of the environment or human health.

“Equipment” means all of the Borrowers’ equipment, as such term is defined by the Uniform Commercial Code, together with all additions, parts, fittings, accessories, special tools, attachments, and accessions now and hereafter affixed thereto and/or used in connection therewith, and all replacements thereof and substitutions therefor.

“ERISA” means the Employee Retirement Income Security Act of 1974 (“ERISA”).

“Event of Default” has the meaning set forth in Section 6 of this Agreement.

“Farm Products” has the meaning given to such term in the UCC.

“Field Exam” has the meaning set forth in Section 4.9 of this Agreement.

“Financing Documents” means, collectively, this Agreement, the Note, any Hedge Agreement, any Letter of Credit Agreement, any Additional Financing Documents and any other instrument, document or agreement now or hereafter executed, delivered or furnished by the Borrowers or any other person evidencing, guaranteeing, securing or in connection with this Agreement or all or any part of the Credit Facilities.

“Fixtures” has the meaning given to such term in the UCC.

“GAAP” means generally accepted accounting principles in the United States of America.

“General Intangibles” means all of the Borrowers’ general intangibles, as such meaning is defined by the Uniform Commercial Code, together with all of the Borrowers’ letters patent, applications for letters patent, trademarks, applications for trademarks, service marks, trade names and copyrights, whether registered or unregistered, together with all goodwill of the business of the Borrowers relating thereto, any and all reissues, extensions, divisions or continuations thereof, all royalties, fees and other payments made or to be made to the Borrowers with respect thereto, and all rights, interests, claims and demands that the Borrowers have or may have in existing and future profits and damages for past and future infringements thereof.

“Goods” has the meaning given to such term in the UCC.

“Government Contract” means (i) any contract entered into by the Borrowers with the United States government or any state or local government or any division, department, or instrumentality thereof and (ii) any contract entered into between the Borrowers and any “prime” contractor providing goods and services to the United States government or any state or local government or any division, department, or instrumentality thereof.

“Hazardous Materials” shall mean hazardous wastes, hazardous substances, toxic chemicals and substances, oil and petroleum products and their by-products, radon, asbestos, pollutants or contaminants.

“Hedge Agreement” means any agreement between the Borrowers and the Lender or any affiliate of the Lender now existing or hereafter entered into, which provides for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross-currency rate swap, currency option, or any similar transaction or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging the Borrowers’ exposure to fluctuations in interest or exchange rates, loan, credit, exchange, security or currency valuations or commodity prices.

“Health Care Insurance Receivables “ shall have the meaning given to such term in the UCC.

“Instruments” has the meaning given to such term in the UCC.

“Interest Payment Date” has the meaning set forth in Section 1.2(d) of this Agreement.

“Interest Rate Change Date” shall mean the first day of each one-month period; provided, however, that if any such day is not a Business Day, at Lender’s option, the Interest Rate Change Date shall be the next succeeding Business Day.

“Inventory” means all of the Borrowers’ now owned and hereafter acquired inventory as such term is defined by the Uniform Commercial Code, wherever located and however constituted, including, without limitation, raw materials, work and goods in process, finished goods, goods or inventory returned or repossessed or stopped in transit, supplies, packaging, shipping and other materials, all other goods, merchandise and personal property used or consumed in the business of the Borrowers, and all documents and documents of title relating to any of the foregoing.

“Investment Property” has the meaning given to such term in the UCC.

“Letter of Credit” means any letter of credit issued by the Lender for the account of the Borrowers under the Revolving Credit Facility.

“Letter of Credit Account” has the meaning set forth in Section 1.2(l) of this Agreement.

“ Letter of Credit Agreement” means an Application and Agreement for Letter of Credit on the Lender’s standard form, as such form may be revised by the Lender in its discretion at any time and from time to time hereafter.

“Letter of Credit Exposure” means at any time the sum of (x) the undrawn amount of all Letters of Credit outstanding at such time, and (y) all Letter of Credit Obligations outstanding at such time.

“Letter of Credit Fee” has the meaning set forth in Section 1.2(k) of this Agreement.

“Letter of Credit Obligations” means, collectively, (i) the amount of each draft drawn under or purporting to be drawn under a Letter of Credit, (ii) the amount of any and all charges, reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) which the Lender may charge, pay or incur for drawings under a Letter of Credit, transfers of a Letter of Credit, amendments to and extensions of a Letter of Credit and for the prosecution or defense of any action arising out of or in connection with any Letter of Credit, including, without limitation, any action to enjoin full or partial payment of any draft drawn under or purporting to be drawn under any Letter of Credit, including, but not limited to, Letter of Credit Fees, (iii) interest on all amounts payable under (i) and (ii) above from the date due until paid in full at a per annum rate of interest equal at all times to the Default Rate.

