-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U9JXWcbFDmi9L0p4FnP+WfmyM4BU+81PNdiQYleyJbXHQ693+9A5QEfRiIIp2Zi3 jk2n68aXBcD3OVhTOZ2Yhg== 0000014280-00-000025.txt : 20000517 0000014280-00-000025.hdr.sgml : 20000517 ACCESSION NUMBER: 0000014280-00-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARKETING SERVICES GROUP INC CENTRAL INDEX KEY: 0000014280 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 880085608 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01768 FILM NUMBER: 636377 BUSINESS ADDRESS: STREET 1: 333 SEVENTH AVENUE STREET 2: 20TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10001 BUSINESS PHONE: 2125947688 MAIL ADDRESS: STREET 1: 333 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10001 FORMER COMPANY: FORMER CONFORMED NAME: ALL-COMM MEDIA CORP DATE OF NAME CHANGE: 19950823 FORMER COMPANY: FORMER CONFORMED NAME: SPORTS TECH INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BRISTOL HOLDINGS INC DATE OF NAME CHANGE: 19920518 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number 0-16730 MARKETING SERVICES GROUP, INC. ------------------------------ (Exact Name of Registrant as Specified in Its Charter) Nevada 88-0085608 ------ ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 333 Seventh Avenue, 20th Floor New York, New York 10001 ------------------ ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (917) 339-7100 ----------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ APPLICABLE ONLY TO CORPORATE ISSUERS State number of shares outstanding of each of the issuer's classes of common equity as of the latest practical date: As of May 12, 2000, there were 29,971,332 shares of the Issuer's Common Stock, par value $.01 per share outstanding. MARKETING SERVICES GROUP, INC. AND SUBSIDIARIES TABLE OF CONTENTS FORM 10-Q REPORT March 31, 2000 PART I - FINANCIAL INFORMATION Page ---- Item 1 Interim Condensed Consolidated Financial Statements (unaudited) Condensed Consolidated Balance Sheets as of March 31, 2000 and June 30, 1999 3 Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2000 and 1999 4 Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2000 and 1999 5 Notes to Interim Condensed Consolidated Financial Statements 6-10 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 11-14 PART II - OTHER INFORMATION Item 1 Legal Proceedings 15 Item 4 Submission of Matters to a Vote of Security Holders 15 Item 6 Exhibits and Reports on Form 8-K 16 (a) Exhibits (b) Reports on Form 8-K Signatures 17 Exhibit 27 Financial Data Schedule 18 PART I - FINANCIAL INFORMATION Item 1 - Interim Condensed Consolidated Financial Statements (unaudited) ------------------------------------------------------------------------ MARKETING SERVICES GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) March 31, 2000 June 30, 1999 ASSETS - ------ Current assets: Cash and cash equivalents $23,968,672 $ 3,285,217 Accounts receivable billed, net of allowance for doubtful accounts of $1,525,730 and $421,861 as of March 31, 2000 and June 30, 1999, respectively 41,912,361 23,527,798 Accounts receivable unbilled 3,290,593 3,862,907 Inventories 7,610,374 - Note receivable 173,359 685,873 Other current assets 6,329,500 1,168,653 ---------- ----------- Total current assets 83,284,859 32,530,448 Investments at cost 34,354,700 - Property and equipment at cost, net 18,815,183 1,504,826 Intangible assets, net 153,514,363 62,493,949 Note receivable 652,010 474,127 Other assets 3,108,156 623,599 ---------- ---------- Total assets $ 293,729,271 $97,626,949 ============= =========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Short-term borrowings $6,091,607 $5,316,775 Trade accounts payable 27,640,993 23,214,278 Related party payable 4,967,938 4,871,750 Current portion of long-term obligations 5,000,901 570,653 Accrued expenses and other liabilities 10,248,946 8,151,764 Current portion of capital lease obligations 57,642 52,099 ----------- ---------- Total current liabilities 54,008,027 42,177,319 ----------- ---------- Capital lease obligations, net of current portion 264,298 67,407 Long-term obligations 37,082,198 997,890 Note payable-related party, net of current portion - 4,871,750 Other liabilities 2,372,918 584,954 ---------- ---------- Total liabilities 93,727,441 48,699,320 ---------- ---------- Subsidiary convertible preferred stock 18,527,275 - Stockholders' equity: Common Stock - $.01 par value; 75,000,00 authorized; 30,328,226 and 22,513,772 shares issued as of March 31, 2000 and June 30, 1999, respectively 303,282 225,138 Additional paid-in capital 198,587,787 70,812,973 Convertible preferred stock- $.01 par value; 150,000 shares authorized; 30,000 shares of Series E issued and outstanding as of March 31,2000 29,478,858 - Accumulated deficit (35,885,209) (19,928,677) Deferred compensation (9,616,453) (788,095) Less: 423,894 shares of common stock in treasury, at cost as of March 31, 2000 and June 30, 1999 (1,393,710) (1,393,710) ----------- ----------- Total stockholders' equity 181,474,555 48,927,629 ----------- ---------- Total liabilities and stockholders' equity $293,729,271 $97,626,949 ============ =========== See Notes to Interim Condensed Consolidated Financial Statements. MARKETING SERVICES GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2000 AND 1999 (unaudited)
Three Months Ended Nine Months Ended March 31, March 31, 2000 1999 2000 1999 ---- ---- ---- ---- Revenues $28,988,563 $22,563,283 $84,037,165 $56,356,724 Operating costs and expenses: Direct costs 17,206,282 15,406,554 53,562,136 35,815,236 Salaries and benefits 10,706,564 6,510,024 27,568,924 18,359,995 Selling, general and administrative 5,306,216 1,844,411 11,278,211 4,485,344 Depreciation and amortization 1,531,251 498,754 3,776,335 1,405,062 Compensation expense on option grants 2,706,028 - 2,998,252 - Severance costs 753,225 - 753,225 - --------- --------- --------- --------- Total operating costs and expenses 38,209,566 24,259,743 99,937,083 60,065,637 Loss from operations (9,221,003) (1,696,460) (15,899,918) (3,708,913) Interest expense, net (207,565) (99,407) (796,826) (169,690) Gain on sale of minority interest - 40,810 45,163 40,810 Loss attributable to minority interest 850,000 - 850,000 - --------- --------- --------- --------- Loss before income taxes (8,578,568) (1,755,057) (15,801,581) (3,837,793) (Provision) benefit for income taxes (93,182) (1,410) (154,951) 58,473 --------- --------- --------- --------- Net loss $(8,671,750) $(1,756,467) $(15,956,532) $(3,779,320) =========== =========== ============ =========== Net loss attributable to common stockholders $(8,671,750) $(2,799,214)* $(15,956,532) $(5,399,217)* =========== =========== ============ =========== Net loss per common share, basic and fully diluted $(0.31) $(0.22) $(0.63) $(0.42) ======= ======= ======= ======= Weighted average common shares outstanding 27,778,475 12,765,852 25,451,810 12,914,756 ========== ========== ========== ==========
* The three and nine months ended March 31, 1999 include the impact of dividends on stock for (a) adjustment of the conversion ratio for $748,571 for exercises of stock options and warrants; (b) $239,082 and $706,697 in cumulative undeclared Preferred Stock dividends, respectively; and (c) $55,094 and $164,629 of periodic non-cash accretions on preferred stock, respectively. See Notes to Interim Condensed Consolidated Financial Statements. MARKETING SERVICES GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999 (unaudited) 2000 1999 ---- ---- Operating activities: Net loss $(15,956,532) $(3,779,320) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 764,940 444,879 Amortization 3,011,395 960,183 Accrued interest on convertible securities - 27,310 Provision for bad debts 13,500 118,594 Gain on sale of Metro Fulfillment (45,163) (40,810) Loss attributable to minority interest (850,000) - Non cash interest expense 284,103 - Compensation expense on option grants 2,998,252 - Settlement of litigation 315,000 - Changes in assets and liabilities, net of acquisitions and dispositions Accounts receivable (637,354) 2,659,333 Inventory 620,223 - Other current assets (512,694) (279,716) Other assets (907,615) (169,003) Trade accounts payable (2,811,554) (765,387) Accrued expenses and other liabilities (3,025,224) (557,874) ----------- ----------- Net cash used in operating activities (16,738,723) (1,381,811) ----------- ----------- Investing activities: Purchase of property and equipment (1,675,793) (388,834) Acquisition of Grizzard, net of cash acquired of $1,645,000 (46,160,754) - Acquisition of Coolidge (240,501) - Acquisition of SK&A, net of cash acquired of $290,946 - (3,599,276) Disposition of MFI 556,984 24,206 Deposit for future acquisition - (1,045,000) Investment in Internet Companies (6,848,300) - ------------ ----------- Net cash used in investing activities (54,368,364) (5,008,904) ------------ ----------- Financing activities: Proceeds from exercises of stock options 2,029,406 1,216,348 Net proceeds from (repayments on) credit facilities (6,225,168) 2,026,247 Net proceeds from bank financing 22,760,586 - Net proceeds from issuance of common stock 30,549,005 - Net proceeds from issuance of preferred stock 29,478,858 - Net proceeds from subsidiary convertible preferred stock 18,527,275 - Repayment of related party note payable (5,000,000) - Repayment of capital lease obligation (96,087) (69,709) Repayments of notes payable other - (117,540) Repayment of acquisition debt (233,333) (408,334) Purchase of treasury stock - (1,258,241) -------- ----------- Net cash provided by financing activities 91,790,542 1,388,771 ---------- ----------- Net increase (decrease) in cash and cash equivalents 20,683,455 (5,001,944) Cash and cash equivalents at beginning of period 3,285,217 6,234,981 ---------- ----------- Cash and cash equivalents at end of period $23,968,672 $1,233,037 =========== =========== See Notes to Interim Condensed Consolidated Financial Statements. MARKETING SERVICES GROUP, INC. AND SUBSIDIARIES NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Marketing Services Group, Inc. and Subsidiaries (the "Company"). These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company's Form 10-K for the year ended June 30, 1999 and the historical consolidated financial statements and related notes included therein. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of only normal recurring accruals, necessary to present fairly the condensed consolidated financial position, results of operations and cash flows of the Company. Certain information and footnote disclosure normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. Operating results for the three and nine month period ended March 31, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2000. Certain reclassifications have been made in the fiscal 1999 financial statements to conform with the fiscal 2000 presentation. 2. EARNINGS PER SHARE Stock options and warrants in the amount of approximately 4,800,000 were not included in the computation of diluted earnings per share as they are antidilutive as a result of net losses during the periods presented. 3. SHORT TERM BORROWINGS At March 31, 2000, the Company was in violation of certain financial covenants with regard to its outstanding debt at certain subsidiaries. The Company has obtained a waiver of such violations. 4. CONTINGENCIES AND LITIGATION In June 1999, certain employees of Stephen Dunn & Associates ("SD&A"), a subsidiary of the Company, voted against representation by the International Longshore and Warehouse Union ("ILWU"). The ILWU has filed unfair labor practices with the National Labor Relations Board ("NLRB") alleging that SD&A engaged in unlawful conduct prior to the vote. The NLRB has issued a complaint seeking a bargaining order and injunctive relief compelling SD&A to recognize and bargain with the ILWU. The Company intends to vigorously defend against these charges. An unfavorable finding will not have any direct financial impact on the Company. In September 1999, an action was commenced against the Company in the Supreme Court of New York, Kings County alleging damages of $4.3 million in connection with the Company's alleged failure to deliver warrants due the plaintiff in June 1996. Although the Company denied all liability, the suit was settled in January 2000 in consideration for the issuance of warrants to acquire 18,000 shares of common stock of the Company at an exercise price of $1.00 per share. Accordingly, the Company recognized $315,000 of expense based on the fair market value of the warrants granted as determined by the Black-Scholes model. The expense is included in selling general and administrative expenses for the nine months ended March 31, 2000. An employee of Metro Fulfillment, Inc. ("MFI"), which, until March 1999, was a subsidiary of the Company, filed a complaint in the Superior Court of the State of California for the County of Los Angeles, Central District, against MSGI and current and former officers of MSGI. The complaint seeks compensatory and punitive damages in connection with the individual's employment at MFI. The Company believes that the allegations in the complaint are without merit and, the Company has asserted numerous defenses, including that the complaint fails to state a claim upon which relief can be granted. The Company intends to vigorously defend against the lawsuit. An estimate of the possible loss cannot be determined. In addition to the above, certain other legal actions are pending to which the Company is a party. The Company does not expect that the ultimate resolution of pending legal matters in future periods will have a material effect on the financial condition, results of operations or cash flows. 5. SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITITES During the nine months ended March 31, 2000, the Company entered into capital lease obligations for approximately $290,000 for certain computer equipment. During the quarter ended September 30, 1999, the Company sold its 15% minority interest in Metro Fulfillment, Inc. for a Note Receivable in the amount of $222,353. In addition, there were certain non-cash transactions related to the acquisition and investment of CIA and Fusion Networks, Inc. See Footnote 6 for details. During the quarter ended March 31, 1999, the Company recorded non-cash preferred dividends in the amount of $294,176 of which $239,082 was in connection with cumulative undeclared dividends and $55,094 was for periodic, non-cash accretions on preferred stock. 6. INTERNET INVESTMENTS In July 1999, the Company invested $1,555,000 to acquire approximately a 10% interest in Screenzone Media Network, LLC ("Screenzone"). Screenzone is an interactive broadcast gateway that was developed to advertise and promote movies, music, live events and other entertainment at shopping malls and over the Internet. The investment will be accounted for under the cost method of accounting. In September 1999, the Company acquired approximately a 14% interest in Greatergood.com for $5,000,000. GreaterGood.com builds, co-markets and manages online shopping villages for not-for-profit organization web sites. The investment will be accounted for under the cost method of accounting. In October 1999, the Company completed an acquisition of approximately 87% of the outstanding common stock of Cambridge Intelligence Agency for a total purchase price of $2.4 which consisted of $1.6 million in common stock of the Company and the Company's Permission Plus software and related operations valued at $.8 million, subject to certain adjustments. As a result of the transaction, the Company recognized a gain of approximately $225,000 which was recorded through equity. The acquisition will be accounted for under the purchase method of accounting. In October 1999, the Company acquired approximately a 10% interest in Mazescape.com for $200,000. Mazescape.com is an innovative internet technology company that delivers customized, automated recruiting software and services that improve the performance of corporate recruiters. The acquisition will be accounted for under the cost method of accounting. In December 1999, the Company acquired approximately a 10% interest in Fusion Networks, Inc. for $27,506,400 in common stock The Company also has an additional option to acquire up to an additional 9% of Fusion Networks based on the same per share prices as the original investment Fusion Networks, Inc. operates the website www.Latinfusion.com. The web site is an interactive, multimedia, and entertainment Latin American based portal featuring television, music, and e-commerce capability. The investment will be accounted for under the cost method of accounting. 7 PRIVATE PLACEMENT OF COMMON STOCK In September 1999, the Company completed a private placement of 3,130,586 shares of common stock for proceeds of approximately $30.5 million, net of approximately $2.3 million of placement fees and expenses. The shares have certain registration rights. The proceeds of the private placement will be used in connection with certain Internet investments, to repay certain short term debt and for working capital purposes. The shares were registered on October 29, 1999. 8. RELATED PARTY TRANSACTION During July and August 1999, the Company entered into a promissory note agreement with a venture fund in the amount of $4,500,000. The principal and all accrued interest was payable in full on December 10, 1999 and bore interest at the greater of 10% or prime plus 2%. An officer of the Company is a partner in the venture fund. The principal amount and all accrued interest was prepaid in September 1999 with the proceeds of the private placement. 9. ACQUISITIONS In March 2000, the Company acquired all of the outstanding capital stock of Grizzard Advertising, Inc. ("Grizzard"). Grizzard and its wholly owned subsidiary operate a vertically integrated network of marketing communications companies. Total cost of the acquisition was $103.8 million consisting of $47.8 million cash, a $5 million Letter of Credit ("LC") for certain hold back provisions, an aggregate of 2,545,799 shares of Common Stock of MSGI, par value $.01, and acquisition costs in the amount of $2.5 million. The shares were valued at $19.04 which was based on the market price for a reasonable period before the closing of the acquisition. A portion of the purchase price was financed through a $58 million senior secured credit facility. The facility is comprised of a $13 million revolving line of credit, $40 million term loan and $5 million LC commitment. The credit facility expires March 31, 2005 and bears interest at a prime rate or LIBOR plus an applicable margin ranging from 1.5% to 2.5% for prime and 2.5% to3.5% for LIBOR based on certain leverage ratios. The loans are guaranteed by the Company's non internet subsidiaries. The revolving line of credit is limited to the lesser of the maximum availability of $13 million or a percentage of eligible receivables. The facility is subject to certain financial and other covenants. In connection with the senior secured credit facility the Company issued a warrant to purchase 298,541 shares of the Company's stock at an exercise price of $.01 per share. The term loan of $40 million was recorded at a discount of approximately $5.0 million to reflect an allocation of the proceeds to the estimated value of the warrant and is being amortized as interest expense using the "interest method" over the life of the term loan. Approximately $45,000 was recorded as interest expense for the three and nine months ended March 31, 2000. The purchase price has been allocated on a preliminary basis to the book values of the assets and the remaining purchase price of $82,409,315 has been allocated to goodwill which is being amortized over 20 years. The Company is in the process of obtaining a purchase price allocation. Pro forma information relating to the acquisition will be filed in a subsequent Form 8-K. The acquisition was accounted for using the purchase method of accounting. Accordingly, the operating results of this acquisition are included in the results of operations from the date of acquisition. On March 31, 2000 , the Company acquired all of the outstanding common shares of The Coolidge company ("Coolidge"). The total cost of the acquisition was $1,1632,379, consisting of a cash purchase price of $207,946, a note payable of $538,715, 22,252 shares of common stock valued at $16.42 per share and transaction and other costs of $51,356. The acquisition was accounted for using the purchase method of accounting. Accordingly, the operating results of this acquisition are included in the results of operations from the date of acquisition. 10. DISPOSITIONS Effective March 1, 1999, the Company sold 85% of the issued and outstanding common stock of its wholly owned subsidiary Metro Fulfillment, Inc. for $1,260,000. The purchase price consisted of $100,000 cash and a promissory note of $1,160,000. The promissory note is payable in nine annual payments and bears interest at 1% above the Prime Rate. In connection with the disposition, the Company recognized a gain on sale of $40,810. In September 1999, the Company sold the remaining 15% for a note receivable in the amount of $222,253. In connection with the disposition of the minority interest, the Company recognized a gain on sale of $45,163. 11. CONVERTIBLE PREFERRED STOCK On February 24, 2000 the Company entered into a private placement with RGC International Investors LDC and Marshall Capital Management, Inc., an affiliate of Credit Suisse First Boston, in which the Company sold an aggregate of 30,000 shares of Series E Convertible Preferred Stock, par value $.01, and warrants to acquire 1,471,074 shares of common stock for proceeds of approximately $29.5 million, net of approximately $520,000 of placement fees and expenses. The Preferred Stock is convertible at any time at $24.473 per share, subject to reset on August 18, 2000 if the market price of our Common Stock is lower and subject to certain anti-dilution adjustments. In no event can the reset price be lower than $12.24 per share. The warrants are exercisable for a period of two years at an exercise price of $28.551, subject to certain anti-dilution adjustments. The closing price of our common stock on the date of issuance was $23.625. In March 2000, the Company completed a private placement of 3,120,001 shares of convertible preferred stock of its WiredEmpire subsidiary for proceeds of approximately $19 million, net of approximately $500,000 of placement fees and expenses.. The proceeds of the private placement will be used to fund the operations of the WiredEmpire Subsidiary. 12. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin 101 ("SAB 101"). SAB 101 summarizes certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. The provisions of this pronouncement will be implemented in the first quarter of fiscal 2001. The Company is in the process of determining the impact it will have on its financial statements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133, " Accounting for Derivatives and Hedging Activities", which establishes accounting and reporting standards for derivative instruments and hedging activities. The pronouncement is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Management does not believe the adoption of this standard will have a material impact on the Company's financial condition, results of operations, or cash flows. 