FINANCING AND SECURITY AGREEMENT

Exhibit 10.3

FINANCING AND SECURITY AGREEMENT

Dated

October 31, 2006

By and Between

BRANCH BANKING AND TRUST COMPANY

And

TVI CORPORATION and Subsidiaries

TABLE OF CONTENTS

 

 

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FINANCING AND SECURITY AGREEMENT

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

RECITALS

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

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

AGREEMENTS

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

ARTICLE I

DEFINITIONS

Section 1.1 Certain Defined Terms .

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

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

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

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

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

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

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

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

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

“Acquisition Line Commitment Period” means the period of time from the Closing Date to August 31, 2013.

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

“Acquisition Line Expiration Date” means August 31, 2013.

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

“Closing Date” means October 31, 2006.

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

LIBOR Base Rate

1.00 - Reserve Percentage

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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

“PBGC” means the Pension Benefit Guaranty Corporation.

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

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

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

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

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

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

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

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

 

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

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

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

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

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

 

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

“Revolving Credit Expiration Date” means October 30, 2013.

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

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

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

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

 

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

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

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

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

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

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

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

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

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

“State” means the State of Maryland.

 

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

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

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

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

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

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

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

Section 1.2 Accounting Terms and Other Definitional Provisions.

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

 

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

Section 1.3 Interpretive Provisions.

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

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

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

ARTICLE II

THE CREDIT FACILITIES

Section 2.1 The Revolving Credit Facility.

2.1.1 Revolving Credit Facility.

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

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

 

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

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

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

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

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

2.1.3 Computation of Borrowing Base.

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

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

 

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

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

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

2.1.4 Revolving Credit Note.

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

2.1.5 Mandatory Prepayments of Revolving Loan.

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

 

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2.1.6 Optional Prepayments of Revolving Loan.

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

2.1.7 The Operating Account.

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

2.1.8 Revolving Loan Account.

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

2.1.9 Revolving Credit Unused Line Fee.

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

Section 2.2 The Acquisition Line Facility.

2.2.1 Acquisition Line Commitment.

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

 

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

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

2.2.2 Procedure for Making Advances Under the Acquisition Line.

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

2.2.3 Acquisition Line Notes.

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

2.2.4 Acquisition Line Term Payments.

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

 

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2.2.5 Acquisition Line Maturity.

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

2.2.6 Mandatory Prepayments of Acquisition Line.

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

2.2.7 Optional Prepayments of Acquisition Line.

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

Section 2.3 The Letter of Credit Facility.

2.3.1 Letters of Credit.

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

 

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

2.3.2 Letter of Credit Fees.

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

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

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

 

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

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

2.3.4 Procedures for Letters of Credit.

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

2.3.5 Payments of Letters of Credit.

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

 

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

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

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

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

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

2.3.6 Change in Law; Increased Cost.

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

 

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

2.3.7 General Letter of Credit Provisions.

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

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

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

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

 

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

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

Section 2.4 Interest and Certain Fee Provisions.

2.4.1 Applicable Margin.

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

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

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

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

 

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2.4.2 Inability to Determine LIBOR Base Rate.

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

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

2.4.4 Payment of Interest.

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

2.4.5 Origination Fee.

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

2.4.6 Field Examination Fees.

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

2.4.7 Computation of Interest and Fees.

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

 

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2.4.8 Maximum Interest Rate.

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

2.4.9 Requirements of Law.

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

Section 2.5 General Financing Provisions.

2.5.1 Borrowers’ Representatives.

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

 

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

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

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

(d) The Lender assumes no responsibility or liability for any errors, mistakes, and/or discrepancies in the oral, telephonic, written or other transmissions of any instructions, orders, requests and confirmations between the Lender and the Borrowers in connection with the Credit Facilities, any Loan, and Letter of Credit or any other transaction in connection with the provisions of this Agreement. Without implying any limitation on the joint and sever