“Letter of Credit Rights” has the meaning given to such term in the UCC.

“Lender” shall mean Bank of America, N.A., a national banking association.

“LIBOR-Based Rate” means a per annum rate of interest equal at all times to the sum of the LIBOR Rate plus the Applicable Margin. The LIBOR-Based Rate shall change immediately and contemporaneously with each change in the LIBOR Rate.

“LIBOR Rate” means, at any time, the rate of interest equal to the rate per annum (rounded upwards to the nearest 1/100 of one percent) equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as selected by the Lender from time to time) as determined for each Interest Rate Change Date at approximately 11:00 a.m. London time two (2) London Banking Days prior to the Interest Rate Change Date, for U.S. Dollar deposits (for delivery on the first day of such interest period) with a term of one month, as adjusted from time to time in the Lender’s sole discretion for Reserve Requirements, deposit insurance assessment rates and other regulatory costs. If such rate is not available at such time for any reason, then the rate for that interest period will be the Prime-based Rate.

“London Banking Day” means a day on which the Lender’s London Banking Center is open for business and dealing in offshore dollars.

“Note” means the Revolving Loan Note of even date herewith from the Borrowers made payable to the order of the Lender.

“Obligations” shall mean all present and future indebtedness, liabilities and obligations of any kind and nature whatsoever of the Borrowers to the Lender both now existing and hereafter arising under, as a result of, on account of, or in connection with, this Agreement and any and all amendments, restatements, supplements and modifications hereof made at any time and from time to time hereafter, the Note, any and all extensions, renewals or replacements thereof, amendments thereto and restatements or modifications thereof made at any time or from time to

time hereafter, the Letter of Credit Agreements, or the other Financing Documents, including, without limitation, future advances, principal, interest, indemnities, fees, late charges, Letter of Credit Exposure, Enforcement Costs and other costs and expenses whether direct, contingent, joint, several, matured or unmatured, and the indebtedness owed under any Hedge Agreement.

“Payment Intangibles” has the meaning given to such term in the UCC.

“PBGC” means the Pension Benefit Guaranty Corporation or its successor entity.

“Permitted Acquisition” means the acquisition or purchase of, or investment in, any Person, any operating division or unit of any Person, or the capital stock or operational assets of any Person or the combination with any Person by any Borrower or any Subsidiary (each individually, a “Subject Transaction”) regardless of the structure of the Subject Transaction, provided that such Subject Transaction is either (i) less than $3,000,000 per transaction or (ii) the Subject Transaction is in an amount greater than $3,000,000 and the Borrowers can provide evidence to the Lender’s reasonable satisfaction that the Person that is the target of such Subject Transaction has demonstrated two (2) consecutive calendar quarters of positive cash flow.

“Permitted Liens” has the meaning set forth in Section 5.3 of this Agreement.

“Person” means any natural person, individual, company, corporation, partnership, joint venture, unincorporated association, government or political subdivision or agency thereof, or any other entity of whatever nature.

“Plan” means any pension, employee benefit, multi-employer, profit sharing, savings, stock bonus or other deferred compensation plan.

“Prime-Based Rate” means a floating and fluctuating per annum rate of interest equal at all times to the Prime Rate.

“Prime Rate” shall mean the floating and fluctuating per annum rate of interest of the Lender at any time and from time to time established and declared by the Lender in its sole and absolute discretion as its prime rate, and does not necessarily represent the lowest rate of interest charged by the Lender to borrowers.

“Promissory Notes” has the meaning given to such term in the UCC.

“Reserve Requirements” means the maximum rate (expressed as a decimal) at which reserves (including any marginal, supplemental, emergency or other reserves) are required to be maintained under Regulation D of the Federal Reserve Board or otherwise by any statute or regulation applicable to the class of commercial banks which includes the Lender.

“Revolving Credit Account” means the loan account maintained by the Lender with respect to advances, repayments and prepayments of Advances, the accrual and payment of interest on Advances and all other amounts and charges owing to the Lender in connection with Advances.

“Revolving Credit Amount” means the amount of Ten Million Dollars ($10,000,000).

“Revolving Credit Expiration Date” means December 31, 2008, or such later date as to which the Lender shall, in its discretion, agree to extend the Revolving Credit Expiration Date.

“Revolving Credit Exposure” means, at any time, the sum of the aggregate principal amount of outstanding Advances plus the Letter of Credit Exposure.

“Revolving Credit Facility” means the revolving credit facility established pursuant to Section 1.2 hereof in a maximum principal amount at any one time outstanding equal to the Revolving Credit Amount, made available to the Borrowers pursuant to this Agreement.