13. INVENTORIES Inventory consists of the following at March 31, 2000. Work in-process $7,433,000 Raw materials and supplies $531,000 ---------- 7,964,000 Reserves (353,626) --------- Total $7,610,374 ========== Inventory is stated at the lower of cost (first-in, first-out method) or market. Work in-process includes job related costs which have not yet been billed to the customer. Item 2 - Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations - ------------- Introduction - ------------ This discussion summarizes the significant factors affecting the consolidated operating results, financial condition and liquidity/cash flows of the Company for the three and nine month periods ended March 31, 2000 and 1999. This should be read in conjunction with the financial statements, and notes thereto, included in this Report on Form 10-Q and the Company's financial statements and notes thereto, included in the Company's Annual Report on Form 10-K for the year ended June 30, 1999. In May 1998, the Company formed Metro Fulfillment, Inc. ("MFI"), a subsidiary providing online commerce, real-time database management, inbound/outbound customer service, custom packaging, assembling, product warehousing, shipping, payment processing and retail distribution. Effective March 1, 1999, the Company sold 85% of the common stock of MFI. Accordingly, effective March 1, 1999 the results of operations of MFI are no longer consolidated in the Company's statement of operations. The investment in MFI was being accounted for by the cost method of accounting. In September 1999, the Company sold the remaining 15% for a Note Receivable in the amount of $222,353. Effective January 1, 1999, the Company acquired all of the outstanding common shares of Stevens-Knox & Associates, Inc., Stevens-Knox List Brokerage, Inc. and Stevens-Knox International, Inc. (collectively "SK&A"). The results of operations of SK&A are reflected in the consolidated financial statements using the purchase method of accounting from the date of acquisition. SK&A provides list management, brokerage and database management services. Effective May 13, 1999, the Company acquired all of the outstanding common shares of CMG Direct Corporation ("CMG Direct"). The results of operations of CMG Direct are reflected in the consolidated financial statements using the purchase method of accounting from the date of acquisition. CMG Direct provides database services to the direct marketing and internet industries. In October 1999, the Company completed an acquisition of approximately 87% of the outstanding common stock of Cambridge Intelligence Agency for a total purchase price of $2.4 which consisted of $1.6 million in common stock of the Company and the Company's Permission Plus software and related operations valued at $.8 million, subject to certain adjustments. This business is now part of the Company's WiredEmpire subsidiary. On March 22, 2000, the Company acquired all of the outstanding common shares of Grizzard Advertising, Inc. ("Grizzard"). The results of operations of Grizzard are reflected in the consolidated financial statements using the purchase method of accounting from the date of acquisition. Grizzard and its wholly owned subsidiary operate a vertically integrated network of marketing communications companies. On March 31, 2000, the Company acquired all of the outstanding common shares of The Coolidge Company ("Coolidge"). The results of operations of Coolidge are reflected in the consolidated financial statements using the purchase method of accounting from the date of acquisition. Coolidge provides list management and brokerage services. Results of Operations for the Three Months Ended March 31, 2000, Compared to the Three Months Ended March 31, 1999. Revenues of approximately $29.0 million for the three months ended March 31, 2000 (the "current period") increased by $6.4 million or 28% over revenues of $22.6 million during the three months ended March 31, 1999 (the "prior period"). Approximately $5.8 million is attributable to an increase in direct marketing revenue primarily resulting from the acquisitions of CMG Direct and Grizzard. The remaining increase of approximately $.6 million resulted from an increase in Internet marketing revenue of 341% over the prior period. Direct costs of approximately $17.2 million in the current period increased by $1.8 million or 12% over direct costs of $15.4 million in the prior period. The increase is primarily attributable to the acquisitions of CMG Direct and Grizzard. Salaries and benefits of approximately $10.7 million in the current period increased by approximately $4.2 million or 65% over salaries and benefits of approximately $6.5 million in the prior period. Approximately $2.2 million is attributable to an increase in salaries and benefits for direct marketing operations due to the acquisitions of CMG Direct and Grizzard. Salaries and benefits from Internet marketing increased by approximately $2.0 million over the prior period due to the increased focus and build up of Internet operations. Non-cash compensation of approximately $2.7 million in the current period represents charges associated with the vested portion of in-the-money stock options granted to employees. Severance costs represent amounts paid and amounts accrued under certain severance agreements. Selling, general and administrative expenses of approximately $5.3 million in the current period increased by approximately $3.5 million or 194% over comparable expenses of $1.8 million in the prior period. Approximately $1.0 million is attributable to an increase in expenses for direct marketing operations due to the acquisitions of CMG Direct and Grizzard. Selling, general and administrative expenses for the direct marketing operations increased by an additional $.7 million due to an increase in rent, utilities, telephone and consulting expenses associated with additional space to manage actual and anticipated growth. Selling, general and administrative expenses for Internet operations increased by approximately $1.8 million due to an increase in expenses associated with the Company's expansion of internet operations such as rent, utilities, telephone and advertising expenses. The Company intends to fund Internet operations with the proceeds raised in the private placement which was completed in March 2000. Depreciation and amortization expense of approximately $1.5 million in the current period increased by approximately $1 million over expense of approximately $.5 million in the prior period. This is primarily attributable to an increase in expense resulting from the acquisitions of CMG Direct, CIA and Grizzard. Net interest expense of approximately $208,000 in the current period increased by approximately $109,000 over net interest expense of approximately $99,000 in the prior period principally due to accrued interest on outstanding borrowings relating to the acquisitions of SK&A , CMG Direct and Grizzard. Results of Operations for the Nine Months Ended March 31, 2000, Compared to the - -------------------------------------------------------------------------------- Nine Months Ended March 31, 1999. - --------------------------------- Revenues of approximately $84.0 million for the nine months ended March 31, 2000 (the "current period") increased by $27.6 million or 49% over revenues of $56.4 million during the nine months ended March 31, 1999 (the "prior period"). Approximately $26.3 million is attributable to an increase in direct marketing revenues resulting from the acquisitions of SK&A, CMG Direct and Grizzard. The remaining increase of approximately $1.3 million resulted from an increase in Internet marketing revenue of 210% over the prior period. Direct costs of approximately $53.6 million in the current period increased by $17.8 million or 50% over direct costs of $35.8 million in the prior period. The increase is primarily attributable to the acquisitions of SK&A, CMG Direct and Grizzard. Salaries and benefits of approximately $27.6 million in the current period increased by approximately $9.2 million or 50% over salaries and benefits of approximately $18.4 million in the prior period. Approximately $6.6 million is attributable to an increase in salaries and benefits for direct marketing operations due to the acquisitions of SK&A, CMG Direct and Grizzard. Salaries and benefits from Internet marketing increased by approximately $4.1 million over the prior period due to the increased focus and build up of Internet operations. Non-cash compensation of approximately $3 million in the current period represents charges associated with the vested portion of in the money stock options granted to employees. Severance costs represent amounts paid and amounts accrued under certain severance agreements. Selling, general and administrative expenses of approximately $11.3 million in the current period increased by approximately $6.8 million or 151% over comparable expenses of $4.5 million in the prior period. Approximately $2.3 million is attributable to an increase in expenses for direct marketing operations due to the acquisitions of SK&A, CMG Direct and Grizzard. Selling, general and administrative expenses for the direct marketing operations increased by an additional $.4 million due to an increase in rent, utilities, telephone and consulting expenses associated with additional space to manage actual and anticipated growth. Selling, general and administrative expenses for Internet operations increased by approximately $3.1 million due to an increase in expenses associated with the Company's expansion of internet operations such as rent, utilities, telephone and advertising expenses. Depreciation and amortization expense of approximately $3.8 million in the current period increased by approximately $2.4 million over expense of $1.4 million in the prior period. This is primarily attributable to an increase in depreciation and amortization expense resulting from the acquisitions of SK&A, CMG Direct, CIA and Grizzard. Net interest expense of approximately $.8 million in the current period increased by approximately $.6 million over net interest expense of approximately $.2 million in the prior period principally due to accrued interest on outstanding borrowings relating to the acquisitions of SK&A and CMG Direct. Capital Resources and Liquidity - ------------------------------- Historically, the Company has funded its operations, capital expenditures and acquisitions primarily through cash flows from operations, private placements of common and preferred stock, and its credit facilities. At March 31, 2000, the Company had cash and cash equivalents of $24.0 million and accounts receivable net of allowances of $45.2 million. The Company generated losses from operations of $15.9 million in the current period. Cash used in operating activities was $16.8 million. Cash used by operating activities principally consists of the net loss, an increase in trade accounts receivable and a decrease in accrued expenses. The proceeds of the Company's private placement were used to pay certain accounts payable and accrued expenses. The Company intends to fund Internet operations with the proceeds raised in the private placement which was completed in March 2000. In the current period, net cash of $54.4 million was used in investing activities consisting primarily of acquisitions and investments in internet companies. In the prior period, net cash used in investing activities of approximately $8.5 million consisted of purchases of property and equipment and acquisitions. The Company intends to continue to invest in technology and telecommunications hardware and software. In the current period, net cash of $91.8 million was provided by financing activities. Net cash provided by financing activities consists principally of $78.5 million net of fees and expenses for the private placement of common and preferred stock and $2.0 million for the exercise of stock options offset by repayments of lines of credit of $6.2 million and repayments on acquisition debt and other notes payable of $5.3 million. At March 31, 2000, the Company had amounts outstanding of $6.1 million on its lines of credit. The Company had approximately $10.8 million available on its lines of credit as of March 31, 2000. The Company believes that funds on hand, funds available from its operations and from its unused lines of credit, should be adequate to finance its operations and capital expenditure requirements, and enable the Company to meet its interest and debt obligations for the next twelve months. Seasonality and Cyclicality: The businesses of telemarketing and marketing services tend to be seasonal. Telemarketing has higher revenues and profits occurring in the fourth fiscal quarter, followed by the first fiscal quarter. This is due to subscription renewal campaigns for its performing arts clients, which generally begin in the spring time and continue during the summer months. Marketing services tend to have higher revenues and profits occurring in the second fiscal quarter, based on the seasonality of its clients' mail dates. Item 1 - Legal Proceedings - -------------------------- An employee of Metro Fulfillment, Inc. ("MFI"), which, until March 1999, was a subsidiary of the Company, filed a complaint in the Superior Court of the State of California for the County of Los Angeles, Central District, against MSGI and current and former officers of MSGI. The complaint seeks compensatory and punitive damages in connection with the individual's employment at MFI. The Company believes that the allegations in the complaint are without merit and, the Company has asserted numerous defenses, including that the complaint fails to state a claim upon which relief can be granted. The Company intends to vigorously defend against the lawsuit. An estimate of the possible loss cannot be determined. Item 4 - Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ On February 25, 2000 the Company held its annual meeting of stockholders to vote on election of directors, ratification of independent auditors and approval of an amendment to the Company's 1999 Employee Stock Option Plan. Of the 27,121,044 shares of the Company's common stock, par value $.01 per share, entitled to vote at the meeting, holders of 20,607,904 shares were present in person or were represented by proxy at the meeting. The directors elected at the meeting and the results of the voting were as follows: For Withheld General nominees: --- -------- J. Jeremy Barbera 20,431,658 176,246 Seymour Jones 20,430,693 177,211 Michael E. Pralle 20,431,858 176,046 The shares voted regarding the Board of Directors' proposal to select the accounting firm of PricewaterhouseCoopers LLP to serve as independent auditors of the Company were as follows: For 20,431,014 Against 127,433 Abstain 49,457 The shares voted regarding the Board of Directors' proposal to increase the number of authorized shares of the Company's 1999 Employee Stock Option Plan from 1,000,000 to 3,000,000 were as follows: For 9,858,313 Against 1,419,153 Abstain 41,694 Broker non-votes 9,288,744 Item 6 - Exhibits and Reports on Form 8-K - ----------------------------------------- a) Exhibits Exhibit # Item Notes --------- ---- ----- 10 Credit Agreement A 27 Financial Data Schedule A Notes relating to Exhibits: A Filed herewith. b) Reports on Form 8-K On or about January 10, 2000, the Company filed a current report on Form 8-K regarding the investment in Fusion Networks, Inc. On or about February 29, 2000, the Company filed a current report on Form 8-K regarding the issuance of Convertible Preferred Stock. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MARKETING SERVICES GROUP, INC. (Registrant) Date: May 15, 2000 By: /s/ J. Jeremy Barbera --------------------- J. Jeremy Barbera Chairman of the Board and Chief Executive Officer Date: May 15, 2000 By: /s/ Cindy H. Hill ----------------- Cindy H. Hill Chief Accounting Officer EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF MARKETING SERVICES GROUP, INC. AS OF AND FOR THE NINE MONTHS ENDED MARCH 31, 2000 INCLUDED IN THIS REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS U.S. Dollars 9-MOS Jun-30-2000 Jul-01-1999 Mar-31-2000 1 23,968,672 0 46,728,684 (1,525,730) 7,610,374 83,284,859 46,630,803 (27,815,620) 293,729,271 54,008,027 39,719,414 303,282 0 48,006,133 151,692,415 293,729,271 84,037,165 84,037,165 52,562,136 99,937,083 46,374,947 0 796,826 (15,181,358) 181,951 (15,956,532) 0 0 0 (15,956,532) (0.63) (0.63)
EX-10 3 EXHIBIT 10 CREDIT AGREEMENT dated as of March 22, 2000 among GRIZZARD COMMUNICATIONS GROUP, INC., as Borrower The Lenders Party Hereto and PARIBAS, as Administrative Agent --------------------------- PARIBAS, as Lead Arranger and Book Runner CREDIT AGREEMENT, dated as of March 22, 2000, among GRIZZARD COMMUNICATIONS GROUP, INC., the LENDERS party hereto and PARIBAS, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1. DEFINITIONS Section 1.1 Defined Terms As used in this Credit Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Adjusted Consolidated EBITDA" means, for any period, the sum of (i) Consolidated EBITDA for such period and (ii) the aggregate amount of all contracted savings in management compensation (demonstrated satisfactorily to the Administrative Agent) made during such period by the Borrower and the Subsidiaries, determined on a consolidated basis in accordance with GAAP, which amount shall not, for purposes of this definition, exceed (a) with respect to such period ending on December 31, 1999, $3,788,000, (b) with respect to such period ending on March 31, 2000, $3,697,000, (c) with respect to such period ending on June 30, 2000, $3,089,000, (d) with respect to such period ending on September 30, 2000, $2,602,000 and (e) with respect to such period ending on December 31, 2000, $649,000. "Administrative Agent" means Paribas, in its capacity as administrative agent for the Lenders hereunder. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Alternate Base Rate" means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Applicable Margin" means, at all times during the applicable periods set forth below: (i) with respect to ABR Borrowings, the percentage set forth below under the heading "ABR Margin" and (ii) with respect to Eurodollar Borrowings and fees payable under Section 3.3(b), the percentage set forth below under the heading "Eurodollar and LC Fee Margin": - --------------------------------------============= When the Total Leverage Ratio is greater than Eurodollar or equal to and less ABR Margin and LC Fee than Margin - --------------------------------------============= 3.50:1.00 2.50% 3.50% - --------------------------------------============= - --------------------------------------============= 3.00:1.00 3.50:1.00 2.25% 3.25% - --------------------------------------============= - --------------------------------------============= 2.00:1.00 3.00:1.00 2.00% 3.00% - --------------------------------------============= - --------------------------------------============= 2.00:1.00 1.50% 2.50% - --------------------------------------============= Changes in the Applicable Margin resulting from a change in the Total Leverage Ratio shall be based upon the certificate most recently delivered under Section 6.1(c) and shall become effective on the second Business Day after the date such certificate is delivered to the Administrative Agent. Notwithstanding anything to the contrary in this definition, (a) if the Borrower shall fail to deliver to the Administrative Agent such a certificate on or prior to any date required hereby, the Total Leverage Ratio for purposes of this defined term only shall be deemed to be 3.50:1.00 from and including such date to the date of delivery to the Administrative Agent of such certificate and (b) during the period commencing on the Effective Date and ending on the date that is six months after the Effective Date, the Total Leverage Ratio for purposes of this defined term only shall be deemed to be 3.50:1.00. "Applicable Percentage" means, with respect to any applicable Lender, the percentage of the total Revolving Commitments or the total LC Commitments, as applicable, represented by such Lender's Revolving Commitment or LC Commitment, as applicable. If the Revolving Commitments or LC Commitments, as applicable, have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving Commitments or the LC Commitments, as applicable, most recently in effect, giving effect to any assignments. "Approved Fund" means, with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4), and accepted by the Administrative Agent, substantially in the form of Exhibit A or any other form approved by the Administrative Agent. "Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Revolving Maturity Date and the date of termination of the Revolving Commitments. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means Grizzard Communications Group, Inc., a Delaware corporation. "Borrowing" means Revolving Loans, Term Loans or LC Loans, as applicable, of the same Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. "Borrowing Base" means, at any time, an amount equal to the sum of 85% of the sum of the aggregate of all Receivables of the Borrower and the Subsidiaries that are Guarantors, determined on a consolidated basis in accordance with GAAP, in each case payable in dollars which is a good and valid account representing an undisputed bona fide indebtedness incurred by the relevant account debtor for a fixed sum as set forth in the invoice relating thereto with respect to an absolute sale and delivery upon the stated terms of goods sold or services rendered and which is and at all times shall continue to be acceptable to the Administrative Agent in all respects in accordance with its reasonable credit judgment. Standards of eligibility may be established and revised from time to time (upon notice to the Lenders) by the Administrative Agent in its reasonable credit judgment; provided, however, that notwithstanding anything in any Loan Document to the contrary, for purposes hereof, the term "Borrowing Base" shall not include: (a) Receivables that remain unpaid more than 120 days after the original date of the applicable invoice; (b) Receivables owing by a single account debtor if 50% of the balance owing by such account debtor remains unpaid more than 120 days after the original date of the applicable invoice; (c) Receivables with respect to which the account debtor is a director, officer, employee, subsidiary or other affiliate of the Borrower or any Subsidiary; (d) Receivables with respect to which the account debtor is not a resident of the United States or Canada, unless (i) such account debtor has supplied the Borrower or the relevant Subsidiary, as applicable, with an irrevocable letter of credit issued by a financial institution satisfactory to the Administrative Agent sufficient to cover such receivable, in form and substance satisfactory to the Administrative Agent, or (ii) the Borrower has requested the inclusion of such a Receivable and has provided the Administrative Agent with a description thereof and such other information with respect thereto as the Administrative Agent shall reasonably request, and the Administrative Agent and Required Lenders shall have consented to such inclusion; (e) Receivables with respect to which the account debtor has (i) disputed such receivable or asserted a counterclaim or any other claim or defense or (ii) a right of setoff, but only to the extent of such counterclaim or setoff; (f) Receivables with respect to which the account debtor is the subject of bankruptcy or a similar insolvency proceeding or has made an assignment for the benefit of creditors or whose assets have been conveyed to a receiver or trustee; (g) Receivables with respect to which the account debtor's obligation to pay is conditional upon the account debtor's approval or is otherwise subject to any repurchase obligation or return right, as with sales made on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval (except with respect to Receivables in connection with which account debtors are entitled to return inventory on the basis of the quality of such inventory) or consignment basis; (h) Receivables not subject to a fully perfected first priority security interest in favor of the Secured Parties or subject to any security interest or Lien in favor of any Person other than the Lien of the Secured Parties; (i) Receivables, the account debtor of which is a Governmental Authority; (j) Receivables with respect to which the account debtor's obligation does not constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms; (k) Receivables with respect to which the Borrower or the relevant Subsidiary, as applicable, has not yet shipped the applicable goods or performed the applicable service; and (l) Receivables which the Administrative Agent, exercising reasonable discretion, has determined to be unacceptable. "Borrowing Request" means a request by the Borrower for a Borrowing in accordance with Section 2.3. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed, provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Expenditures" of any Person means expenditures for fixed or capital assets and all other capitalized expenditures (including in respect of software), in each case whether paid in cash or other consideration or accrued as a liability (excluding any capitalized interest and any such expenditure in respect of an asset acquired in connection with normal replacement and maintenance programs properly charged to current operations and excluding any such expenditure in respect of replacement assets acquired with the proceeds of insurance) made by such Person. "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Change in Control" means (i) the ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 as in effect on the date hereof) of shares representing 35% or more of the aggregate ordinary voting power or economic interests represented by the issued and outstanding equity securities of the Parent on a fully diluted basis, (ii) the occupation of a majority of the seats (other than vacant seats) on the board of directors of the Parent by Persons who were neither (a) nominated by the board of directors of the Parent nor (b) appointed by directors so nominated or (iii) the failure of the Parent to own directly, beneficially and of record, 100% of the aggregate ordinary voting power represented by the issued and outstanding equity securities of the Borrower on a fully diluted basis. "Change in Law" means (i) the adoption of any law, rule or regulation after the date of this Credit Agreement, (ii) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Credit Agreement or (iii) compliance by any Credit Party (or, for purposes of Section 3.5(b), by any lending office of such Credit Party or by such Credit Party's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Credit Agreement. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Term Loans or LC Loans. "Code" means the Internal Revenue Code of 1986. "Collateral" means any and all "Collateral" as defined in any applicable Security Document. "Consent and Intercreditor Agreement" means the Consent and Intercreditor Agreement, substantially in the form of Exhibit G, between Milberg Factors, Inc. and the Administrative Agent, for the benefit of the Secured Parties. "Consolidated EBITDA" means, for any period, net income for such period of the Borrower and the Subsidiaries, determined on a consolidated basis in accordance with GAAP, plus, without duplication and to the extent deducted in determining such net income, the sum of (i) Consolidated Interest Expense for such period, (ii) provision for income taxes for such period, (iii) the aggregate amount attributable to depreciation and amortization for such period, (iv) the aggregate amount of extraordinary or non-recurring charges during such period and (v) the aggregate amount of non-cash losses resulting from the disposition of assets and other non-cash expenses during such period, and minus, without duplication and to the extent added in determining such net income for such period, the aggregate amount of extraordinary, non-cash and non-recurring gains resulting from the disposition of assets and other extraordinary, non-cash and non-recurring additions to income during such period. Notwithstanding anything to the contrary in this definition, for purposes hereof, the term "Consolidated EBITDA" shall be computed, on a consistent basis, to reflect purchases, acquisitions, sales, transfers and dispositions made by the Borrower and the Subsidiaries during the relevant period as if they occurred at the beginning of such period. "Consolidated Fixed Charges" means, for any period, the sum of each of the following with respect to the Borrower and the Subsidiaries, determined on a consolidated basis in accordance with GAAP: (i) Consolidated Interest Expense for such period, (ii) the sum of the aggregate amount of all Capital Expenditures made in cash during such period, (iii) the aggregate of all scheduled principal amounts that become payable during such period in respect of Indebtedness (excluding any prepayment under the second sentence of Section 2.7(b) and any prepayment under Section 2.7(e)) and (iv) the aggregate amount of cash income taxes paid for such period in accordance with the Tax Sharing Agreement. "Consolidated Interest Expense" means, for any period, interest and fees accrued or accreted by the Borrower and the Subsidiaries during such period in respect of the Indebtedness of the Borrower and the Subsidiaries, determined on a consolidated basis in accordance with GAAP, including (i) the amortization of debt discounts to the extent included in interest expense in accordance with GAAP, (ii) the amortization of all fees (including fees with respect to interest rate cap agreements or other agreements or arrangements entered into by the Borrower or any Subsidiary designed to protect the Borrower or such Subsidiary, as applicable, against fluctuations in interest rates) payable in connection with the incurrence of Indebtedness to the extent included in interest expense in accordance with GAAP and (iii) the portion of any rents payable under capital leases allocable to interest expense in accordance with GAAP, but excluding (a) pay-in-kind or accreted interest expense not involving any payment of cash and (b) all fees and other similar consideration (and the amortization of all debt discounts relating thereto) paid to the Credit Parties on the Effective Date. "Consolidated Total Debt" means, as of any date, the sum of the aggregate principal amount of all Indebtedness of the Borrower and the Subsidiaries that would be reflected as liabilities on a consolidated balance sheet of the Borrower and the Subsidiaries as of such date prepared in accordance with GAAP and, to the extent not otherwise included, the aggregate amount of all obligations as of such date of the Borrower and the Subsidiaries, determined on a consolidated basis in accordance with GAAP, of the type described in clause (xiii) of the definition of the term "Indebtedness". "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms "Controlling" and "Controlled" have meanings correlative thereto. "Credit Parties" means the Administrative Agent, the Issuing Bank and the Lenders. "Default" means any event or condition which constitutes an Event of Default or that upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Disclosed Matters" means the actions, suits and proceedings and the environmental matters disclosed in Schedule 4.6. "dollars" or "$" refers to lawful money of the United States of America. "Effective Date" means the date on which the conditions specified in Section 5.1 are satisfied (or waived in accordance with Section 10.2). "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Loan Party or other Subsidiary directly or indirectly resulting from or based upon (i) violation of any Environmental Law, (ii) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (iii) exposure to any Hazardous Materials, (iv) the release or threatened release of any Hazardous Materials into the environment or (v) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with any Loan Party or any other Subsidiary, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (i) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (ii) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (iii) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (iv) the incurrence by any Loan Party, any other Subsidiary or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan; (v) the receipt by any Loan Party, any other Subsidiary or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (vi) the incurrence by any Loan Party, any other Subsidiary or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (vii) the receipt by any Loan Party, any other Subsidiary or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Loan Party, any other Subsidiary or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Event of Default" has the meaning assigned to such term in Article 8. "Excess Cash Flow" means, for any period, Consolidated EBITDA in respect of such period, minus, without duplication, the sum of each of the following with respect to the Borrower and the Subsidiaries, determined on a consolidated basis in accordance with GAAP, (i) the sum of the aggregate amount of all Capital Expenditures (to the extent not financed using the proceeds of any Indebtedness) permitted under Section 7.15 and made in cash during such period, (ii) the sum of the aggregate of all scheduled principal amounts that became payable during such period in respect of Indebtedness (excluding any prepayment under the second sentence of Section 2.7(b) in respect of any prior period and any prepayment under Section 2.7(e)) and all prepayments of Term Loan Borrowings and LC Loan Borrowings under Section 2.7(a) to the extent such prepayments are made from Consolidated EBITDA, (iii) the aggregate amount of cash income taxes paid for such period in accordance with the Tax Sharing Agreement and (iv) Consolidated Interest Expense for such period. "Excluded Taxes" means, with respect to any Credit Party or any other recipient of any payment to be made by or on account of any obligation of any Loan Party under any Loan Document, (i) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Credit Party, in which its applicable lending office is located, (ii) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which such Loan Party is located and (iii) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Credit Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 3.7(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from such Loan Party with respect to such withholding tax pursuant to Section 3.7(a). "Federal Funds Effective Rate" means, for any day, a rate per annum (expressed as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Effective Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (ii) if such rate is not so published for any day, the Federal Funds Effective Rate for such day shall be the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by it. "Fixed Charge Coverage Ratio" means, as of the end of any fiscal quarter, the quotient of (i) Consolidated EBITDA for the period of four consecutive fiscal quarters ending thereon divided by (ii) Consolidated Fixed Charges for such period. Notwithstanding anything to the contrary in this definition, for purposes hereof, until a period of four consecutive fiscal quarters shall have elapsed after the date hereof, the term "Consolidated Fixed Charges" shall be computed, on a consistent basis, solely from the period of consecutive fiscal quarters that shall have elapsed as of the relevant fiscal quarter end. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the applicable Loan Party is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles in effect from time to time in the United States of America. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor as to enable the primary obligor to pay such Indebtedness or other obligation or (iv) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation, provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guaranteed" has a meaning correlative thereto. "Guarantee Agreement" means the Guarantee Agreement, substantially in the form of Exhibit D, among the Borrower, the Guarantors and the Administrative Agent, for the benefit of the Secured Parties. "Guarantee Documents" means the Guarantee Agreement and each other guarantee agreement, instrument or other document executed or delivered pursuant to Section 6.12 or 6.13 or Section 10(k), 10(l) or 10(m) of the Guarantee Agreement to guarantee any of the Obligations. "Guarantor" means the Parent and any subsidiary of the Parent that executes and delivers the Security Documents and the Guarantee Documents, in each case in accordance with Sections 5.1(g), 5.1(h), 6.12 and 6.13, Sections 10(k), 10(l) and 10(m) of the Guarantee Agreement and Sections 5(e) and 24 of the Security Agreement. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price swap, cap, collar, hedging or other like arrangement. "Holdback Agreement" means the Holdback Agreement, dated as of March 22, 2000, among the Parent, the Borrower and Claude H. Grizzard, Sr., as Stockholder's Representative. "Indebtedness" of any Person means, without duplication, (i) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (ii) all obligations of such Person evidenced by or otherwise in respect of bonds, debentures, notes or similar instruments, including seller paper, (iii) all obligations of such Person upon which interest charges are customarily paid, (iv) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (v) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (vi) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (vii) all Guarantees by such Person of Indebtedness of others, (viii) all Capital Lease Obligations of such Person, (ix) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty securing Indebtedness of others, (x) the principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product of the Borrower or any Subsidiary where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease under GAAP, (xi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted (e.g., take-or-pay obligations) or similar obligations, (xii) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances and (xiii) to the extent not otherwise included, all net obligations of such Person under Hedging Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Indemnitee" has the meaning assigned to such term in Section 10.3(b). "Initial Syndication Period" means the period commencing on the Effective Date and ending on the day on which the Administrative Agent notifies the Borrower in writing that the initial syndication of the credit facilities established under this Credit Agreement has been completed, but in no event later than six months after the Effective Date. "Initial Transaction Documents" means (i) the Agreement and Plan of Merger, dated as of July 8, 1999, by and among the Parent, the Borrower and Grizzard Advertising Incorporated, (ii) the Holdback Agreement and (iii) each other agreement, instrument or other document executed or delivered in connection therewith, including all approvals and consents obtained, and all legal opinions delivered, in connection with the Initial Transactions (and, in the case of each such legal opinion, evidence satisfactory to the Administrative Agent that the Credit Parties shall be permitted to rely thereon). "Initial Transactions" means (i) the merger of Grizzard Advertising Incorporated, a Texas corporation, into the Borrower, (ii) the change of the Borrower's name from "GCG Merger Corp." to "Grizzard Communications Group, Inc." and (iii) the payment of certain amounts in connection with such merger and the other transactions contemplated hereby as described in Schedule 1.1B, all to occur on the Effective Date pursuant to the Initial Transaction Documents, and each other transaction contemplated by the Initial Transaction Documents to occur on the Effective Date. "Interest Coverage Ratio" means, as of the end of any fiscal quarter, the quotient of (i) Consolidated EBITDA for the period of four consecutive fiscal quarters ending thereon divided by (ii) Consolidated Interest Expense for such period. Notwithstanding anything to the contrary in this definition, for purposes hereof, until a period of four consecutive fiscal quarters shall have elapsed after the date hereof, the term "Consolidated Interest Expense" shall be computed, on a consistent basis, solely from the period of consecutive fiscal quarters that shall have elapsed as of the relevant fiscal quarter end. "Interest Election Request" means a request by the Borrower to convert or continue a Borrowing in accordance with Section 3.2. "Interest Payment Date" means (i) with respect to any ABR Loan, the last day of each March, June, September and December, (ii) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Loan with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, (iii) as to all Revolving Loans, the Revolving Maturity Date, (iv) as to all Term Loans, the Term Maturity Date, and (v) as to all LC Loans, the LC Maturity Date. "Interest Period" means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six thereafter, as the Borrower may elect, provided that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period and (iii) during the Initial Syndication Period, the Borrower may only select Interest Periods of not greater than one month all of which shall commence on the same date and end on the same date. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Internet Subsidiaries" means, at any time, (i) WiredEmpire Inc. and Pegasus Internet Inc., (ii) any investment at such time in GreaterGood.com., Screenzone Media Networks, Fusion Networks or Mazescape.com and (iii) any other Subsidiary, or any other investments in any entity, that at such time is engaged primarily in the internet business or any business reasonably related thereto. "Issuing Bank" means Paribas, in its capacity as issuer of the Letter of Credit. "LC Commitment" means, with respect to each Lender having an LC Commitment, the commitment of such Lender to acquire participations in the Letter of Credit hereunder and to make LC Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's participation in the Letter of Credit and such Lender's LC Loans hereunder, as such commitment may be reduced as a result of a reduction in the amount of the Letter of Credit pursuant to Sections 2.1 and 2.8 or reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.4. The initial amount of each applicable Lender's LC Commitment is set forth on Schedule 2.1, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its LC Commitment, as applicable. The initial aggregate amount of the LC Commitments is $5,000,000. "LC Disbursement" means a payment made by the Issuing Bank pursuant to the Letter of Credit. "LC Exposure" means, at any time, the sum, without duplication, of (i) the aggregate undrawn amount of the Letter of Credit at such time plus (ii) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time plus (iii) the aggregate outstanding principal amount of all LC Loans at such time. The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time. "LC Loan" means a Loan referred to in Section 2.1(c) and made pursuant to Section 2.8(e). "LC Maturity Date" means March 31, 2005. "Lenders" means the Persons listed on Schedule 2.1 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "Letter of Credit" means the letter of credit issued pursuant to this Credit Agreement. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (i) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (ii) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset and (iii) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan Documents" means this Credit Agreement, the Notes, the Guarantee Documents, the Security Documents and the Subordination Agreement. "Loan Parties" means the Borrower and the Guarantors. "Loans" means the loans made by the Lenders to the Borrower pursuant to this Credit Agreement. "Margin Stock" has the meaning assigned to such term in Regulation U. "Material Adverse Effect" means a material adverse effect on (i) the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole, (ii) the ability of any Loan Party to perform any of its obligations under any Loan Document or (iii) the rights of or benefits available to any Credit Party under any Loan Document. "Material Obligations" means (i) Indebtedness or other obligations of one or more of the Loan Parties to Milberg Factors, Inc. and (ii) other Indebtedness (other than Indebtedness under the Loan Documents) or other obligations of any one or more of the Loan Parties and the other Subsidiaries in an aggregate principal amount exceeding $500,000. For purposes of determining Material Obligations, the "principal amount" of the obligations of any Loan Party or any other Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Loan Party or other Subsidiary, as applicable, would be required to pay if such Hedging Agreement were terminated at such time. "Milberg Financing Documents" means each agreement, instrument or other document executed or delivered by any Loan Party in connection with the Indebtedness and other obligations incurred by the Loan Parties to Milberg Factors, Inc. "Mortgage" means a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien on any Mortgaged Property to secure the Obligations. Each Mortgage shall be satisfactory in form and substance to the Administrative Agent. "Mortgaged Property" means, initially, each parcel of real property and the improvements thereto owned by the Borrower or any Guarantor and identified on Schedule 1.1A, and includes each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 6.12 or 6.13 or Sections 10(k), 10(l) or 10(m) of the Guarantee Agreement. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Proceeds" means, with respect to any event, (a) the cash proceeds received in respect of such event, including (i) any cash received in respect of any non-cash proceeds, but only as and when received, (ii) in the case of a casualty, insurance proceeds and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, (b) net of the sum of (i) all reasonable fees and out-of-pocket expenses paid by the Loan Parties and the other Subsidiaries to third parties in connection with such event, (ii) in the case of a sale, transfer, lease or other disposition of an asset (including pursuant to a sale and leaseback transaction), the amount of all payments required to be made by the Loan Parties and the other Subsidiaries as a result of such event to repay Indebtedness (other than Indebtedness under the Loan Documents) secured by such asset or otherwise subject to mandatory payment as a result of such event, and (iii) the amount of all taxes paid (or reasonably estimated to be payable after giving effect to all net operating losses and other tax credits available under the Tax Sharing Agreement) by the Loan Parties and the other Subsidiaries, and the amount of any reserves established by the Loan Parties and the other Subsidiaries to fund contingent liabilities reasonably estimated to be payable, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by the chief financial officer of the Borrower), provided, however, that, subject to Section 6.11 and Section 5(l) of the Security Agreement, with respect to any such casualty or condemnation or similar event, if (A) the Borrower shall deliver a certificate of its chief financial officer to the Administrative Agent at the time of event setting forth the intent of the relevant Loan Parties and other Subsidiaries to use the proceeds of such event to replace or repair the assets that are the subject thereof with, or otherwise purchase, other assets to be used in the same line of business within 180 days of receipt of such proceeds and (B) no Default shall have occurred and shall be continuing at the time of such certificate or at the proposed time of the application of such proceeds, such proceeds shall not constitute Net Proceeds except to the extent not so used at the end of such 180-day period, at which time such proceeds shall be deemed Net Proceeds. "Notes" means, with respect to each Lender, a promissory note evidencing such Lender's Loans payable to the order of such Lender (or, if required by such Lender, to such Lender and its registered assigns), substantially in the form of Exhibit C. "Obligations" has the meaning assigned to such term in the Security Agreement. "Other Taxes" means any and all current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, the Loan Documents. "Parent" means Marketing Services Group, Inc., a Nevada corporation. "Participant" has the meaning assigned to such term in Section 10.4(e). "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Perfection Certificate" means a certificate in the form of Annex 1 to the Security Agreement or any other form approved by the Administrative Agent. "Permitted Encumbrances" means: (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 6.4; (b) landlords', vendors', carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 6.4; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article 8; (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of any Loan Party or other Subsidiary and other encumbrances disclosed in any policy of title insurance satisfactory to the Administrative Agent issued in respect of any Mortgage; and (g) Liens on Margin Stock to the extent that a prohibition on such Liens would violate Regulation U. "Permitted Investments" means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent that such obligations are backed by the full faith and credit of the United States of America), in each case measuring within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, or any successor thereto, or from Moody's Investors Service, Inc. or any successor thereto; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000 or, to the extent not otherwise included, any Lender; and (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) of this definition and entered into with a financial institution satisfying the criteria described in clause (c) of this definition. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which any Loan Party, any other Subsidiary or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prepayment/Reduction Event" means, without duplication: (a) any of the following events with respect to the Borrower or any Subsidiary: (i) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of any Loan Party and (ii) the receipt by the Borrower or any Subsidiary of any capital contribution (other than in connection with the Initial Transactions) if at the time thereof or immediately after giving effect thereto a Default or Event of Default shall have occurred and be continuing (other than a Default of the Borrower's obligations under Section 2.7(e)); and (b) any of the following events with respect to the Guarantors (other than the Subsidiaries): (i) the issuance by any such Guarantor of any equity securities other than (A) the issuance of restricted equity securities for executive compensation in the ordinary course of business, (B) the issuance of equity securities to any other of such Guarantors and (C) the issuance of equity securities (and any warrants, options or other rights to acquire equity securities) to the extent the proceeds thereof have been used to make a redemption or repurchase pursuant to Section 10(x)(iv) of the Guarantee Agreement, (ii) the receipt by any such Guarantor of any capital contribution other than from any other of such Guarantors, (iii) any sale, transfer, lease or other disposition by any such Guarantor of any Internet Subsidiary and (iii) the receipt by any such Guarantor of any cash dividend or other distribution from any Internet Subsidiary, other than any such dividend or other distribution for the purpose of enabling the Parent, as a consolidated taxpayer, to pay taxes attributable such Internet Subsidiary in accordance with the Tax Sharing Agreement. "Prime Rate" means the rate of interest per annum publicly announced from time to time by The Chase Manhattan Bank as its prime commercial lending rate; each change in the Prime Rate being effective from and including the date such change is publicly announced as being effective. The Prime Rate is not intended to be lowest rate of interest charged by The Chase Manhattan Bank or any Credit Party in connection with extensions of credit to borrowers. "Private Placement Documents" means (i) the Securities Purchase Agreement, dated as of February 18, 2000, among the Parent, Marshall Capital Management, Inc. and RGC International Investors, LDC, (ii) the Certificate of Designations, Preferences, and Rights of Series E Convertible Preferred Stock of Marketing Services Group, Inc., dated February 22, 2000, (iii) the Stock Purchase Warrant issued to each of Marshall Capital Management, Inc. and RGC International Investors, LDC, dated February 24, 2000, in connection with such Securities Purchase Agreement, (iv) the Registration Rights Agreement, dated as of February 18, 2000, among the Parent, Marshall Capital Management, Inc. and RGC International Investors, LDC and (v) each other agreement, instrument or other document executed or delivered in connection with any of the foregoing. "Receivable" means any right to payment arising as a result of, or in connection with, a sale of inventory or the performance of services by, and in the ordinary course of business of, the Borrower or any Subsidiary. "Register" has the meaning assigned to such term in Section 10.4(c). "Regulation T" means Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation U" means Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation X" means Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Required Lenders" means, at any time, Lenders having outstanding Revolving Loans, outstanding Term Loans, LC Exposures and unused Revolving Commitments representing more than 50% of the sum of the total outstanding Revolving Loans, outstanding Term Loans, LC Exposures and unused Revolving Commitments at such time. "Restricted Payment" means, as to any Person, (i) any dividend or other distribution by such Person (whether in cash, securities or other property) with respect to any shares of any class of equity securities of such Person, (ii) any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such shares or any option, warrant or other right to acquire any such shares and (iii) any payment of principal or interest or any purchase, redemption, retirement, acquisition or defeasance with respect to any Indebtedness of such Person which is subordinated to the payment of the Obligations. "Revolving Commitment" means, with respect to each Lender having a Revolving Commitment, the commitment of such Lender to make Revolving Loans hereunder, expressed as an amount representing the maximum aggregate outstanding principal amount of such Lender's Revolving Loans hereunder, as such commitment may be reduced or increased from time to time pursuant to Section 2.5 or pursuant to assignments by or to such Lender pursuant to Section 10.4. The initial amount of each applicable Lender's Revolving Commitment is set forth on Schedule 2.1, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable. The initial aggregate amount of the Revolving Commitments is $13,000,000. "Revolving Loan" means a Loan referred to in Section 2.1(a) and made pursuant to Section 2.4. "Revolving Maturity Date" means March 31, 2005. "Secured Parties" means the "Secured Parties" as defined in the Security Agreement. "Security Agreement" means the Security Agreement, substantially in the form of Exhibit E, among the Borrower, the Guarantors and the Administrative Agent, for the benefit of the Secured Parties. "Security Documents" means the Security Agreement, the Mortgages and each other security agreement, instrument or other document executed or delivered pursuant to Section 6.12 or 6.13, Section 10(k), 10(l) or 10(m) of the Guarantee Agreement or Section 5(e) or 24 of the Security Agreement to secure any of the Obligations. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Subordination Agreement" means the Subordination Agreement, substantially in the form of Exhibit F, among the Parent, Marshall Capital Management, Inc., RGC International Investors, LDC and the Administrative Agent, for the benefit of the Secured Parties. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held by the parent or one or more subsidiaries of the parent. "Subsidiary" means any subsidiary of the Borrower. "Tax Sharing Agreement" means the Federal Income Tax Allocation Agreement, dated as of March 22, 2000, among the Parent and its subsidiaries. "Taxes" means any and all current or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Term Commitment" means, with respect to each Lender having a Term Commitment, the commitment of such Lender to make a Term Loan hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Term Loan hereunder. The amount of each applicable Lender's Term Commitment is set forth on Schedule 2.1. The aggregate amount of the Term Commitments is $40,000,000. "Term Loan" means a Loan referred to in Section 2.1(b) and made pursuant to Section 2.4. "Term Maturity Date" means March 31, 2005. "Total Leverage Ratio" means, as of any date, the quotient of (i) Consolidated Total Debt as of such date divided by (ii) Adjusted Consolidated EBITDA for the period of four consecutive fiscal quarters ending on, or most recently before, such date. "Transactions" means (i) the execution, delivery and performance by each Loan Party of each Loan Document to which it is a party, (ii) the borrowing of the Loans and the issuance of the Letter of Credit, (iii) the use of the proceeds of the Loans and the Letter of Credit and (iv) the Initial Transactions. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. Section 1.2 Classification of Loans and Borrowings For purposes of this Credit Agreement, Loans may be classified and referred to by Class (e.g., a "Term Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Term Loan"). Borrowings may also be classified and referred to by Class (e.g., a "Term Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Term Borrowing"). Section 1.3 Terms Generally The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (ii) any definition of or reference to any law shall be construed as referring to such law as from time to time amended and any successor thereto and the rules and regulations promulgated from time to time thereunder, (iii) any reference herein to any Person shall be construed to include such Person's successors and assigns, (iv) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Credit Agreement in its entirety and not to any particular provision hereof, (v) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Credit Agreement and (vi) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. Any reference to an "applicable Lender" shall mean (a) in the case of Revolving Borrowings, Lenders having a Revolving Commitment, (b) in the case of the Letter of Credit and LC Borrowings, Lenders having an LC Commitment and (c) in the case of Term Borrowings, Lenders having a Term Commitment. Section 1.4 Accounting Terms; GAAP Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time, provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Unless the context otherwise requires, any reference to a fiscal period shall refer to the relevant fiscal period of the Borrower. ARTICLE 2. THE CREDITS Section 2.1 Commitments (a) Subject to the terms and conditions set forth herein, each Lender having a Revolving Commitment agrees to make Revolving Loans to the Borrower in dollars from time to time during the Availability Period in an aggregate principal amount that will not result in (i) the sum of the aggregate outstanding principal amount of such Lender's Revolving Loans exceeding such Lender's Revolving Commitment and (ii) the sum of the aggregate outstanding principal amount of all Revolving Loans exceeding the Borrowing Base. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. (b) Subject to the terms and conditions hereof, each Lender having a Term Commitment severally agrees to make a Term Loan to the Borrower in dollars on the Effective Date in a principal amount equal to such Term Commitment. Term Loans which are prepaid or repaid, in whole or in part, may not be reborrowed. (c) Subject to the terms and conditions hereof, each Lender having an LC Commitment severally agrees to make LC Loans to the Borrower in dollars from time to time prior to the expiration of the Letter of Credit in an aggregate principal amount that will not result in such Lender's LC Exposure exceeding such Lender's LC Commitment, provided that immediately after giving effect thereto the aggregate undrawn amount of the Letter of Credit shall have been automatically reduced in accordance with the Holdback Agreement by an amount equal to the amount of such LC Loan. Section 2.2 Loans and Borrowings (a) Each Revolving Loan, Term Loan and LC Loan shall be made as part of a Borrowing consisting of Revolving Loans, Term Loans or LC Loans, as applicable, made by the applicable Lenders ratably in accordance with their respective Revolving Commitments, Term Commitments and LC Commitments. The failure of any applicable Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder, provided that the Revolving Commitments, Term Commitments and LC Commitments of the applicable Lenders are several, and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 3.4, each Borrowing shall be comprised entirely of (i) Revolving Loans, Term Loans or LC Loans, as applicable, and (ii) ABR Loans or Eurodollar Loans, as applicable, in each case as the Borrower may request in accordance herewith. Each applicable Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan, provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Credit Agreement. (c) At the commencement of each Interest Period for any Eurodollar Revolving Borrowing or Eurodollar Term Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $250,000 and not less than $500,000. At the time that each ABR Revolving Borrowing or ABR Term Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $250,000 and not less than $500,000, provided that an ABR Revolving Borrowing or an ABR Term Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Commitments or the entire aggregate outstanding principal amount of the Term Loans, as applicable. Borrowings of more than one Type may be outstanding at the same time, provided that there shall not at any time be more than a total of six Eurodollar Borrowings outstanding. (d) Notwithstanding any other provision of this Credit Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after (i) the Revolving Maturity Date, in the case of Revolving Loans, (ii) the Term Maturity Date, in the case of Term Loans or (iii) the LC Maturity Date, in the case of LC Loans. Section 2.3 Requests for Borrowings (a) To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (i) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (ii) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.2: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be a Revolving Borrowing, Term Borrowing or LC Loan Borrowing; (iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (v) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (vi) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.4. (b) If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each applicable Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. Section 2.4 Funding of Borrowings (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. Subject to Section 5.2, the Administrative Agent will make such Loans available to the Borrower by promptly crediting or otherwise transferring the amounts so received, in like funds, to an account of the Borrower designated by it in the applicable Borrowing Request. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate that would be otherwise applicable to such Borrowing. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. Section 2.5 Termination and Reduction of Revolving Commitments (a) Unless previously terminated, the Revolving Commitments shall terminate on the Revolving Maturity Date. (b) The Borrower may at any time terminate, or from time to time reduce, the Revolving Commitments, provided that (i) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any concurrent repayment or prepayment of the Revolving Loans in accordance with Section 2.6 or 2.7, the aggregate outstanding principal amount of the Revolving Loans would exceed the total Revolving Commitments, and (iii) each such reduction shall be in an amount that is an integral multiple of $250,000 and not less than $500,000. (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Revolving Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable, provided that a notice of termination of the Revolving Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Revolving Commitments hereunder shall be permanent. Each reduction of the Revolving Commitments hereunder shall be made ratably among the applicable Lenders in accordance with their respective Revolving Commitments. (d) In addition to any termination or reduction of the Revolving Commitments under paragraph (a) or (b) of this Section, the Revolving Commitments shall be reduced as required under Section 2.7(b). Section 2.6 Repayment of Loans; Evidence of Debt (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each applicable Lender the then unpaid principal amount of each Revolving Loan, Term Loan and LC Loan on the Revolving Maturity Date, Term Maturity Date and LC Maturity Date, respectively. (b) On each date below, the aggregate unpaid principal balance of the Term Loans shall be due and payable in the amount set forth below adjacent to such date: - --------------------------------============================ Date Amount - --------------------------------============================ December 31, 2000 $1,500,000 - --------------------------------============================ - --------------------------------============================ March 31, 2001 $1,500,000 - --------------------------------============================ - --------------------------------============================ June 30, 2001 $1,500,000 - --------------------------------============================ - --------------------------------============================ September 30, 2001 $1,500,000 - --------------------------------============================ December 31, 2001 $2,400,000 - --------------------------------============================ - --------------------------------============================ March 31, 2002 $2,400,000 - --------------------------------============================ - --------------------------------============================ June 30, 2002 $2,400,000 - --------------------------------============================ - --------------------------------============================ September 30, 2002 $2,400,000 - --------------------------------============================ December 31, 2002 $2,400,000 - --------------------------------============================ - --------------------------------============================ March 31, 2003 $2,400,000 - --------------------------------============================ - --------------------------------============================ June 30, 2003 $2,400,000 - --------------------------------============================ - --------------------------------============================ September 30, 2003 $2,400,000 - --------------------------------============================ December 31, 2003 $2,400,000 - --------------------------------============================ - --------------------------------============================ March 31, 2004 $2,400,000 - --------------------------------============================ - --------------------------------============================ June 30, 2004 $2,400,000 - --------------------------------============================ - --------------------------------============================ September 30, 2004 $2,400,000 - --------------------------------============================ December 31, 2004 $2,400,000. - --------------------------------============================ (c) On the date of each fiscal quarter end, commencing on March 31, 2004, the aggregate unpaid principal balance of the LC Loans shall be due and payable in an amount equal to (i) the aggregate unpaid principal balance of the LC Loans as of March 31, 2004 multiplied by (ii) 20%. (d) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the debt of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (e) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (f) The entries made in the accounts maintained pursuant to paragraphs (d) or (e) of this Section shall, to the extent not inconsistent with entries made in the Notes, be prima facie evidence of the existence and amounts of the obligations recorded therein, provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Credit Agreement. (g) The Loans evidenced by each Note and interest thereon shall at all times (including after assignment pursuant to Section 10.4) be represented by one or more Notes in such form payable to the order of the payee named therein and its registered assigns. Section 2.7 Prepayment of Loans (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section. (b) In the event and on each occasion that any Net Proceeds are received by or on behalf of any Loan Party or any other Subsidiary in respect of any Prepayment/Reduction Event, then, immediately after such Net Proceeds are received, the Borrower shall prepay Borrowings in an amount equal to (i) in the case of any event referred to in clause (b) of the definition of the term "Prepayment/Reduction Event", 50% of such Net Proceeds, provided that the aggregate amount of all prepayments made under this clause (i) in respect of all such events shall not exceed $20,000,000, and (ii) in all other cases, 100% of such Net Proceeds. In addition, on October 31st of each year (commencing on October 31, 2001), the Borrower shall prepay Borrowings in an amount equal to (i) 75% of the Excess Cash Flow attributable to the most recently completed fiscal year of the Borrower, in the event that the Total Leverage Ratio in respect of such fiscal year is greater than or equal to 2.00:1.00 or (ii) 50% of such Excess Cash Flow, in the event that such Leverage Ratio is less than 2.00:1.00. Notwithstanding anything to the contrary herein, each prepayment under this Section 2.7(b) shall be applied in the following order: (A) first, as a prepayment of the Term Borrowings then outstanding, (B) second, to the extent of any excess, as a reduction of the Revolving Commitments then outstanding, (C) third, to the extent of any excess, as a prepayment of the LC Borrowings then outstanding and (D) fourth, to the extent of any excess, as a cash deposit into the account referred to in Section 2.8(i) to be held by the Administrative Agent in accordance with such Section as additional collateral for the payment and performance of the Borrower's obligations hereunder. (c) In the event of any partial reduction or termination of the Revolving Commitments, then (i) at or prior to the date of such reduction or termination, the Administrative Agent shall notify the Borrower and the applicable Lenders of the aggregate outstanding principal amount of the Revolving Loans after giving effect thereto and (ii) if such amount would exceed the total Revolving Commitments after giving effect to such reduction or termination, then the Borrower shall, on the date of such reduction or termination, prepay Revolving Borrowings in an amount sufficient to eliminate such excess. (d) If on any day the aggregate outstanding principal amount of the Revolving Loans would exceed the Borrowing Base, then the Borrower shall, within three Business Days of such day, prepay Revolving Borrowings in an amount sufficient to eliminate such excess. (e) During the period from February 1st to April 30th of each year (commencing on February 1, 2001), the Borrower shall cause the sum of the aggregate outstanding principal amount of the Revolving Loans not to exceed $2,500,000 for a period of not less than 30 consecutive days. (f) The Borrower shall notify the Administrative Agent by telephone (confirmed by facsimile) of any prepayment hereunder (i) in the case of a prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid, provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Revolving Commitments as contemplated by Section 2.5, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.5. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing under Sections 2.5(b) and 2.7(a) shall, when added to the amount of each concurrent reduction of the Revolving Commitments and prepayment of Borrowings under such Sections, be in an integral multiple of $250,000 and not less than $500,000. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Each prepayment of Term Loans or LC Loans shall be applied ratably among the remaining installments of principal required under Section 2.6(b) or 2.6(c), as applicable. Prepayments shall be accompanied by accrued interest to the extent required by Section 3.1. Section 2.8 Letter of Credit (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance on the Effective Date of the Letter of Credit denominated in dollars for its own account, in all respects acceptable to the Administrative Agent and the Issuing Bank. (b) Notice of Issuance; Certain Conditions. To request the issuance of the Letter of Credit, the Borrower shall hand deliver or facsimile (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance) a notice requesting the issuance of the Letter of Credit and specifying the date of issuance (which shall be a Business Day), the date on which the Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of the Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to issue the Letter of Credit. The initial undrawn amount of the Letter of Credit shall be $5,000,000. (c) Expiration Date. The Letter of Credit shall expire at or prior to the close of business on June 30, 2003. The Letter of Credit may not be renewed or extended or increased. (d) Participations. By the issuance of the Letter of Credit and without any further action on the part of the Issuing Bank or the applicable Lenders, the Issuing Bank hereby grants to each Lender having an LC Commitment, and each such Lender hereby acquires from the Issuing Bank, a participation in the Letter of Credit equal to such Lender's Applicable Percentage of the aggregate amount available to be drawn under the Letter of Credit. In consideration and in furtherance of the foregoing, each such Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each such Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of the Letter of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement; LC Loans. If the Issuing Bank shall make any LC Disbursement in respect of the Letter of Credit, then the Issuing Bank shall either (i) notify the Borrower to reimburse the Issuing Bank therefor, in which case the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement and any accrued interest thereon not later than 1:00 p.m., New York City time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 12:00 noon, New York City time, on such date, or if such notice has not been received by the Borrower prior to such time on such date, then not later than 1:00 p.m., New York City time, on (A) the Business Day that the Borrower receives such notice, if such notice is received prior to 12:00 noon, New York City time, on the day of receipt or (B) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt, provided that the Borrower may, subject to the conditions of borrowing set forth herein, request in accordance with Sections 2.1 and 2.3 that such payment be financed with an ABR LC Loan Borrowing in an equal amount and, to the extent so financed, the Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR LC Borrowing or (ii) notify the Administrative Agent that that the Issuing Bank is requesting that the applicable Lenders make an ABR LC Borrowing in an amount equal to such LC Disbursement and any accrued interest thereon, in which case (A) the Administrative Agent shall notify each applicable Lender of the details thereof and of the amount of such Lender's LC Loan to be made as part of such ABR LC Borrowing and (B) each Lender shall, whether or not any Default shall have occurred and be continuing, any representation or warranty shall be accurate, any condition to the making of any Loan hereunder shall have been fulfilled, or any other matter whatsoever, make the Loan to be made by it under this paragraph by wire transfer of immediately available funds to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders, (X) on such date, in the event that such Lender shall have received notice of such ABR LC Borrowing prior to 12:00 noon, New York City time, or (Y) if such notice has not been received by such Lender prior to such time on such date, then not later than 1:00 p.m., New York City time, on (I) the Business Day that such Lender receives such notice, if such notice is received prior to 12:00 noon, New York City time, on the day of receipt or (II) the Business Day immediately following the day that such Lender receives such notice, if such notice is not received prior to such time on the day of receipt. Such Loans shall, for all purposes hereof, be deemed to be an ABR LC Borrowing, and the Lenders obligations to make such Loans shall be absolute and unconditional. The Administrative Agent will make such Loans available to the Issuing Bank by promptly crediting or otherwise transferring the amounts so received, in like funds, to the Issuing Bank for the purpose of repaying in full the LC Disbursement and all accrued interest thereon. (f) Obligations Absolute. The Borrower's obligations to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Credit Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of the Letter of Credit or this Credit Agreement, or any term or provision therein or herein, (ii) any draft or other document presented under the Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under the Letter of Credit against presentation of a draft or other document that does not comply with the terms of the Letter of Credit or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower's obligations hereunder. Neither any Credit Party nor any of their respective Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of the Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to the Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under the Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of the Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of the Letter of Credit. (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under the Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by facsimile) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the applicable Lenders with respect to any such LC Disbursement. (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 3.1(b) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment. (i) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the applicable Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Article 8. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Credit Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposit, which investments shall be in direct short-term obligations of, or short-term obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, in each case maturing no later than the expiry date of the Letter of Credit giving rise to the relevant LC Exposure, such deposit shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Borrower under this Credit Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after the Administrative Agent's shall have received a request therefor from the Borrower, provided that all Events of Default have been cured or waived. Section 2.9 Payments Generally; Pro Rata Treatment; Sharing of Setoffs (a) Each Loan Party shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal of Loans, LC Disbursements, interest or fees, or of amounts payable under Sections 3.5, 3.6, 3.7 or 10.3, or otherwise) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without setoff or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its office at 787 Seventh Avenue, New York, New York, or such other office as to which the Administrative Agent may notify the other parties hereto, except payments to be made to the Issuing Bank as expressly provided herein and except that payments pursuant to Sections 3.5, 3.6, 3.7 and 10.3 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal of Loans, unreimbursed LC Disbursements, interest, fees and commissions then due hereunder, such funds shall be applied (i) first, towards payment of interest, fees and commissions then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest, fees and commissions then due to such parties and (ii) second, towards payment of principal of Loans and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal of Loans and unreimbursed LC Disbursements then due to such parties. (c) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of, or interest on, any of its Loans or participations in LC Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and accrued interest thereon than the proportion received by any other applicable Lender, then the applicable Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements of other applicable Lenders to the extent necessary so that the benefit of all such payments shall be shared by the applicable Lenders ratably in accordance with the aggregate amount of principal of, and accrued interest on, their respective Loans and participations in LC Disbursements, provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Credit Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from a Loan Party prior to the date on which any payment is due to the Administrative Agent for the account of the applicable Credit Parties hereunder that such Loan Party will not make such payment, the Administrative Agent may assume that such Loan Party has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to such Credit Parties the amount due. In such event, if such Loan Party has not in fact made such payment, then each such Credit Party severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Credit Party with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Credit Party shall fail to make any payment required to be made by it pursuant to Section 2.4(b) or 2.8(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Credit Party to satisfy such Credit Party's obligations under such Sections until all such unsatisfied obligations are fully paid. ARTICLE 3. INTEREST, FEES, YIELD PROTECTION, ETC. Section 3.1 Interest (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Margin, and the Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin. (b) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraph of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Borrowings as provided in the preceding paragraph of this Section. In addition, notwithstanding the foregoing, if an Event of Default has occurred and is continuing, then, so long as such Event of Default is continuing, all outstanding principal of each Loan shall, without duplication of amounts payable under the preceding sentence, bear interest, after as well as before judgment, at a rate per annum equal to 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraph of this Section. (c) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan, provided that (i) interest accrued pursuant to paragraph (b) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than the prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (d) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent clearly demonstrable error. Section 3.2 Interest Elections (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the applicable Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.3 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.2: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) of this paragraph shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each applicable Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If the Borrower fails to deliver a timely Interest Election Request prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period, such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. Section 3.3 Fees (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender having a Revolving Commitment, a commitment fee, which shall accrue at a rate per annum equal to (i) 0.75%, at all times when the Total Leverage Ratio is greater than or equal to 2.00:1.00 and (ii) 0.50%, at all other times, on the daily amount of the unused Revolving Commitment during the period from and including the date on which this Credit Agreement shall have become effective in accordance with Section 10.6 to but excluding the date on which such Revolving Commitment terminates. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year, each date on which the Revolving Commitments are permanently reduced and on the date on which the Revolving Commitments terminate, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). Changes in the rate at which commitment fees accrue resulting from a change in the Total Leverage Ratio shall be based upon the certificate most recently delivered under Section 6.1(c) and shall become effective on the second Business Day after the date such certificate is delivered to the Administrative Agent. Notwithstanding anything to the contrary in this paragraph, (A) if the Borrower shall fail to deliver to the Administrative Agent such a certificate on or prior to any date required hereby, the Total Leverage Ratio for purposes of this paragraph only shall be deemed to be 2.00:1.00 from and including such date to the date of delivery to the Administrative Agent of such certificate and (ii) during the period commencing on the Effective Date and ending on the date that is six months after the Effective Date, the Total Leverage Ratio for purposes of this paragraph only shall be deemed to be 2.00:1.00. (b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender having an LC Commitment a participation fee with respect to its participations in the Letter of Credit, which shall accrue at rate per annum equal to the Applicable Margin on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements or the LC Loans) during the period from and including the date on which this Credit Agreement shall become effective in accordance with Section 10.6 to but excluding the later of the date on which such Lender's LC Commitment terminates and the date on which such Lender ceases to have any such LC Exposure and (ii) the Issuing Bank's standard fees with respect to the issuance of the Letter of Credit or processing of drawings thereunder. Accrued participation fees and fronting fees shall be payable in arrears on the last day of March, June, September and December of each year, commencing on the first such date to occur after the date hereof; provided that all such fees shall be payable on the date on which the LC Commitments terminate, and any such fees accruing after the date on which the LC Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within ten days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). Notwithstanding anything to the contrary herein, at all times during the continuance of an Event of Default, all participation fees and fronting fees shall be calculated at a rate per annum equal to 2% plus the rate otherwise applicable thereto and shall be payable on demand. (c) The Borrower agrees to pay to each Credit Party, for its own account, fees and other amounts payable in the amounts and at the times separately agreed upon between the Borrower and such Credit Party. (d) All fees and other amounts payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in each case of fees payable to it) for distribution, in the case of commitment and participation fees, to the Lenders. Fees and other amounts paid shall not be refundable under any circumstances. Section 3.4 Alternate Rate of Interest If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or (b) the Administrative Agent is advised by any applicable Lender that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lender of making or maintaining its Loan included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the applicable Lenders by telephone or facsimile as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the applicable Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing. Section 3.5 Increased Costs; Illegality (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Credit Party (except any such reserve requirement reflected in the Adjusted LIBO Rate); (ii) impose on any Credit Party or the London interbank market any other condition affecting this Credit Agreement, any Eurodollar Loans made by such Credit Party or any participation therein or the Letter of Credit or participation therein, and the result of any of the foregoing shall be to increase the cost to such Credit Party of making or maintaining any Eurodollar Loan or the cost to such Credit Party of issuing, participating in or maintaining the Letter of Credit hereunder or to increase the cost to such Credit Party or to reduce the amount of any sum received or receivable by such Credit Party hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Credit Party such additional amount or amounts as will compensate such Credit Party for such additional costs incurred or reduction suffered. (b) If any Credit Party determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Credit Party's capital or on the capital of such Credit Party's holding company, if any, as a consequence of this Credit Agreement or the Loans made, the Letter of Credit issued or the participations therein held, by such Credit Party to a level below that which such Credit Party or such Credit Party's holding company could have achieved but for such Change in Law (taking into consideration such Credit Party's policies and the policies of such Credit Party's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Credit Party such additional amount or amounts as will compensate such Credit Party or such Credit Party's holding company for any such reduction suffered. (c) A certificate of a Credit Party setting forth the amount or amounts necessary to compensate such Credit Party or its holding company, as applicable, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Credit Party the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Credit Party to demand compensation pursuant to this Section shall not constitute a waiver of such Credit Party's right to demand such compensation. (e) Notwithstanding any other provision of this Credit Agreement, if, after the date of this Credit Agreement, any Change in Law shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent: (i) such Lender may declare that Eurodollar Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods and ABR Loans will not thereafter (for such duration) be converted into Eurodollar Loans), whereupon any request for a Eurodollar Borrowing or to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing, as applicable, for an additional Interest Period shall, as to such Lender only, be deemed a request for an ABR Loan (or a request to continue an ABR Loan as such for an additional Interest Period or to convert a Eurodollar Loan into an ABR Loan, as applicable), unless such declaration shall be subsequently withdrawn; and (ii) such Lender may require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans, as of the effective date of such notice as provided in the last sentence of this paragraph. In the event any Lender shall exercise its rights under (i) or (ii) of this paragraph (e), all payments and prepayments of principal that would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans, as applicable. For purposes of this paragraph, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower. Section 3.6 Break Funding Payments In the event of (a) the payment or prepayment (voluntary or otherwise) of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto or (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.7(f) and is revoked in accordance therewith), then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. Section 3.7 Taxes (a) Any and all payments by or on account of any obligation of any Loan Party hereunder and under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes, provided that, if such Loan Party shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that, after making all required deductions (including deductions applicable to additional sums payable under this Section), the applicable Credit Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Loan Party shall make such deductions and (iii) such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Loan Parties shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Each Loan Party shall indemnify each Credit Party, within ten days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by such Credit Party on or with respect to any payment by or on account of any obligation of such Loan Party under the Loan Documents (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Credit Party, or by the Administrative Agent on its own behalf or on behalf of a Credit Party, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the relevant Loan Party is located, or any treaty to which such jurisdiction is a party, with respect to payments under the Loan Documents shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. Section 3.8 Mitigation Obligations If any Lender requests compensation under Section 3.5, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.7, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans or Letter of Credit (or any participation therein) hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.5 or 3.7, as applicable, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. ARTICLE 4. REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Credit Parties that: Section 4.1 Organization; Powers Each of the Borrower and the Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. Section 4.2 Authorization; Enforceability The Transactions are within the corporate, partnership or other analogous powers of each of the Borrower and the Subsidiaries to the extent it is a party thereto and have been duly authorized by all necessary corporate, partnership or other analogous and, if required, equityholder action. Each Loan Document has been duly executed and delivered by each of the Borrower and the Subsidiaries to the extent it is a party thereto and constitutes a legal, valid and binding obligation thereof, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally. Section 4.3 Governmental Approvals; No Conflicts The Transactions (i) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (ii) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of the Subsidiaries or any order of any Governmental Authority, (iii) will not violate or result in a default under any material indenture, agreement or other instrument binding upon the Borrower or any of the Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of the Subsidiaries, and (iv) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of the Subsidiaries (other than Liens permitted by Section 7.2). Section 4.4 Financial Condition; No Material Adverse Change (a) The Borrower has heretofore furnished to the Credit Parties (i) its consolidated balance sheet and statements of income, stockholders' equity and cash flows as of and for the fiscal year ended December 31, 1998, reported on by Deloitte & Touche LLP, independent public accountants, (ii) its consolidated balance sheet and statements of income, stockholders' equity and cash flows as of and for the twelve consecutive month period ended December 31, 1999 and (iii) the related consolidated balance sheet and statement of operations of the Parent for the fiscal year ended June 30, 1999, in each case under this clause (iii) prepared on a pro forma basis after giving effect to, among other things, all of the Initial Transactions. The consolidated financial statements referred to in clauses (i) and (ii) above present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and consolidated Subsidiaries as of such dates and for the indicated periods in accordance with GAAP and are consistent with the books and records of the Borrower (which books and records are correct and complete), subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above, and the financial statements referred to in clause (iii) above have been prepared in accordance with GAAP on a consistent basis throughout the indicated periods indicated and present fairly, in all material respects, the pro form financial position, results of operations and changes in financial position of the Parent as of the indicated dates and for the indicated periods and are consistent with the books and records of the Parent (which books and records are correct and complete). (b) Since December 31, 1998, there has been no material adverse change in the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole, and since June 30, 1999, there has been no material adverse change in the business, assets, operations, prospects or condition, financial or otherwise, of the Parent and its subsidiaries, taken as a whole, from the business, assets, operations, prospects or condition, financial or otherwise, described in the financial statements referred to in Section 4.4(a)(iii). Section 4.5 Properties (a) Each of the Borrower and the Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do not materially interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. (b) Each of the Borrower and the Subsidiaries owns, or is entitled to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and the Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. (c) Schedule 4.5 sets forth the address of each real property that is owned or leased by any Loan Party or other Subsidiary as of the Effective Date after giving effect to the Transactions. (d) Neither the Borrower nor any of the Subsidiaries have received notice of, or have knowledge of, any pending or contemplated condemnation proceeding affecting any Mortgaged Property or any sale or disposition thereof in lieu of condemnation. Neither any Mortgaged Property of the Borrower or any Subsidiary nor any interest therein is subject to any right of first refusal, option or other contractual right to purchase such Mortgaged Property or interest therein. Section 4.6 Litigation and Environmental Matters (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of the Subsidiaries (i) that, if adversely determined (and there exists a reasonable possibility of such adverse determination), could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve any Loan Document or the Transactions. (b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) have failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) have become subject to any Environmental Liability, (iii) have received notice of any claim with respect to any Environmental Liability or (iv) know of any basis for any Environmental Liability. (c) Since the date of this Credit Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. Section 4.7 Compliance with Laws and Agreements Each of the Borrower and the Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. Section 4.8 Investment and Holding Company Status Neither the Borrower nor any of the Subsidiaries are (i) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (ii) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. Section 4.9 Taxes Each of the Borrower and the Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (i) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (ii) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. Section 4.10 ERISA No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $500,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $500,000 the fair market value of the assets of all such underfunded Plans. As of the Effective Date, neither the Borrower nor any Subsidiary has any obligation or liability in respect of any Plan or Multiemployer Plan. Section 4.11 Disclosure The Borrower has disclosed to the Credit Parties all agreements, instruments and corporate or other restrictions to which it or any of the Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower or any Subsidiary to any Credit Party in connection with the negotiation of the Loan Documents or delivered thereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. Section 4.12 Subsidiaries Schedule 4.12 sets forth the name of, and the ownership interest of the Borrower in, each Subsidiary and identifies each Subsidiary that is a Guarantor, in each case as of the Effective Date. Section 4.13 Insurance Schedule 4.13 sets forth a description of all insurance maintained by or on behalf of the Borrower and the Subsidiaries as of the Effective Date. As of the Effective Date, all premiums in respect of such insurance that are due and payable have been paid. Section 4.14 Labor Matters Except for the Disclosed Matters, (i) as of the Effective Date, there are no strikes, lockouts or slowdowns against the Borrower or any Subsidiary pending or, to the knowledge of the Borrower, threatened, (ii) the hours worked by and payments made to employees of the Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters, except where any such violations, individually and in the aggregate, would not be reasonably likely to result in a Material Adverse Effect, (iii) all material payments due from the Borrower or any Subsidiary, or for which any claim may be made against the Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of the Borrower or such Subsidiary and (iv) the consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower or any Subsidiary is bound. Section 4.15 Solvency Immediately after the consummation of each Transaction and immediately following the making of each Loan, if any, and the issuance of the Letter of Credit made or issued on the date thereof and after giving effect to the application of the proceeds of such Loan and the Letter of Credit, (i) the fair value of the assets of the Borrower and the Subsidiaries, taken as a whole, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of the Borrower and the Subsidiaries, taken as a whole, will be greater than the amount that will be required to pay the probable liability of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) each of the Borrower and the Subsidiaries that are Guarantors will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) each of the Borrower and the Subsidiaries that are Guarantors will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following such date. Section 4.16 Security Documents (a) The Security Agreement is effective to create in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Security Agreement) and, when (i) the pledged property constituting such Collateral is delivered to the Administrative Agent, (ii) the financing statements in appropriate form are filed in the offices specified on Schedule 6 to the Perfection Certificate and (iii) all other applicable filings under the Uniform Commercial Code or otherwise that are required under the Loan Documents are made, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral to the extent that a security interest may be perfected by filing, recording or registering a financing statement or analogous document, or by the secured party's taking possession, in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions, in each case prior and superior in right to any other Person, other than with respect to Liens expressly permitted by Section 7.2 and Section 10(r) of the Guarantee Agreement and except for any such Collateral as to which the representations and warranties in this Section would not be true solely by virtue of such Collateral having been used or disposed of in a manner expressly permitted by the Security Agreement. (b) When the Security Agreement is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Borrower and the Guarantors in the Intellectual Property (as defined in the Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, in each case prior and superior in right to any other Person, other than with respect to Liens expressly permitted by Section 7.2 and Section 10(r) of the Guarantee Agreement (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks, trademark applications and copyrights acquired by the Borrower and the Guarantors after the date hereof). (c) The Mortgages are effective to create, subject to the exceptions listed in each title insurance policy covering such Mortgage, in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the right, title and interest of the Borrower and the Guarantors in and to the Mortgaged Properties thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 4.16 and all other applicable offices, the Mortgages shall constitute a Lien on, and security interest in, all right, title and interest of the Borrower and the Guarantors in such Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to the rights of Persons pursuant to Liens expressly permitted by Section 7.2 and Section 10(r) of the Guarantee Agreement. Section 4.17 Federal Reserve Regulations (a) Neither the Borrower nor any of the Subsidiaries are engaged principally, or as one of their important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. (b) No part of the proceeds of any Loan or the Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase, acquire or carry any Margin Stock or for any purpose that entails a violation of, or that is inconsistent with, the provisions of the regulations of the Board, including Regulation T, U or X. ARTICLE 5. CONDITIONS Section 5.1 Effective Date The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letter of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.2): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Credit Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include facsimile transmission of a signed signature page of this Credit Agreement) that such party has signed a counterpart of this Credit Agreement. (b) The Administrative Agent shall have received a Note for each Lender signed on behalf of the Borrower. (c) The Administrative Agent shall have received favorable written opinions (addressed to the Credit Parties and dated the Effective Date) from (i) Alston & Bird LLP on behalf of the Borrower and the Subsidiaries and (ii) Camhy Karlinsky & Stein LLP on behalf of the Loan Parties, substantially in the form of Exhibits B-1 and B-2, respectively, and covering such other matters relating to the Loan Parties, the Loan Documents and the Transactions as the Required Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinion. (d) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating to the Loan Parties, the Loan Documents or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (e) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the chief executive officer or the chief financial officer of each of the Borrower and the Parent, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 5.2. (f) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. (g) The Administrative Agent shall have received counterparts of the Security Agreement signed on behalf of the Borrower, the Parent and each subsidiary of the Parent party thereto, together with the following: (i) any stock certificates representing shares of capital stock owned by or on behalf of any Loan Party constituting Collateral as of the Effective Date after giving effect to the Transactions; (ii) any promissory notes and other instruments evidencing loans, advances and other debt owed or owing to any Loan Party constituting Collateral as of the Effective Date after giving effect to the Transactions; (iii) stock powers and instruments of transfer, endorsed in blank, with respect to such stock certificates, promissory notes and other instruments; (iv) all instruments and other documents, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Administrative Agent to be filed, registered or recorded to create or perfect the Liens intended to be created under the Security Agreement; and (v) a completed Perfection Certificate, dated the Effective Date and signed by the chief executive officer or the chief financial officer of each of the Borrower and the Parent, together with all attachments contemplated thereby, including the results of a search of the Uniform Commercial Code (or equivalent) filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificate and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are permitted by Section 7.2 or Section 10(r) of the Guarantee Agreement or have been released. (h) The Administrative Agent shall have received (i) counterparts of a Mortgage with respect to each Mortgaged Property listed on Schedule 1.1A signed on behalf of the record owner of such Mortgaged Property, (ii) a policy or policies of title insurance issued by a nationally recognized title insurance company, insuring the Lien of each such Mortgage as a valid first Lien on the Mortgaged Property described therein, free of any other Liens except as permitted by