“Software” has the meaning given to such term in the UCC.

“Subordinated Debt” means debt of the Borrowers, the payment of which subordinated to the repayment of the Advances on terms satisfactory to the Lender in its sole discretion.

“Subsidiary” means an entity of which the Borrowers directly or indirectly owns or controls securities or other ownership interests representing more than 50% of the ordinary voting power thereof.

“Subsidiary Guaranty” means each guaranty agreement executed and delivered by each Subsidiary of the Borrowers to the Lender, in form and substance reasonably satisfactory to the Lender.

“Subsidiary Security Agreement” means each security agreement executed and delivered by each Subsidiary of the Borrowers to the Lender, in form and substance reasonably satisfactory to the Lender.

“Total Funded Debt” shall mean all outstanding liabilities for borrowed money and other interest-bearing liabilities, including current and long-term debt, Capital Leases and Subordinated Debt, less the non-current portion of Subordinated Debt. For the avoidance of doubt, Total Funded Debt does not include Earn-Out Obligations, unless then earned and due.

“Unused Commitment Fee” shall mean the fee paid by the Borrowers to the Lender pursuant to Section 1.2(e).

“Unused Commitment Fee Percentage” shall mean the percentage upon which the Unused Commitment Fee shall be calculated, as determined in accordance with Attachment I hereto. The Unused Commitment Fee Percentage earned during any calendar quarter shall be determined based upon the Borrowers’ ratio of Total Funded Debt to EBITDA as of the last day of the immediately prior calendar quarter. The Unused Commitment Fee Percentage shall be determined and adjusted quarterly on the first day of the first month after the date by which the annual and quarterly compliance certificates and related financial statements and information are required in accordance with the provisions of this Agreement.

1.2. Revolving Credit Facility .

(a) Advances and Letters of Credit . Subject to and upon the provisions of this Agreement and relying upon the representations and warranties herein set forth, the Lender

agrees at any time and from time to time to make Advances to the Borrowers and issue Letters of Credit for the account of the Borrowers from the date hereof until the earlier of the Revolving Credit Expiration Date or the date on which this Revolving Credit Facility is terminated pursuant to Section 7 hereof, in an aggregate principal amount at any time outstanding not to exceed the Revolving Credit Amount; provided however, that in no event shall the total Letter of Credit Exposure exceed Two Million Dollars ($2,000,000) at any one time.

In no event shall the Lender be obligated to make an Advance or issue a Letter of Credit hereunder if a Default shall have occurred and be continuing. Unless sooner terminated pursuant to other provisions of this Agreement, this Revolving Credit Facility and the obligation of the Lender to make Advances and issue Letters of Credit hereunder shall automatically terminate on the Revolving Credit Expiration Date without further action by, or notice of any kind from, the Lender. Within the limitations set forth herein and subject to the provisions of this Agreement, the Borrowers may borrow, repay and reborrow under this Revolving Credit Facility. The fact that there may be no Advances or Letters of Credit outstanding at any particular time shall not affect the continuing validity of this Agreement.

(b) Use of Proceeds of Advances . Each Advance shall be advanced by the Lender not later than the Business Day following the day (which shall be a Business Day) of the Borrowers’ request therefor. The proceeds of each Advance may be deposited by the Lender in the Borrowers’ demand deposit account with the Lender. The proceeds of the Advances shall be used solely for working capital, for acquisitions permitted by the terms of this Agreement, and for other lawful purposes.

(c) Liability of Lender . Lender shall in no event be responsible or liable to any person other than Borrowers for the disbursement of or failure to disburse Advances or any part thereof, and no other party shall have any right or claim against Lender under this Agreement or the other Financing Documents.

(d) Interest on Advances; Repayment of Advances . Except for any period during which an Event of Default shall have occurred and be continuing, the Borrowers shall pay interest (calculated on a daily basis) on the unpaid principal balance of the Advances until maturity (whether by acceleration, extension or otherwise) at a per annum rate of interest equal at all times to the LIBOR-Based Rate in effect from time to time.

After maturity, or during any period in which an Event of Default exists and remains continuing, the unpaid principal balance of the Advances shall bear interest at a rate equal to the Default Rate.

Notwithstanding any other provision of this Agreement, if the Lender determines in good faith (which determination shall be conclusive) (i) that any applicable law, rule, or regulation, or any change in the interpretation of any such law, rule, or regulation shall make it unlawful or impossible for the Lender to charge or collect interest at the LIBOR-Based Rate, or (ii) that quotations of interest rates for the relevant deposits referred to in the definition of the LIBOR-Based Rate are not being provided in the relevant amounts or for the relevant maturities, then upon notice from the Lender to the Borrowers, the entire outstanding principal balance of the Revolving Credit Facility shall bear interest at the Prime-Based Rate.

Until the maturity of the Revolving Credit Facility, all accrued and unpaid interest on all Advances shall be paid monthly on the first day of each month (each, an “ Interest Payment Date ”).

If not sooner paid, the entire outstanding principal balance of the Advances, together with all accrued and unpaid interest thereon, shall be due and payable on the Revolving Credit Expiration Date.

(e) Unused Commitment Fee . During the period from the date hereof until the earlier of the Revolving Credit Expiration Date or the date on which the Revolving Credit Facility is terminated pursuant to the provisions hereof, the Borrowers shall pay to the Lender an availability fee in a per annum amount equal to the Unused Commitment Fee Percentage times the average daily unused portion of the Revolving Credit Amount. Such availability fee shall commence to accrue on the date hereof and shall be due and payable by the Borrowers quarterly, in arrears, commencing on March 31, 2006 and on the last Business Day of each third month thereafter, and on the earlier of the Revolving Credit Expiration Date or on the date on which the Revolving Credit Facility is terminated pursuant to Section 7 hereof.

(f) Note; Revolving Credit Account . The Borrowers’ obligation to pay the Advances with interest shall be evidenced by the Note. The Lender will maintain the Revolving Credit Account with respect to advances, repayments and prepayments of Advances, the accrual and payment of interest on Advances and all other amounts and charges owing to the Lender in connection with Advances. Except for demonstrable error, the Revolving Credit Account shall be conclusive as to all amounts owing by the Borrowers to the Lender in connection with and on account of Advances.

(g) Notwithstanding anything contained herein to the contrary, so long as the Borrowers opt to use the Lender’s “AutoBorrow” program and have executed and delivered to the Lender an AutoBorrow Service Agreement (which AutoBorrow Service Agreement remains in full force and effect), all Advances to be made hereunder shall be made in accordance with, and all interest accrued on such Advances and all repayments of such Advances shall be payable at the times and in the manner provided for in, the AutoBorrow Service Agreement. To the extent that any of the provisions of Section 1.2(a) through 1.2(g) hereof are inconsistent with provisions of the AutoBorrow Service Agreement, the provisions of the AutoBorrow Service Agreement shall govern. Any Advances made to the Borrowers under the AutoBorrow Service Agreement shall nonetheless be deemed to be an Advance hereunder, subject to all other terms hereof.

(h) Voluntary Prepayments; Voluntary Termination . The Borrowers may prepay any Advance in whole or in part, from time to time without premium or penalty. Any permitted prepayment need not be accompanied by payment of interest on the amount prepaid except that any prepayment of Advances which constitutes a final payment of all Advances shall be accompanied by payment of all interest thereon accrued through the date of prepayment.

(i) Terms of Letters of Credit . Each Letter of Credit shall (i) be a commercial Letter of Credit or a standby Letter of Credit, (ii) be opened pursuant to a Letter of Credit Agreement duly executed and delivered to the Lender by the Borrowers prior to the issuance of such Letter of Credit, (iii) expire not later than six (6) months after the Revolving Credit Expiration Date (unless such are secured by cash or cash-equivalent collateral satisfactory to the Lender in the Lender’s sole discretion) provided, however , that if the Revolving Credit Facility is not renewed or extended, the Borrower shall provide cash security for all outstanding Letters of Credit scheduled to expire after the Revolving Credit Expiration date, not later than fifteen (15) days prior to the Revolving Credit Expiration Date, (iv) be in an amount not less than $10,000, (v) be issued in the ordinary course of the Borrowers’ business, and (vi) be issued in accordance with the Lender’s then current practices relating to the issuance of letters of credit. All powers, right, remedies and provisions set forth in any Letter of Credit Agreement shall be in addition to those set forth herein. In the event of any conflict between the provisions of this Agreement and the provisions of any Letter of Credit Agreement, the provisions of this Agreement shall prevail and control unless expressly provided otherwise herein or in the Letter of Credit Agreement .

(j) Procedures for Letters of Credit . The Borrowers shall give the Lender written notice of its request for a Letter of Credit at least three (3) Business Days prior to the date on which the Letter of Credit is to be opened by delivering to the Lender a duly executed Letter of Credit Agreement in form and content acceptable to the Lender setting forth (i) the face amount of the Letter of Credit, (ii) the name and address of the beneficiary of the Letter of Credit, (iii) whether the Letter of Credit is irrevocable or revocable, (iv) whether the Letter of Credit requested is a standby or commercial Letter of Credit, (v) the date the Letter of Credit is to be opened and the date the Letter of Credit is to expire, (vi) the purpose of the Letter of Credit, (vii) the terms and conditions for any draws under the Letter of Credit, and (viii) such other information as the Lender may reasonably deem to be necessary or desirable.