Section 7.2 or Section 10(r) of the Guarantee Agreement, in form and substance reasonably acceptable to the Administrative Agent, together with such endorsements, coinsurance and reinsurance as the Administrative Agent or the Required Lenders may reasonably request, (iii) such surveys as may be required pursuant to such Mortgages or as the Administrative Agent or the Required Lenders may reasonably request, (iv) a copy of the original permanent certificate or temporary certificate of occupancy as the same may have been amended or issued from time to time, covering each improvement located upon such Mortgaged Properties, that were required to have been issued by the appropriate Governmental Authority for such improvement, (v) written confirmation from the applicable zoning commission or other appropriate Governmental Authority stating that, with respect to each such Mortgaged Property as built, it complies with existing land use and zoning ordinances, regulations and restrictions applicable to such Mortgaged Property, (vi) a copy of any phase I environmental report issued for each such Mortgaged Property, each such report to be satisfactory to the Administrative Agent, (vii) such opinions of local counsel to the relevant Loan Parties with respect to such Mortgages as the Administrative Agent shall require and (viii) such other customary documentation with respect to such Mortgages and such Mortgaged Property, including copies of all appraisals issued with respect thereto, as the Administrative Agent or the Required Lenders may reasonably request. (i) The Administrative Agent shall have received (i) a certificate, dated the Effective Date and signed by the chief executive officer or the chief financial officer of each of the Borrower and the Parent, (A) confirming that each Initial Transaction has been consummated in accordance with the terms and conditions of the applicable Initial Transaction Documents, all of which shall be satisfactory to the Administrative Agent, and (B) attaching a true, complete and correct copy of each Initial Transaction Document, each Private Placement Document, each Milberg Financing Document and the Tax Sharing Agreement, each of which shall be in form and substance satisfactory to the Administrative Agent, and (ii) other evidence satisfactory to it that (A) an agreement of merger and/or certificate of merger, as applicable, in respect of the merger contemplated by the Initial Transaction Documents has been filed with the Secretary of State of each of the State of Delaware and Texas indicating that such merger has been consummated and (B) the change of the Borrower's name from "GCG Merger Corp." to "Grizzard Communications Group, Inc." has become effective. (j) The litigation and other legal proceedings in Brandon C. Coleman, Jr. vs. Grizzard Advertising Incorporated and Michael D. Dzvonik, 269th Judicial District Court of Harris County, Texas, Cause No. 200002591, shall have been resolved in a manner in all respects satisfactory to the Administrative Agent, and the Administrative Agent shall have received evidence satisfactory to it that all amounts to be paid to Brandon C. Coleman in connection therewith shall have been transferred to the Borrower in immediately available funds. (k) The Administrative Agent shall have received counterparts of the Guarantee Agreement signed on behalf of the Parent and each subsidiary thereof party thereto. (l) The Administrative Agent shall have received (i) counterparts of the Subordination Agreement signed on behalf of the Parent, Marshall Capital Management, Inc. and RGC International Investors, LDC and (ii) a counterpart of the Consent and Intercreditor Agreement signed on behalf of Milberg Factors, Inc. (m) The Administrative Agent shall have received evidence satisfactory to it that the insurance required by Section 6.10 and by the other Loan Documents is in effect. (n) The performance by each Loan Party of its obligations under each Loan Document shall not (i) violate any applicable law, statute, rule or regulation or (ii) conflict with, or result in a default or event of default under, any material agreement of any Loan Party or any other Subsidiary, and the Administrative Agent shall have received one or more legal opinions and/or officer's certificates to such effect, satisfactory to the Administrative Agent. (o) The Lenders shall be reasonably satisfied as to the amount and nature of any environmental and employee health and safety exposures to which the Loan Parties and the other Subsidiaries may be subject, and with the plans of the Borrower with respect thereto. (p) The Lenders shall be reasonably satisfied that there shall be no litigation or administrative proceeding, or regulatory development, that would reasonably be expected to have a material adverse effect on (i) the business, assets, operations, prospects, condition (financial or otherwise) or material agreements of the Loan Parties and the other Subsidiaries, taken as a whole, (ii) the ability of any Loan Party to perform any of its obligations under any Loan Document or (iii) the rights of or benefits available to any Credit Party under any Loan Document. (q) After giving effect to the Transactions occurring on the Effective Date, none of the Loan Parties or any other Subsidiary shall have outstanding any shares of preferred equity securities or any Indebtedness, other than as permitted under Section 7.1 and Sections 10(p) and 10(q) of the Guarantee Agreement. (r) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the chief financial officer of the Borrower, setting forth (i) a reasonably detailed calculation demonstrating compliance with Section 7.14, (ii) a reasonably detailed calculation demonstrating that Adjusted Consolidated EBITDA for the period of four consecutive fiscal quarters ending on, or most recently before, the Effective Date shall not be less than $15,000,000, and (iii) a reasonably detailed calculation of the Borrowing Base as of the Effective Date, in each case on a pro forma basis immediately after giving effect to the Transactions occurring on the Effective Date. The Administrative Agent shall notify the Borrower and the Credit Parties of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and the Issuing Bank to issue the Letter of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.2) at or prior to 3:00 p.m., New York City time, on March 22, 2000 (and, in the event such conditions are not so satisfied or waived, the Revolving Commitments, the Term Commitments and the LC Commitments shall terminate at such time). Section 5.2 Each Credit Event The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue the Letter of Credit, is subject to the satisfaction of the following conditions: (a) The representations and warranties of the Loan Parties set forth in the Loan Documents shall be true and correct on and as of the date of such Borrowing or the date of such issuance, as applicable. (b) At the time of and immediately after giving effect to such Borrowing or such issuance, as applicable, no Default shall have occurred and be continuing. (c) The Administrative Agent shall have received a certificate of the chief financial officer of the Borrower, in form and substance satisfactory to the Administrative Agent, setting forth a reasonably detailed calculation of the Total Leverage Ratio and, in the case of each Revolving Borrowing, the Borrowing Base, in each case on a pro forma basis immediately after giving effect to such Borrowing. (d) The Administrative Agent shall have received such other documentation and assurances as shall be reasonably required by it in connection therewith. Each Borrowing and the issuance of the Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. ARTICLE 6. AFFIRMATIVE COVENANTS Until the Revolving Commitments and the LC Commitments have expired or been terminated and the principal of and interest on each Loan and all fees and other amounts payable under the Loan Documents shall have been paid in full and the Letter of Credit has expired and all LC Disbursements have been reimbursed, the Borrower covenants and agrees with the Lenders that: Section 6.1 Financial Statements and Other Information The Borrower will furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year, (i) its audited consolidated balance sheet and related statements of income, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Deloitte & Touche LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied and (ii) financial projections consisting of pro forma consolidated statements of income and cash flows in form and substance reasonably satisfactory to the Administrative Agent, prepared on a quarterly basis for the immediately succeeding fiscal year and, thereafter, on an annual basis for each succeeding fiscal year through maturity, together with a certificate of the chief financial officer of the Borrower, setting forth reasonably detailed calculations demonstrating pro forma compliance with Sections 7.12, 7.13, 7.14, 7.15, 7.16 and 7.17, in each case based upon such financial projections; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, (i) its consolidated balance sheet and related statements of income, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year and (ii) unaudited financial information for each of the Borrower's business lines, all certified by its chief financial officer as presenting fairly in all material respects the financial condition and results of operations of the Borrower and the consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of the chief financial officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth (A) reasonably detailed calculations demonstrating compliance with Sections 7.12, 7.13, 7.14, 7.15, 7.16 and 7.17 and (B) the Guarantors as of the date of such certificate and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 4.4 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) on or prior to April 7, 2000, its audited consolidated balance sheet and related statements of income, stockholders' equity and cash flows as of the end of and for the twelve consecutive month period ending on December 31, 1999, setting forth in each case in comparative form the figures for the previous twelve consecutive month period, all reported on by Deloitte & Touche LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (e) within 15 days after the end of each month, a certificate of the chief financial officer of the Borrower, in form and substance satisfactory to the Administrative Agent, setting forth a reasonably detailed calculation of the Borrowing Base as of the end such month; (f) concurrently with any delivery of financial statements under clauses (a) and (d) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines); (g) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; and (h) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may reasonably request. Section 6.2 Notices of Material Events The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could in the good faith opinion of the Borrower reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Loan Parties and the other Subsidiaries in an aggregate amount exceeding $250,000; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of the chief financial officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. Section 6.3 Existence; Conduct of Business The Borrower will, and will cause each of the Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business. Section 6.4 Payment and Performance of Obligations The Borrower will, and will cause each of the Subsidiaries to, pay or perform its obligations, including Tax liabilities, that, if not paid or performed, could reasonably be expected to result in a Material Adverse Effect before the same shall become delinquent or in default, except where (i) the validity or amount thereof is being contested in good faith by appropriate proceedings, (ii) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (iii) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. Section 6.5 Maintenance of Properties The Borrower will, and will cause each of the Subsidiaries to, keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted. Section 6.6 Books and Records; Inspection Rights The Borrower will, and will cause each of the Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of the Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. Section 6.7 Compliance with Laws The Borrower will, and will cause each of the Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Section 6.8 Use of Proceeds The proceeds of the Revolving Loans will be used only for general corporate purposes (excluding the payment or prepayment of the principal of any Indebtedness), the proceeds of the Letter of Credit will be used only to satisfy the Parent's and the Borrower's obligations in respect of the Holdback Agreement and the other Initial Transaction Documents, the proceeds of the LC Loans will be used only to pay reimbursement obligations in respect of LC Disbursements and to finance payments made by the Borrower and the Parent in respect of underlying claims the types and amounts of which are covered (and only to the extent so covered) by the Letter of Credit in accordance with the Holdback Agreement, and the Term Loans will be used only to refinance certain existing Indebtedness of the Borrower, to fund a portion of the cash consideration payable in connection with the merger contemplated by the Initial Transaction Documents and to pay fees and other transaction expenses related to the credit facilities established hereunder and the Initial Transactions, in each case not inconsistent with the terms hereof. No part of the proceeds of any Loan or the Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase, acquire or carry any Margin Stock or for any purpose that entails a violation of any of the regulations of the Board, including Regulations T, U and X. Section 6.9 Information Regarding Collateral (a) The Borrower will furnish to the Administrative Agent prompt written notice of any change in (i) the legal name of any Loan Party or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) the location of the chief executive office of any Loan Party, its principal place of business, any office in which it maintains books or records relating to Collateral owned or held by it or on its behalf or, except to the extent permitted by Section 5(j) of the Security Agreement, any office or facility at which Collateral owned or held by it or on its behalf is located (including the establishment of any such new office or facility), (iii) the identity or organizational structure of any Loan Party such that a filed financing statement becomes misleading or (iv) the Federal Taxpayer Identification Number of any Loan Party. The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. The Borrower also agrees promptly to notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed. (b) Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to Section 6.1(a), the Borrower and the Parent shall deliver to the Administrative Agent a certificate of the chief executive officer or the chief financial officer of each of the Borrower or the Parent, (i) setting forth the information required pursuant to Sections 1, 2, 8, 9 and 10 of the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate or the date of the most recent certificate delivered pursuant to this Section and (ii) certifying that all Uniform Commercial Code financing statements or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above, and all other actions have been taken, to the extent necessary to protect and perfect the security interests under the Security Agreement for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). Section 6.10 Insurance The Borrower will, and will cause each of the Subsidiaries to, maintain, with financially sound and reputable insurance companies, (i) adequate insurance for its insurable properties, all to such extent and against such risks, including fire, casualty, business interruption and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar locations, and (ii) such other insurance as is required pursuant to the terms of any Security Document. Section 6.11 Casualty and Condemnation (a) The Borrower will furnish to the Administrative Agent and the Lenders prompt written notice of any casualty or other insured damage to any portion of any Collateral owned or held by or on behalf of itself or any Subsidiary or the commencement of any action or proceeding for the taking of any such Collateral or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding. (b) If any Prepayment/Reduction Event results in Net Proceeds (whether in the form of insurance proceeds, condemnation award or otherwise), the Administrative Agent is authorized to collect such Net Proceeds and, if received by any Loan Party or any other Subsidiary, such Net Proceeds shall be paid over to the Administrative Agent, and the Administrative Agent shall, and the Borrower, on behalf of the relevant Loan Parties and other Subsidiaries, hereby authorizes the Administrative Agent to, apply such Net Proceeds, to the extent that they are Net Proceeds, to prepay the Loans in accordance with Section 2.7, provided that all proceeds of business interruption insurance shall be paid over to the Borrower, on behalf of the relevant Loan Parties and other Subsidiaries, unless an Event of Default has occurred and is continuing. (c) All proceeds retained by or paid to the Administrative Agent that do not constitute Net Proceeds shall be paid over to the Borrower, on behalf of the relevant Loan Parties and other Subsidiaries, unless an Event of Default has occurred and is continuing. Section 6.12 Additional Subsidiaries If any Subsidiary is formed or acquired after the Effective Date, the Borrower will notify the Administrative Agent and the Lenders in writing thereof within ten Business Days after the date on which such Subsidiary is formed or acquired and (i) the Borrower will cause such Subsidiary to (a) execute and deliver each applicable Guarantee Document (or otherwise become a party thereto in the manner provided therein) and become a party to each applicable Security Document in the manner provided therein, in each case within ten Business Days after the date on which such Subsidiary is formed or acquired and (ii) promptly take such actions to create and perfect Liens on such Subsidiary's assets to secure the Obligations as the Administrative Agent or the Required Lenders shall reasonably request and (b) if any equity securities issued by any such Subsidiary are owned or held by or on behalf of the Borrower or any Subsidiary that is a Guarantor or any loans, advances or other debt is owed or owing by any such Subsidiary to the Borrower or any Subsidiary that is a Guarantor, the Borrower will cause such equity securities and promissory notes and other instruments evidencing such loans, advances and other debt to be pledged pursuant to the Security Documents within ten Business Days after the date on which such Subsidiary is formed or acquired. Section 6.13 Further Assurances; Certain Real Estate Matters (a) The Borrower will, and will cause each Subsidiary that is a Guarantor to, execute any and all further documents, financing statements, agreements (including guarantee agreements and security agreements) and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, Mortgages and other documents), that may be required under any applicable law, or which the Administrative Agent or the Required Lenders may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect (including as a result of any change in applicable law) the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Borrower and the Subsidiaries that are Guarantors. The Borrower also agrees to provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents. (b) On or prior to April 30, 2000, the Borrower will cause to be delivered to the Administrative Agent, with respect to each Mortgaged Property listed on Schedule 1.1A, a phase I environmental report therefor, each such report to be satisfactory to the Administrative Agent, and such other customary documentation with respect to such Mortgaged Property and the Mortgages relating thereto as the Administrative Agent or the Required Lenders may reasonably request. (c) If any material assets (including any real property or improvements thereto or any interest therein other than leasehold interests in real property) are acquired by the Borrower or any Subsidiary that is a Guarantor after the Effective Date (other than assets constituting Collateral under the Security Documents that become subject to the Lien of the Security Documents upon acquisition thereof), the Borrower will notify the Administrative Agent and the Lenders thereof, and, if requested by the Administrative Agent or the Required Lenders, the Borrower will cause such assets to be subjected to a Lien securing the Obligations and will take, and cause the Subsidiaries that are Guarantors to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section, all at the expense of the Borrower and the Subsidiaries that are Guarantors. Section 6.14 Environmental Compliance The Borrower will, and will cause each Subsidiary to, use and operate all of its facilities and property in compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in compliance therewith, and handle all Hazardous Materials in compliance with all applicable Environmental Laws, except where noncompliance with any of the foregoing could not reasonably be expected to have a Material Adverse Effect. Section 6.15 Hedging Agreements At the request of the Administrative Agent, the Borrower will, within 90 days after the Effective Date, enter into, and thereafter maintain, one or more Hedging Agreements in all respects satisfactory to the Administrative Agent having an initial term of not less than two years with respect to a notional amount of not less than 50% of the aggregate outstanding principal amount of the Term Loans, provided, however, that the Borrower shall have no obligation or further obligation, as applicable, under this Section at any time after the sum of the aggregate amount of all prepayments made under Section 2.7(b)(i) plus the aggregate amount of all other payments (including prepayments) of Term Borrowings shall equal or exceed $20,000,000. ARTICLE 7. NEGATIVE COVENANTS Until the Revolving Commitments and the LC Commitments have expired or been terminated and the principal of and interest on each Loan and all fees and other amounts payable under the Loan Documents shall have been paid in full and the Letter of Credit has expired and all LC Disbursements have been reimbursed, the Borrower covenants and agrees with the Lenders that: Section 7.1 Indebtedness (a) The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except: (i) Indebtedness under the Loan Documents and under the Initial Transaction Documents; (ii) Indebtedness existing on the date hereof and set forth in Schedule 7.1, but not any extensions, renewals or replacements of any such Indebtedness; (iii) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof, provided that (A) such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement and (B) the aggregate principal amount of Indebtedness permitted by this clause (iii) shall not, without duplication, exceed $3,000,000 at any time outstanding; (iv) Indebtedness of the Borrower or any Subsidiary that is a Guarantor to the Borrower or any Subsidiary that is a Guarantor; (v) Indebtedness of Grizzard Canada Advertising (Canada) Ltd. to the Borrower or any Subsidiary in an aggregate amount not, without duplication, exceeding $500,000 at any time outstanding; (vi) temporary loans or advances made or deemed made to the Borrower or any Subsidiary by the Parent or any of its subsidiaries in respect of any healthcare, insurance, payroll, accounting or other general administrative services provided in the ordinary course of business, provided that the sum, without duplication, of the aggregate amount of all such loans or advances plus the aggregate amount of all loans and advances permitted by Section 7.4(d)(iii) and Sections 10(p)(v) and 10(t)(iv) of the Guarantee Agreement shall not, without duplication, exceed $500,000 at any time outstanding; and (vii) other unsecured Indebtedness of the Borrower and its Subsidiaries in an aggregate amount not, without duplication, exceeding $250,000 at any time outstanding. (b) The Borrower will not, and it will not permit any Subsidiary to, (i) issue any equity securities or (ii) be or become liable in respect of any obligation (contingent or otherwise) to purchase, redeem, retire, acquire or make any other payment in respect of any shares of equity securities of the Borrower or any Subsidiary or any option, warrant or other right to acquire any such shares of equity securities, except as permitted under Section 7.8. Section 7.2 Liens The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Liens created under the Loan Documents; (b) Permitted Encumbrances; (c) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 7.2, provided that (i) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and any extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; and (d) security interests on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary, provided that (i) such security interests secure Indebtedness permitted by clause (iii) of Section 7.1, (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Borrower or any Subsidiary. Section 7.3 Fundamental Changes (a) The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets, or all or substantially all of the equity securities of any of the Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto, no Default shall have occurred and be continuing: (i) any Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving entity, and any Subsidiary may merge into any other Subsidiary that is a Guarantor in a transaction in which such other Subsidiary is the surviving entity; (ii) any Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the Borrower or any Subsidiary that is a Guarantor; and (iii) any Subsidiary (other than a Subsidiary that is a Guarantor) may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders. (b) The Borrower will not, and will not permit any of the Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and the Subsidiaries on the date of execution of this Credit Agreement and businesses reasonably related thereto. Section 7.4 Investments, Loans, Advances, Guarantees and Acquisitions The Borrower will not, and will not permit any of the Subsidiaries to, purchase, hold or