(k) Letter of Credit Fees . With respect to each Letter of Credit issued hereunder, the Borrowers shall pay to the Lender a letter of credit fee (the “ Letter of Credit Fee ”) in an amount per annum set forth in the table attached hereto as Attachment I , payable quarterly in advance, plus the Lender’s then standard fee for the issuance, negotiation, processing and administration of letters of credit of the same type as the Letter of Credit. The amount of the Letter of Credit Fee payable per annum with respect to any Letter of Credit shall be a percentage of the face amount of such Letter of Credit, calculated on the basis of the table included as Attachment I hereto, based upon the Borrowers’ ratio of Total Funded Debt to EBITDA as of the end of the calendar quarter immediately preceding the date of calculation.

(l) Agreement to Pay Letter of Credit Obligations . The Borrowers shall pay to the Lender the Letter of Credit Obligations when due; provided , however , that (a) so long as the Borrowers have availability under the Revolving Credit Facility, the Lender may, and is hereby authorized to, make Advances to itself to pay when due any or all Letter of Credit Obligations incurred in connection with Letters of Credit. The Lender may maintain on its books a letter of credit account (the “ Letter of Credit Account ”) with respect to the Letter of Credit Obligations paid and payable from time to time hereunder. Except for demonstrable error, the Letter of Credit Account shall be conclusive as to all amounts owing by the Borrowers to the

Lender in connection with and on account of the Letter of Credit Obligations. From the date due until paid in full, all Letter of Credit Obligations shall bear interest at the rate then applicable to Advances.

(m) Agreement to Pay Absolute . The obligation of the Borrowers to pay Letter of Credit Obligations set forth above shall be absolute and unconditional and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, (ii) the existence of any claim, setoff, defense or other right which the Borrowers may at any time have against the beneficiary under any Letter of Credit or the Lender, (iii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue provided that payment by the Lender under such Letter of Credit against presentation of such draft shall not have constituted gross negligence or willful misconduct, and (v) any other events or circumstances whatsoever, whether or not similar to any of the foregoing provided that the payment by the Lender under the Letter of Credit shall not have constituted gross negligence or willful misconduct of the Lender.

(n) Commitment Fee . In consideration for the agreements of the Lender as set forth herein, the Borrowers agree to pay to the Lender at closing the balance remaining of its commitment fee of twenty-five (25) basis points times the Revolving Credit Amount, which fee shall be deemed earned upon its receipt by the Lender.

1.3. Additional Provisions .

(a) Interest Calculation . Other than calculations with respect to the Prime Rate (which shall be computed on the basis of actual days elapsed in a 365/366 day year), all interest and fees payable under the provisions of this Agreement or the Note shall be computed on the basis of actual number of days elapsed over a year of 360 days.

(b) Late Charges . Except for principal, interest and other charges due upon acceleration of the Obligations, if the Borrowers fails to make any payment of principal, interest, prepayments, fees or any other amount becoming due pursuant to the provisions of this Agreement, the Note or any other Financing Document within fifteen (15) days after the date due and payable, the Borrowers shall pay to the Lender a late charge equal to five percent (5%) of the amount of such payment. Such 15-day period shall not be construed in any way to extend the due date of any such payment. Late charges are imposed for the purpose of defraying the Lender’s expenses incident to the handling of delinquent payments, and are in addition to, and not in lieu of, the exercise by the Lender of any rights and remedies hereunder or under applicable laws and any fees and expenses of any agents or attorneys which the Lender may employ upon the occurrence of an Event of Default.

(c) Payments . Whenever any payment to be made by the Borrowers under the provisions of this Agreement, the Note, the Letter of Credit Agreements or any other Financing Document is due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, in the case of any payment which bears interest, such extension of time shall be included in computing interest on such payment. All payments of principal, interest, fees or other amounts to be made by the Borrowers under the provisions of

this Agreement or the Note shall be paid without set-off or counterclaim to the Lender at the Lender’s office at 1101 Wooton Parkway, 4 ^th Floor, Rockville, Maryland 20852, or to such other place as the Lender shall direct in writing, in lawful money of the United States of America in immediately available funds.

(d) Interest On Overdue Amounts . If the principal of or interest on, the Note or any other amount required to be paid to the Lender hereunder or under the Note or any of the other Financing Documents is not paid within fifteen (15) days after the date when the same becomes due and payable, whether by acceleration or otherwise, the Borrowers shall on demand from time to time pay to the Lender interest on such principal, interest or other amount from the date due until the date of payment (after as well as before any judgment) at a rate per annum equal to the Default Rate.

(e) Collateral and Subsidiary Guarantees. (1) In order to secure the full and punctual payment of the Obligations in accordance with the terms thereof, and to secure the performance of this Agreement and the other Financing Documents, the Borrowers hereby pledge and assign to the Lender, and grant to the Lender a continuing lien and security interest in and to the Collateral, both now owned and existing and hereafter created, acquired and arising and regardless of where located.

(2) Promptly, following the acquisition or creation thereof and in any event within thirty (30) days after a request with respect thereto, the Borrowers shall cause each of the Borrowers’ Subsidiaries formed after the execution of this Agreement to become party to, and to execute and deliver, a Subsidiary Guaranty Agreement, guarantying to the Lender the prompt payment, when and as due, of all Obligations of the Borrowers under the Financing Documents, including all obligations under any Hedge Agreements.

(3) Promptly, following the acquisition or creation thereof and in any event within thirty (30) days after a request with respect thereto, the Borrowers shall cause such Subsidiary to grant to the Lender a first priority lien on all property (tangible and intangible) of such Subsidiary, including, without limitation, all of the capital stock of any of its domestic subsidiaries and 65% of the stock of any of its foreign subsidiaries, upon terms similar to those set forth in the Financing Documents and otherwise reasonably satisfactory in form and substance to the Lender. The Borrowers shall cause such Subsidiary, at its own expense, to become a party to a Subsidiary Security Agreement and any other Financing Document and to execute, acknowledge and deliver, or cause the execution, acknowledgment and delivery of, and thereafter register, file or record in any appropriate governmental office, any document or instrument reasonably deemed by the Lender to be necessary or desirable for the creation and perfection of the foregoing liens (including legal opinion, consents, corporate documents and any additional or substitute security agreements or mortgages). The Borrowers will cause such Subsidiary to take all actions requested by the Lender (including, without limitation, the filing of UCC-1’s) in connection with the granting of such security interests.

(4) The security interests required to be granted pursuant to this Section shall be granted pursuant to such security documentation as is reasonably satisfactory in form and substance to Lender (the “ Additional Financing Documents ”) and shall constitute valid and

enforceable perfected security interests prior to the rights of all third Persons and subject to no other Liens except Liens permitted hereunder. The Additional Financing Documents and other instruments related thereto shall be duly recorded or filed in such manner and in such places and at such times as are required by law to establish, perfect, preserve and protect the Liens, in favor of the Lender, granted pursuant to the Additional Financing Documents and, all taxes, fees and other charges payable in connection therewith shall be paid in full by the Borrowers. At the time of the execution and delivery of Additional Financing Documents, the Borrowers shall cause to be delivered to Lender such agreements, opinions of counsel, and other related documents as may be reasonably requested by the Lender to assure it that this Section has been complied with.

(5) Automatic Debit . To ensure timely payment of all interest and other sums due hereunder, the Borrowers hereby authorizes and instructs the Lender to either (i) debit, on the due date thereof, demand deposit account no. 00393577 3043 maintained at the Lender for the amount then due, (ii) if the amount in the foregoing demand deposit account is insufficient to satisfy the amount then due, or (iii) if the Borrowers so instruct the Lender, cause an Advance to be made sufficient to pay the amount then due. This authorization shall not affect the obligation of the Borrowers to pay such sums when due, without notice, if there are insufficient funds available to make any payment in full on the due date thereof, or if the automatic debit feature is at any time terminated by the Lender in its discretion.

1.4. The Borrowers’ Representative . Each of the Borrowers hereby represents and warrants to the Lender that each of them will derive benefits, directly and indirectly, from the proceeds of each Advance and Letter of Credit, both in its separate capacity and as a member of the integrated business to which each of the Borrowers belong. For administrative convenience, TVI is hereby irrevocably appointed by each of the Borrowers as agent for each of the Borrowers for the purpose of requesting Advances and Letters of Credit hereunder from the Lender, receiving the proceeds of Advances and disbursing the proceeds of Advances among the Borrowers. In its capacity as such agent, TVI shall have the power and authority through its authorized officer or officers to (i) endorse any check for the proceeds of any Advance for and on behalf of each of the Borrowers and in the name of each of the Borrowers, and (ii) instruct the Lender to credit the proceeds of any Advance directly to a banking account of any of the Borrowers. By reason of the foregoing, the Lender is hereby irrevocably authorized by each of the Borrowers to make Advances to the Borrowers and issue Letters of Credit for the account of the Borrowers pursuant to this Agreement upon the request of any one of the persons who is authorized to do so under the provisions of any applicable corporate resolutions of TVI. The Lender assumes no responsibility or liability for any errors, mistakes and/or discrepancies in any oral, telephonic, written or other transmissions of any instructions, orders, requests and confirmations between the Lender and any one or more of the Borrowers in connection with any Advance, Letter of Credit or other transaction pursuant to the provisions of this Agreement, except for acts of gross negligence and/or willful misconduct.