acquire (including pursuant to any merger) any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, make or permit to exist any Guarantees of any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions (including pursuant to any merger)) any assets of any other Person constituting a business unit, except: (a) Permitted Investments; (b) investments existing on the date hereof and set forth in Schedules 4.12 and 7.4; (c) investments made by the Borrower or any Subsidiary in the equity securities of any Subsidiary that is a Guarantor; (d) (i) loans or advances made by the Borrower or any Subsidiary that is a Guarantor to the Borrower or any Subsidiary that is a Guarantor, (ii) Indebtedness permitted by Section 7.1(a)(v) and (iii) other temporary loans or advances made or deemed made by the Borrower or any Subsidiary to the Parent or any of its subsidiaries in respect of any healthcare, insurance, payroll, accounting or other general administrative services provided in the ordinary course of business, provided that the sum, without duplication, of the aggregate amount of all such loans or advances under this clause (iii) plus the aggregate amount of all loans or advances permitted by Section 7.1(a)(vi) and Sections 10(p)(v) and 10(t)(iv) of the Guarantee Agreement shall not, without duplication, exceed $500,000 at any time outstanding; and (e) acquisitions made by the Borrower or any Subsidiary that is a Guarantor from the Borrower or any Subsidiary that is a Guarantor. Section 7.5 Asset Sales The Borrower will not, and will not permit any of the Subsidiaries to, sell, transfer, lease or otherwise dispose (including pursuant to a merger) of any asset, including any equity securities, nor will the Borrower permit any of the Subsidiaries to issue any additional shares of its equity securities, except: (a) sales, transfers, leases and other dispositions of inventory, used or surplus equipment and Permitted Investments, in each case in the ordinary course of business; (b) sales, transfers, leases and other dispositions made by the Borrower or any Subsidiary that is a Guarantor to the Borrower or any Subsidiary that is a Guarantor; and (c) if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing other sales, transfers, leases and other dispositions of assets (other than the equity securities in any Subsidiary), provided that (i) the aggregate fair market value of all assets, sold, transferred, leased or otherwise disposed of in reliance upon this clause (c) shall not exceed $1,000,000 in the aggregate and (ii) all sales, transfers, leases and other dispositions permitted by this clause (c) shall be made for fair value and solely for cash consideration. Section 7.6 Sale and Lease-Back Transactions The Borrower will not, and will not permit any of the Subsidiaries to, enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred. Section 7.7 Hedging Agreements The Borrower will not, and will not permit any of the Subsidiaries to, enter into any Hedging Agreement, other (i) than Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct of its business or the management of its liabilities and (ii) Hedging Agreements required by Section 6.15. Section 7.8 Restricted Payments The Borrower will not, and will not permit any of the Subsidiaries to, declare or make, or agree to pay for or make, directly or indirectly, any Restricted Payment, except that (i) the Borrower may declare and pay dividends with respect to its equity securities payable solely in shares of its perpetual common stock, (ii) any wholly-owned Subsidiary may declare and pay dividends with respect to its equity securities to the Borrower or any other wholly-owned Subsidiary and (iii) the Borrower and the Subsidiaries may make Restricted Payments to the Parent for purposes of enabling the Parent, as a consolidated taxpayer, to pay taxes attributable to the Borrower and the Subsidiaries in accordance with the Tax Sharing Agreement. Section 7.9 Transactions with Affiliates The Borrower will not, and will not permit any of the Subsidiaries to, sell, transfer, lease or otherwise dispose (including pursuant to a merger) any property or assets to, or purchase, lease or otherwise acquire (including pursuant to a merger) any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arms-length basis from unrelated third parties, provided that this Section shall not apply to any transaction that is permitted under Section 7.8, or Section 10(x) of the Guarantee Agreement, between or among the Loan Parties and not involving any other Affiliate. Section 7.10 Restrictive Agreements The Borrower will not, and will not permit any of the Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (i) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets (unless such agreement or arrangement does not prohibit, restrict or impose any condition upon the ability of any Loan Party to create, incur or permit to exist any Lien in favor of the Secured Parties created under the Loan Documents) or (ii) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its equity securities or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary, provided that (a) the foregoing shall not apply to restrictions and conditions imposed by law or by the Loan Documents, (b) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 7.10 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (c) clause (i) of this Section shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Credit Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (d) clause (i) of this Section shall not apply to customary provisions in leases restricting the assignment thereof. Section 7.11 Amendment of Material Documents The Borrower will not, and will not permit any Subsidiary to, amend, modify or waive any Initial Transaction Document, the Tax Sharing Agreement or its certificate of incorporation, by-laws or other organizational documents (other than, with respect to such certificate of incorporation, by-laws or other organizational document, immaterial amendments, modifications or waivers that could not reasonably be expected to adversely affect the Credit Parties, provided that the Borrower shall deliver or cause to be delivered to the Administrative Agent and each Lender a copy of each such amendment, modification or waiver promptly after the execution and delivery thereof). Section 7.12 Interest Coverage Ratio The Borrower will not permit the Interest Coverage Ratio as of the end of any fiscal quarter during any period set forth below to be less than the ratio set forth below with respect to such period: - ------------------------------------------============================ Period Ratio - ------------------------------------------============================ - ------------------------------------------============================ Effective Date through September 30, 2000 2.25:1.00 - ------------------------------------------============================ - ------------------------------------------============================ October 1, 2000 through December 31, 2000 2.75:1.00 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2001 through September 30, 3.00:1.00 2001 - ------------------------------------------============================ - ------------------------------------------============================ October 1, 2001 through December 31, 2001 3.50:1.00 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2002 through September 30, 4.00:1.00 2002 - ------------------------------------------============================ - ------------------------------------------============================ October 1, 2002 and thereafter 4.50:1.00. - ------------------------------------------============================ Section 7.13 Fixed Charge Coverage Ratio The Borrower will not permit the Fixed Charge Coverage Ratio as of the end of any fiscal quarter during any period set forth below to be less than the ratio set forth below with respect to such period: - ------------------------------------------============================ Period Ratio - ------------------------------------------============================ - ------------------------------------------============================ December 31, 2000 through December 31, 1.05:1.00 2002 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2002 through December 31, 2003 1.10:1.00 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2004 and thereafter 1.15:1.00. - ------------------------------------------============================ Section 7.14 Total Leverage Ratio The Borrower will not permit the Total Leverage Ratio at any time during any period set forth below to be greater than the ratio set forth below with respect to such period: - ------------------------------------------============================ Period Ratio - ------------------------------------------============================ - ------------------------------------------============================ Effective Date through September 30, 2000 3.85:1.00 - ------------------------------------------============================ - ------------------------------------------============================ October 1, 2000 through December 31, 2000 3.75:1.00 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2001 through September 30, 3.00:1.00 2001 - ------------------------------------------============================ - ------------------------------------------============================ October 1, 2001 through December 31, 2001 2.75:1.00 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2002 through December 31, 2002 2.25:1.00 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2003 through December 31, 2003 1.50:1.00 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2004 and thereafter 1.00:1.00. - ------------------------------------------============================ Section 7.15 Capital Expenditures The Borrower will not permit Capital Expenditures made or obligated to be made by the Borrower and the Subsidiaries in respect of any period set forth below to be greater than the amount set forth below with respect to such period, provided that if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing any amounts not expended in any period may be carried over and expended in the immediately subsequent period only: - ------------------------------------------============================ Period Amount - ------------------------------------------============================ - ------------------------------------------============================ Effective Date through December 31, 2000 $5,975,000 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2001 through December 31, 2001 $3,825,000 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2002 through December 31, 2002 $4,350,000 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2003 through December 31, 2003 $4,600,000 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2004 through December 31, 2004 $4,850,000. - ------------------------------------------============================ Section 7.16 Minimum Adjusted Consolidated EBITDA As of the end of any fiscal quarter during any period set forth below, the Borrower will not permit Adjusted Consolidated EBITDA for the period of four consecutive fiscal quarters ending on such date to be less than the amount set forth below with respect to such period: - ------------------------------------------============================ Period Amount - ------------------------------------------============================ - ------------------------------------------============================ Effective Date through March 31, 2000 $14,400,000 - ------------------------------------------============================ - ------------------------------------------============================ April 1, 2000 through June 30, 2000 $13,200,000 - ------------------------------------------============================ - ------------------------------------------============================ July 1, 2000 through September 30, 2000 $13,300,000 - ------------------------------------------============================ - ------------------------------------------============================ October 1, 2000 through December 31, 2000 $14,850,000 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2001 through March 31, 2001 $15,000,000 - ------------------------------------------============================ - ------------------------------------------============================ April 1, 2001 through June 30, 2001 $15,100,000 - ------------------------------------------============================ - ------------------------------------------============================ July 1, 2001 through September 30, 2001 $15,500,000 - ------------------------------------------============================ - ------------------------------------------============================ October 1, 2001 through December 31, 2001 $16,950,000 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2002 through March 31, 2002 $17,100,000 - ------------------------------------------============================ - ------------------------------------------============================ April 1, 2002 through June 30, 2002 $17,300,000 - ------------------------------------------============================ - ------------------------------------------============================ July 1, 2002 through September 30, 2002 $17,600,000 - ------------------------------------------============================ - ------------------------------------------============================ October 1, 2002 through December 31, 2002 $18,850,000 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2003 through March 31, 2003 $19,500,000 - ------------------------------------------============================ - ------------------------------------------============================ April 1, 2003 through June 30, 2003 $20,150,000 - ------------------------------------------============================ - ------------------------------------------============================ July 1, 2003 through September 30, 2003 $20,500,000 - ------------------------------------------============================ - ------------------------------------------============================ October 1, 2003 through December 31, 2003 $21,900,000 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2004 through March 31, 2004 $22,100,000 - ------------------------------------------============================ - ------------------------------------------============================ April 1, 2004 through June 30, 2004 $22,300,000 - ------------------------------------------============================ - ------------------------------------------============================ July 1, 2004 through September 30, 2004 $22,800,000 - ------------------------------------------============================ - ------------------------------------------============================ October 1, 2004 through December 31, 2004 $24,200,000 - ------------------------------------------============================ - ------------------------------------------============================ January 1, 2005 and thereafter $25,000,000. - ------------------------------------------============================ Section 7.17 Maximum Days Receivables Amount As of the end of each March 31st, June 30th, September 30th and December 31st (other than December 31, 2000), the Borrower will not permit the product of (i) 365 and (ii) the quotient of (a) the Receivables of the Borrower and the Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of such date divided by (b) the gross revenues of the Borrower and the Subsidiaries, determined on a consolidated basis in accordance with GAAP, for the period of four consecutive fiscal quarters ending thereon to exceed 85, 76, 78 and 120, respectively, and the Borrower will not permit such product as of December 31, 2000 to exceed 135. Section 7.18 Prepayments The Borrower will not, and will not permit any Subsidiary to, prepay or obligate itself to prepay (whether by payment, purchase, defeasance or otherwise), in whole or in part, any Indebtedness, provided that Indebtedness permitted by Sections 7.1(a)(iii) and 7.1(a)(vii) may be refinanced with other Indebtedness that immediately after giving effect thereto would be permitted by Sections 7.1(a)(iii) and 7.1(a)(vii), respectively. Section 7.19 Initial Transactions Notwithstanding anything to the contrary in any Loan Document, nothing contained in this Article shall prevent the consummation of any of the Initial Transactions. ARTICLE 8. EVENTS OF DEFAULT If any of the following events ("Events of Default") shall occur: (a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or on any reimbursement obligation in respect of any LC Disbursement or any fee, commission or any other amount (other than an amount referred to in clause (a) of this Article) payable under any Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days; (c) any representation or warranty made or deemed made by or on behalf of any Loan Party or any other Subsidiary in or in connection with any Loan Document or any amendment or modification hereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification hereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 6.3, 6.8, 6.10, 6.12, 6.13 or 6.15 or in Article 7, or any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in the Security Documents, the Subordination Agreement or Section 1, 10(c), 10(i), 10(k), 10(l), 10(m) or 10(p) through 10(cc) of the Guarantee Agreement; (e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document to which it is a party (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after such Loan Party shall have obtained knowledge thereof; (f) any Loan Party or any other Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Obligations, when and as the same shall become due and payable (after giving effect to any applicable grace period); (g) any event or condition occurs that results in any Material Obligations becoming due prior to its scheduled maturity or payment date, or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Obligations or any trustee or agent on its or their behalf to cause any Material Obligations to become due prior to its scheduled maturity or payment date (in each case after giving effect to any applicable cure period); (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of any Loan Party or any other Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or any other Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 45 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) any Loan Party or any other Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or any other Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (j) any Loan Party or any other Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due; (k) any event or condition occurs that results (with or without the giving of notice, the lapse of time or both) in (i) any payment (whether in cash, securities (other than to the extent such payment shall be made solely in shares of common equity securities) or other property) on account of the puchase, redemption, retirement or conversion of any equity securities under the Private Placement Documents becoming due (or any notice shall be given requiring any such payment to be made (including a "Mandatory Redemption Notice" under and as defined in the Private Placement Documents), which notice shall not have been retracted or otherwise withdrawn), or (ii) any other payment under the Private Placement Documents becoming due (other than to the extent such payment shall be made solely in shares of common equity securities); (l) one or more judgments for the payment of money in an aggregate amount in excess of $500,000 shall be rendered against any Loan Party or any other Subsidiary or any combination thereof (which shall not be fully covered by insurance without taking into account any applicable deductibles) and the same shall remain undischarged or unbonded for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of any Loan Party or any other Subsidiary to enforce any such judgment; (m) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Loan Parties and the other Subsidiaries in an aggregate amount exceeding $500,000 at any time; (n) (i) any Loan Document or the Tax Sharing Agreement shall cease, for any reason, to be in full force and effect or any Loan Party shall so assert in writing or shall disavow any of its obligations thereunder, (ii) the Consent and Intercreditor Agreement shall cease, for any reason (other than in accordance with its terms), to be in full force and effect or Milberg shall so assert in writing or shall disavow any of its obligations thereunder or (iii) any representation, warranty, covenant or other obligation for the benefit of the Borrower or any of its Affiliates contained in any Initial Transaction Document, any Private Placement Document or the Tax Sharing Agreement that, by its terms, survives for any period shall cease, for any reason, to so survive; (o) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral, with the priority required by the applicable Security Document, except as a result of the Administrative Agent's failure to maintain possession of any stock certificates, promissory notes or other instruments delivered to it under the Security Agreement, or any foreclosure, distraint, sale or similar proceedings have been commenced with respect to any Collateral; (p) a Change in Control shall occur; (q) Michael Dzvonik shall for any reason fail to be the chief executive officer of the Borrower and a Person in all respects reasonably satisfactory to the Administrative Agent shall not have been hired, appointed or otherwise designated to serve in such capacity within 90 days thereafter or Jeremy Barbera shall for any reason fail to be the chief executive officer of the Parent and a Person in all respects reasonably satisfactory to the Administrative Agent shall not have been hired, appointed or otherwise designated to serve in such capacity within 90 days thereafter; or (r) the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole, as reflected in the financial statements delivered under Section 6.1(d) shall differ in any material and adverse respect from the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole, as reflected in the financial statements referred to in Section 4.4(a); then, and in every such event (other than an event described in clause (h) or (i) of this Article with respect to the Borrower or any Subsidiary), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Revolving Commitments, and thereupon the Revolving Commitments shall terminate immediately and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of each Loan Party accrued under the Loan Documents, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event described in clause (h) or (i) of this Article with respect to the Borrower or any Subsidiary, the Revolving Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of each Loan Party accrued under the Loan Documents, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE 9. THE ADMINISTRATIVE AGENT Each Credit Party hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such Person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Credit Parties as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower, any of the Subsidiaries or any other Loan Party that is communicated to or obtained by the Person serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Credit Parties as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Credit Party (and, promptly after its receipt of any such notice, it shall give each Credit Party and the Borrower notice thereof), and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth therein, (iv) the validity, enforceability, effectiveness or genuineness thereof or any other agreement, instrument or other document or (v) the satisfaction of any condition set forth in Article 5 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent, provided that no such delegation shall serve as a release of the Administrative Agent or waiver by the Borrower of any rights hereunder. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Credit Parties and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Credit Parties, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.3 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent. Each Credit Party acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Credit Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Credit Agreement. Each Credit Party also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Credit Party and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon any Loan Document, any related agreement or any document furnished thereunder. ARTICLE 10. MISCELLANEOUS Section 10.1 Notices Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, as follows: (a) if to the Borrower, to it at 333 Seventh Avenue, New York, New York 10001, Attention of: Chief Financial Officer (Telephone No. (212) 594-7688); Facsimile No. (212) 465-8877), with a copy to Camhy Karlinsky & Stein LLP at 1740 Broadway, 16th Floor, New York, New York 10030, Attention of: Alan I. Annex, Esq. (Telephone No. (212) 977-6600); Facsimile No. (212) 977-8389); (b) if to the Administrative Agent or the Issuing Bank, to it at 787 Seventh Avenue, New York, New York 10019, Attention of: Lynne S. Randall (Telephone No. (212) 841-2595); Facsimile No. (212) 841-2369), with a copy to Sean M. Faherty (Telephone No. (212) 841-2118; Facsimile No. (212) 841-2369); and (c) if to any other Credit Party, to it at its address (or facsimile number) set forth in its Administrative Questionnaire. Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Credit Agreement shall be deemed to have been given on the date of receipt. Section 10.2 Waivers; Amendments (a) No failure or delay by any Credit Party in exercising any right or power under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Credit Parties under the Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or the issuance of the Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Credit Party may have had notice or knowledge of such Default at the time. (b) Neither any Loan Document nor any provision thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders, provided that no such agreement shall (i) increase the Revolving Commitment, Term Commitment or LC Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or any reimbursement obligation with respect to an LC Disbursement, or reduce the rate of any interest, or reduce any fees, payable under the Loan Documents, without the written consent of each Credit Party affected thereby, (iii) postpone the date of payment at stated maturity of any Loan or the date of payment of any reimbursement obligation with respect to an LC Disbursement, any interest or any fees payable under the Loan Documents, or reduce the amount of, waive or excuse any such payment, or postpone the stated termination or expiration of the Revolving Commitments or the LC Commitments, without the written consent of each Credit Party affected thereby, (iv) change any provision hereof in a manner that would alter the pro rata sharing of payments required by any Loan Document, without the written consent of each Credit Party affected thereby, (v) change any of the provisions of this Section or the definition of the term "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, (vi) release any Guarantor from its Guarantee under the Guarantee Documents (except as expressly provided therein), or limit its liability in respect of such Guarantee, without the written consent of each Lender, or (vii) release all or substantially all of the Collateral from the Liens of the Loan Documents (except as expressly provided in the Security Documents), without the consent of each Lender, and provided, further, that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Issuing Bank hereunder without the prior written consent of the Administrative Agent or the Issuing Bank, as applicable. Section 10.3 Expenses; Indemnity; Damage Waiver (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Credit Agreement or any amendments, modifications or waivers of the provisions of any Loan Document (whether or not the transactions contemplated thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance of the Letter of Credit or any demand for payment thereunder, and (iii) all reasonable out-of-pocket expenses incurred by any Credit Party, including the fees, charges and disbursements of any counsel for any Credit Party, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letter of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or the Letter of Credit. (b) The Borrower shall indemnify each Credit Party and each Related Party thereof (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related reasonable expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated thereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated thereby, (ii) any Loan or the Letter of Credit or the use of the proceeds thereof, including any refusal of the Issuing Bank to honor a demand for payment under the Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of the Letter of Credit, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Loan Parties or any of the other Subsidiaries, or any Environmental Liability related in any way to the Loan Parties or any of the other Subsidiaries or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent or the Issuing Bank under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent or the Issuing Bank, as applicable, an amount equal to the product of such unpaid amount multiplied by a fraction, the numerator of which is the sum of such Lender's Revolving Commitment plus the sum of the aggregate outstanding principal amount of such Lender's Loans and the denominator of which is the sum of the total of all Lenders' Revolving Commitments plus the sum of the aggregate outstanding principal amount of all Lenders' Loans (in each case determined as of the time that the applicable unreimbursed expense or indemnity payment is sought). (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct and actual damages) arising out of, in connection with, or as a result of, any Loan Document or any agreement, instrument or other document contemplated thereby, the Transactions, or any Loan or the Letter of Credit or the use of the proceeds thereof. (e) All amounts due under this Section shall be payable promptly but in no event later than ten days after written demand therefor. Section 10.4 Successors and Assigns (a) The provisions of this Credit Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Credit Party (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Credit Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each Credit Party) any legal or equitable right, remedy or claim under or by reason of any Loan Document. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Credit Agreement (including all or a portion of its Revolving Commitment and outstanding Revolving Loans, its LC Commitment and outstanding LC Loans and/or its outstanding Term Loans, as applicable), provided that (i) except in the case of an assignment to a Lender or an Affiliate or an Approved Fund of a Lender, each of the Borrower and the Administrative Agent (and, in the case of an assignment of all or any portion of its LC Commitment or obligations in respect of its LC Exposure, the Issuing Bank) must give its prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate or an Approved Fund of a Lender or an assignment of the entire remaining amount of the assigning Lender's Revolving Commitment and outstanding Revolving Loans, LC Commitment and outstanding LC Loans and/or outstanding Term Loans, as applicable, the amount of the Revolving Commitment and outstanding Revolving Loans, LC Commitment and outstanding LC Loans and/or outstanding Term Loans, as applicable, of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000, unless the Administrative Agent otherwise consent, (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance together with, unless otherwise agreed by the Administrative Agent, a processing and recordation fee of $3,500, and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire, and provided further that any consent of the Borrower otherwise required under this paragraph shall not be required if a Default has occurred and is continuing or during the Initial Syndication Period. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under the Loan Documents, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under the Loan Documents (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.5, 3.6, 3.7 and 10.3). Any assignment or transfer by a Lender of rights or obligations under the Loan Documents that does not comply with this paragraph shall be treated for purposes of the Loan Documents as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in New York City a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Revolving Commitment and LC Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive absent clearly demonstrable error, and the Borrower and each Credit Party may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Credit Party, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Credit Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of the Borrower or any Credit Party, sell participations to one or more banks or other entities (each such bank or other entity being called a "Participant") in all or a portion of such Lender's rights and obligations under the Loan Documents (including all or a portion of its Revolving Commitment and outstanding Revolving Loans, its LC Commitment and outstanding LC Loans and/or its outstanding Term Loans), provided that (i) such Lender's obligations under the Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Loan Parties and the Credit Parties shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of any Loan Documents, provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.2(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.5 and 3.6 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.8 as though it were a Lender, provided that such Participant agrees to be subject to Section 3.7(e) as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 3.5 or 3.7 than the Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.7 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.7(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under the Loan Documents to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest, provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations under the Loan Documents or substitute any such pledgee or assignee for such Lender as a party hereto. Section 10.5 Survival All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Credit Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of any Loan Document and the making of any Loans and the issuance of the Letter of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that any Credit Party may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any LC Disbursement or any fee or any other amount payable under the Loan Documents is outstanding and unpaid or the Letter of Credit is outstanding and so long as the Revolving Commitments and the LC Commitments have not expired or terminated. The provisions of Sections 3.5, 3.6, 3.7 and 10.3 and Article 9 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans and the LC Disbursements, the expiration or termination of the Letter of Credit and the termination of the Revolving Commitments and the LC Commitments or the termination of this Credit Agreement or any provision hereof. Section 10.6 Counterparts; Integration; Effectiveness This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which, when taken together, shall constitute but one contract. This Agreement and any separate letter agreements with respect to fees payable to any Credit Party or the syndication of the credit facilities established hereunder constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 5.1, this Credit Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of this Credit Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Credit Agreement. Section 10.7 Severability In the event any one or more of the provisions contained in this Credit Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. Section 10.8 Right of Setoff If the Loans shall have been declared due and payable in whole or in part pursuant to Article 8 or if an Event of Default shall have occurred and be continuing under clause (a) or (b) of such Article, each of the Lenders and their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by it to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Credit Agreement held by it, irrespective of whether or not it shall have made any demand under this Credit Agreement and although such obligations may be unmatured. The rights of each the Lenders and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that it may have. Section 10.9 Governing Law; Jurisdiction; Consent to Service of Process (a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Credit Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that, to the extent permitted by applicable law, all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by applicable law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Credit Agreement shall affect any right that the Administrative Agent or any other Credit Party may otherwise have to bring any action or proceeding relating to this Credit Agreement or the other Loan Documents against the Borrower, or any of its property, in the courts of any jurisdiction. (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Credit Agreement or the other Loan Documents in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Credit Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.1. Nothing in this Credit Agreement will affect the right of any party to this Credit Agreement to serve process in any other manner permitted by law. Section 10.10 WAIVER OF JURY TRIAL EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. Section 10.11 Headings Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Credit Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Credit Agreement. Section 10.12 Interest Rate Limitation Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under applicable law (collectively the "charges"), shall exceed the maximum lawful rate (the "maximum rate") that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all of the charges payable in respect thereof, shall be limited to the maximum rate and, to the extent lawful, the interest and the charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated, and the interest and the charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the maximum rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. Section 10.13 Treatment of Certain Information Each Credit Party agrees to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of the same nature, all non-public information supplied by the Borrower or any Subsidiary pursuant to this Credit Agreement which (i) is clearly identified by such Person as being confidential at the time the same is delivered to such Credit Party or (ii) constitutes any financial statement, financial projections or forecasts, budget, compliance certificate, audit report, management letter or accountants' certification delivered hereunder ("information"), provided, however, that nothing herein shall limit the disclosure of any information (a) to such of their respective Related Parties as need to know such information, (b) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, or requested by any bank regulatory authority, (c) on a confidential basis, to prospective lenders or their counsel, (d) to auditors or accountants, and any analogous counterpart thereof, (e) to any other Credit Party, (f) in connection with any litigation to which any one or more of the Credit Parties is a party, (g) to the extent such information (A) becomes publicly available other than as a result of a breach of this Credit Agreement, (B) becomes available to any of the Credit Parties on a non-confidential basis from a source other than the Borrower or any Subsidiary or (C) was available to the Credit Parties on a non-confidential basis prior to its disclosure to any of them by the Borrower or any Subsidiary; and (h) to the extent the Borrower shall have consented to such disclosure in writing. GRIZZARD COMMUNICATIONS GROUP, INC. CREDIT AGREEMENT GRIZZARD COMMUNICATIONS GROUP, INC. CREDIT AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed by their respective authorized officers as of the day and year first above written. GRIZZARD COMMUNICATIONS GROUP, INC. By: Name: Title: PARIBAS, individually, as Issuing Bank and as Administrative Agent By: Name: Title: By: Name: Title: iii TABLE OF CONTENTS ARTICLE 1. DEFINITIONS.................................................1 SECTION 1.1 DEFINED TERMS........................................1 ------------- SECTION 1.2 CLASSIFICATION OF LOANS AND BORROWINGS..............21 -------------------------------------- SECTION 1.3 TERMS GENERALLY.....................................21 --------------- SECTION 1.4 ACCOUNTING TERMS; GAAP..............................22 ---------------------- ARTICLE 2. THE CREDITS................................................22 SECTION 2.1 COMMITMENTS.........................................22 ----------- SECTION 2.2 LOANS AND BORROWINGS................................23 -------------------- SECTION 2.3 REQUESTS FOR BORROWINGS.............................24 ----------------------- SECTION 2.4 FUNDING OF BORROWINGS...............................24 --------------------- SECTION 2.5 TERMINATION AND REDUCTION OF REVOLVING COMMITMENTS..25 -------------------------------------------------- SECTION 2.6 REPAYMENT OF LOANS; EVIDENCE OF DEBT................26 ------------------------------------ SECTION 2.7 PREPAYMENT OF LOANS.................................27 ------------------- SECTION 2.8 LETTER OF CREDIT....................................29 ---------------- SECTION 2.9 PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SETOFFS 32 ---------------------------------------------------------- ARTICLE 3. INTEREST, FEES, YIELD PROTECTION, ETC......................34 SECTION 3.1 INTEREST............................................34 -------- SECTION 3.2 INTEREST ELECTIONS..................................35 ------------------ SECTION 3.3 FEES................................................36 ---- SECTION 3.4 ALTERNATE RATE OF INTEREST..........................37 -------------------------- SECTION 3.5 INCREASED COSTS; ILLEGALITY.........................38 --------------------------- SECTION 3.6 BREAK FUNDING PAYMENTS..............................40 ---------------------- SECTION 3.7 TAXES...............................................40 ----- SECTION 3.8 MITIGATION OBLIGATIONS..............................41 ---------------------- ARTICLE 4. REPRESENTATIONS AND WARRANTIES.............................41 SECTION 4.1 ORGANIZATION; POWERS................................41 -------------------- SECTION 4.2 AUTHORIZATION; ENFORCEABILITY.......................42 ----------------------------- SECTION 4.3 GOVERNMENTAL APPROVALS; NO CONFLICTS................42 ------------------------------------ SECTION 4.4 FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.....42 ----------------------------------------------- SECTION 4.5 PROPERTIES..........................................43 ---------- SECTION 4.6 LITIGATION AND ENVIRONMENTAL MATTERS................43 ------------------------------------ SECTION 4.7 COMPLIANCE WITH LAWS AND AGREEMENTS.................44 ----------------------------------- SECTION 4.8 INVESTMENT AND HOLDING COMPANY STATUS...............44 ------------------------------------- SECTION 4.9 TAXES...............................................44 ----- SECTION 4.10 ERISA...............................................44 ----- SECTION 4.11 DISCLOSURE..........................................45 ---------- SECTION 4.12 SUBSIDIARIES........................................45 ------------ SECTION 4.13 INSURANCE...........................................45 --------- SECTION 4.14 LABOR MATTERS.......................................45 ------------- SECTION 4.15 SOLVENCY............................................46 -------- SECTION 4.16 SECURITY DOCUMENTS..................................46 ------------------ SECTION 4.17 FEDERAL RESERVE REGULATIONS.........................47 --------------------------- ARTICLE 5. CONDITIONS.................................................47 SECTION 5.1 EFFECTIVE DATE......................................47 -------------- SECTION 5.2 EACH CREDIT EVENT ..................................51 ----------------- ARTICLE 6. AFFIRMATIVE COVENANTS......................................52 SECTION 6.1 FINANCIAL STATEMENTS AND OTHER INFORMATION..........52 ------------------------------------------ SECTION 6.2 NOTICES OF MATERIAL EVENTS..........................54 -------------------------- SECTION 6.3 EXISTENCE; CONDUCT OF BUSINESS......................54 ------------------------------ SECTION 6.4 PAYMENT AND PERFORMANCE OF OBLIGATIONS..............54 -------------------------------------- SECTION 6.5 MAINTENANCE OF PROPERTIES...........................55 ------------------------- SECTION 6.6 BOOKS AND RECORDS; INSPECTION RIGHTS................55 ------------------------------------ SECTION 6.7 COMPLIANCE WITH LAWS................................55 -------------------- SECTION 6.8 USE OF PROCEEDS.....................................55 --------------- SECTION 6.9 INFORMATION REGARDING COLLATERAL....................56 -------------------------------- SECTION 6.10 INSURANCE...........................................56 --------- SECTION 6.11 CASUALTY AND CONDEMNATION...........................57 ------------------------- SECTION 6.12 ADDITIONAL SUBSIDIARIES.............................57 ----------------------- SECTION 6.13 FURTHER ASSURANCES; CERTAIN REAL ESTATE MATTERS.....58 ----------------------------------------------- SECTION 6.14 ENVIRONMENTAL COMPLIANCE............................58 ------------------------ SECTION 6.16 HEDGING AGREEMENTS..................................59 ------------------ ARTICLE 7. NEGATIVE COVENANTS.........................................59 SECTION 7.1 INDEBTEDNESS........................................59 ------------ SECTION 7.2 LIENS...............................................60 ----- SECTION 7.3 FUNDAMENTAL CHANGES.................................61 ------------------- SECTION 7.4 INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND ACQUISITIONS 61 --------------------------------------------------------- SECTION 7.5 ASSET SALES.........................................62 ----------- SECTION 7.6 SALE AND LEASE-BACK TRANSACTIONS....................63 -------------------------------- SECTION 7.7 HEDGING AGREEMENTS..................................63 ------------------ SECTION 7.8 RESTRICTED PAYMENTS.................................63 ------------------- SECTION 7.9 TRANSACTIONS WITH AFFILIATES........................63 ---------------------------- SECTION 7.10 RESTRICTIVE AGREEMENTS..............................63 ---------------------- SECTION 7.11 AMENDMENT OF MATERIAL DOCUMENTS.....................64 ------------------------------- SECTION 7.12 INTEREST COVERAGE RATIO.............................64 ----------------------- SECTION 7.14 FIXED CHARGE COVERAGE RATIO.........................65 --------------------------- SECTION 7.15 TOTAL LEVERAGE RATIO................................65 -------------------- SECTION 7.16 CAPITAL EXPENDITURES................................65 -------------------- SECTION 7.17 MINIMUM ADJUSTED CONSOLIDATED EBITDA................66 ------------------------------------ SECTION 7.18 MAXIMUM DAYS RECEIVABLES AMOUNT.....................67 ------------------------------- SECTION 7.19 PREPAYMENTS.........................................67 ----------- SECTION 7.20 INITIAL TRANSACTIONS................................68 -------------------- ARTICLE 8. EVENTS OF DEFAULT..........................................68 ARTICLE 9. THE ADMINISTRATIVE AGENT...................................71 ARTICLE 10. MISCELLANEOUS.............................................73 SECTION 10.1 NOTICES.............................................73 ------- SECTION 10.2 WAIVERS; AMENDMENTS.................................74 ------------------- SECTION 10.3 EXPENSES; INDEMNITY; DAMAGE WAIVER..................75 ---------------------------------- SECTION 10.4 SUCCESSORS AND ASSIGNS..............................76 ---------------------- SECTION 10.5 SURVIVAL............................................78 -------- SECTION 10.6 COUNTERPARTS; INTEGRATION; EFFECTIVENESS............79 ---------------------------------------- SECTION 10.7 SEVERABILITY .......................................79 ------------ SECTION 10.8 RIGHT OF SETOFF ....................................79 --------------- SECTION 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS .80 ---------------------------------------------------------- SECTION 10.10 WAIVER OF JURY TRIAL ...............................81 -------------------- SECTION 10.11 HEADINGS ...........................................81 -------- SECTION 10.12 INTEREST RATE LIMITATION ...........................81 ------------------------ SECTION 10.13 TREATMENT OF CERTAIN INFORMATION ...................81 -------------------------------- SCHEDULES: - ---------------------====================================================== Schedule 1.1A List of Mortgaged Properties - ---------------------====================================================== - ---------------------====================================================== Schedule 1.1B Flow of Funds Memorandum - ---------------------====================================================== - ---------------------====================================================== Schedule 2.1 List of Commitments - ---------------------====================================================== - ---------------------====================================================== Schedule 4.5 List of Real Property - ---------------------====================================================== - ---------------------====================================================== Schedule 4.6 Disclosed Matters - ---------------------====================================================== - ---------------------====================================================== Schedule 4.12 List of Subsidiaries - ---------------------====================================================== - ---------------------====================================================== Schedule 4.13 List of Insurance - ---------------------====================================================== - ---------------------====================================================== Schedule 4.16 List of Mortgage Filing Offices - ---------------------====================================================== - ---------------------====================================================== Schedule 7.1 Existing Indebtedness - ---------------------====================================================== - ---------------------====================================================== Schedule 7.2 Existing Liens - ---------------------====================================================== - ---------------------====================================================== Schedule 7.4 Existing Investments - ---------------------====================================================== - ---------------------====================================================== Schedule 7.10 Existing Restrictions - ---------------------====================================================== EXHIBITS: - ---------------------====================================================== Exhibit A Form of Assignment and Acceptance - ---------------------====================================================== - ---------------------====================================================== Exhibit B Form of Opinion of Counsel to the Loan Parties - ---------------------====================================================== - ---------------------====================================================== Exhibit C Form of Note - ---------------------====================================================== - ---------------------====================================================== Exhibit D Form of Guarantee Agreement - ---------------------====================================================== - ---------------------====================================================== Exhibit E Form of Security Agreement - ---------------------====================================================== - ---------------------====================================================== Exhibit F Form of Subordination Agreement - ---------------------====================================================== - ---------------------====================================================== Exhibit G Form of Consent and Intercreditor Agreement - ---------------------====================================================== -----END PRIVACY-ENHANCED MESSAGE-----