SECTION 2. Conditions Precedent .

2.1. Initial Advance or Letter of Credit . The Lender shall not be required to make the initial Advance, or issue the initial Letter of Credit hereunder, whichever occurs first, unless the following conditions precedent have been satisfied in a manner reasonably acceptable to the Lender and its counsel:

(a) Borrowers’ Organizational Documents . The Lender shall have received with respect to the Borrowers: (i) a copy, certified as of a recent date by the Maryland State Department of Assessments and Taxation or other jurisdiction of organization, as applicable, of the Borrowers’ Articles of Incorporation or Articles of Organization, as applicable, as well as a copy of the Borrowers’ bylaws, operating agreements and all amendments thereto, as applicable (ii) a Certificate of Good Standing for each of the Borrowers issued by the Maryland State Department of Assessments and Taxation or other jurisdiction of organization, as applicable, and (iii) a copy, certified to the Lender as true and correct as of the date hereof by the Borrowers, of the resolutions of the Borrowers’ boards of directors or managers, as applicable, authorizing the execution and delivery of this Agreement and the other Financing Documents to which the Borrowers are a party and designating by name and title the officer(s) of the Borrowers who are authorized to sign this Agreement and such other Financing Documents for and on behalf of the Borrowers and to make the borrowings hereunder.

(b) Lists of Locations, Etc. The Borrowers shall have delivered to the Lender a list showing the street address, city or county and state of the Borrowers’ chief executive office and of any other location where the Borrowers conducts or has a place of business or where any of the Collateral is or may be located, which list shall include the names of all landlords (and mortgagees) and be accompanied by true and complete copies of all leases, together with all amendments thereto;

(c) Insurance . The Borrowers shall have delivered to the Lender (or shall have made arrangements for delivery within thirty (30) days of closing) an Accord certificate of insurance reflecting the Borrowers’ property and casualty insurance coverage policy from a well-rated and responsible insurance company insuring the Collateral in amounts reasonably satisfactory to the Lender against loss or damage resulting from fire and other risks insured against by extended coverage, that lists the Lender as loss payee;

(d) Searches . The Lender shall have received the results of a search by an attorney or company reasonably satisfactory to the Lender of the Uniform Commercial Code filings with respect to the Borrowers in their jurisdictions of organization and in which the Borrowers conduct or have a place of business or in which any of the Collateral is or will be located, accompanied by copies of such filings, if any, and evidence reasonably satisfactory to the Lender that any security interest or other lien indicated in any such filing has or will be released or is permitted by the Lender so that the Lender’s security interest in the Collateral will be a perfected first security interest and lien on the Collateral subject only to Permitted Liens and such other matters as the Lender may approve;

(e) Opinions . The Lender shall have received the written opinion of counsel of the Borrowers dated on or around the date of this Agreement, reasonably satisfactory in form and content to the Lender, opining, among other things, that the Borrowers are duly organized,

validly existing, and in good standing, that the Financing Documents executed and delivered by the Borrowers have been duly authorized by all requisite corporate action, and that the Financing Documents executed and delivered by the Borrowers constitute the legal, valid, binding, and enforceable obligations of the Borrowers, enforceable against the Borrowers, as applicable, in accordance with the terms thereof, subject to customary exceptions and limitations reasonably acceptable to the Lender.

(f) Financing Documents . The Lender shall have received each of the Financing Documents required by the Lender to be executed and delivered prior to the making of the initial Advance.

(g) Due Diligence . The Lender shall have received and reviewed such financial information and other due diligence reports as the Lender shall reasonably require.

(h) Operating Account; Etc. The Borrowers shall have established an operating account into which Advances shall be paid, and the Borrowers shall maintain its primary accounts with the Lender.

(i) Additional Documents . The Borrowers shall have furnished in form and content reasonably acceptable to the Lender any additional documents, agreements, certifications, record searches, insurance policies or opinions which the Lender may reasonably deem necessary or desirable.

2.2. All Advances and Letters of Credit . The Lender shall not be required to make any Advances, including the initial Advance, or issue any Letter of Credit, until compliance to the satisfaction of the Lender with all of the following conditions at the time of and with respect to each Advance or Letter of Credit:

(a) Representations and Warranties . No representation or warranty made in or in connection with this Agreement and the other Financing Documents shall be untrue, incorrect or incomplete in any material respect on and as of the date of any Advance or Letter of Credit as if made on such date, except for changes in facts or circumstances arising in the ordinary course of business and which do not constitute a breach of any covenant set forth herein; and

(b) Event of Default or Default . No Event of Default or Default shall have occurred and be continuing.

SECTION 3. Representations and Warranties . The Borrowers represents and warrants to the Lender that, except as specifically set forth on Schedule 3 attached hereto, the following statements are true, correct and complete in all material respects as of the date hereof and as of each date any Advance is to be made or any Letter of Credit is to be issued hereunder, except for changes in facts or circumstances arising in the ordinary course of business and which do not constitute a breach of any covenant set forth herein:

3.1. Authority, Etc. TVI is duly incorporated and in good standing under the laws of Maryland under organizational identification number D00737676. CAPA Manufacturing Corp. is duly incorporated and in good standing under the laws of Maryland under organizational identification number D07907413. Safety Tech International, Inc. is duly incorporated and in good standing under the laws of Maryland under organizational identification number D10721777. TVI Air Shelters, LLC is duly organized and in good standing under the laws of Maryland under organizational identification number W10727758. The Borrowers are qualified to do business in all states where the Borrowers do business, except where the failure to be so qualified would not materially adversely affect the business, operations or financial condition of the Borrower. The Borrowers have the full power and authority to execute, deliver and perform this Agreement and the other Financing Documents to which the Borrowers are a party. Neither such execution, delivery and performance, nor compliance by the Borrowers with the provisions of this Agreement and of the other Financing Documents to which the Borrowers are a party will conflict with or result in a breach or violation of the Borrowers’ articles of incorporation or bylaws, or any judgment, order, regulation, ruling or law to which the Borrowers are subject or any contract or agreement to which the Borrowers are a party or to which the Borrowers’ assets and properties is subject, or constitute a default thereunder. The execution, delivery and performance of this Agreement and all other Financing Documents to which the Borrowers are a party have been duly authorized and approved by all necessary action by the Borrowers and constitute the legal, valid and binding obligations of the Borrowers, enforceable in accordance with their terms except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

3.2. Litigation . Except as specified in Schedule 1.1 , there is no litigation or proceeding pending or, to the knowledge of any representative of the Borrowers signing this Agreement on behalf of the Borrowers, specifically threatened in writing, against or affecting the Borrowers which might materially adversely affect the business, financial condition or operations of the Borrowers or the ability of the Borrowers to perform and comply with this Agreement or the other Financing Documents to which the Borrowers are a party.

3.3. Subsidiaries . TVI does not currently have any Subsidiaries other than the Subsidiaries executing this Agreement.

3.4. Financial Condition . The Borrowers have heretofore furnished to the Lender certain financial statements. Such financial statements and all other financial statements and information furnished or to be furnished to the Lender hereunder have been and will be prepared in accordance with generally accepted accounting principles (subject to year-end adjustments and the omission of footnote information) and fairly present in all material respects the financial condition of the Borrowers as of the dates thereof and the results of the operations of the Borrowers for the periods covered thereby. No material adverse change in the business, financial condition or operations of the Borrowers (on an aggregated basis) have occurred since the date of such financial statements. The Borrowers do not have any indebtedness or liabilities that are required to be accrued on financial statements prepared in accordance with GAAP other than that reflected on such financial statements or expressly permitted by the provisions of this Agreement, and accounts payable incurred in the ordinary course of business since the date of such financial statements. The Borrowers are not in default under any obligation for borrowed money.

3.5. Taxes . The Borrowers have filed all federal, state and local income, excise, property and other tax returns which are required to be filed and has paid all taxes as shown on such returns or assessments received (including, without limitation, all F.I.C.A. payments and withholding taxes, if appropriate), except for such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. No tax liens have been filed and no claims are being asserted with respect to such taxes or assessments.

3.6. Title to Properties and Collateral . The Borrowers have good and marketable title to all of the Borrowers’ assets and properties, including, without limitation, the Collateral, and such assets and properties are subject to no liens, security interests or other encumbrances except for those of the Lender or other Permitted Liens.

3.7. Borrowers’ Name, Business Locations, etc . The correct legal names of the Borrowers are those specified on Schedule 3.7 . Except as provided on Schedule 3.7 , the Borrowers have conducted business under their legal names since their formation. The Borrowers do not do business under any trade or fictitious names. The chief executive office of the Borrowers and the place where records concerning Accounts an