Financing Agreement among Tri-State Outdoor Media Group, Inc., SGH Holdings, Inc., and Ableco Finance LLC dated March 27, 2001

Summary

This agreement is between Tri-State Outdoor Media Group, Inc. (the Borrower), SGH Holdings, Inc. (the Parent/Guarantor), and Ableco Finance LLC (the Lender). Ableco Finance agrees to provide Tri-State with a $13 million term loan and a revolving credit facility up to $7 million. The funds will be used to refinance existing debt, pay interest on senior notes, support working capital, and for other approved business purposes. The agreement outlines the terms, conditions, and obligations for borrowing and repayment, including specific definitions and requirements for use of funds.

EX-10.16 2 y49175ex10-16.txt FINANCING AGREEMENT 1 EXECUTION COPY EXHIBIT 10.16 FINANCING AGREEMENT Financing Agreement, dated as of March 27, 2001, by and among TRI-STATE OUTDOOR MEDIA GROUP, INC., a Kansas corporation ("the Borrower"), SGH HOLDINGS, INC., a Delaware corporation (the "Parent"), and ABLECO FINANCE LLC, a Delaware limited liability company (the "Lender"). RECITALS The Borrower and the Guarantor have asked the Lender to extend credit to the Borrower consisting of (a) a term loan in the principal amount of $13,000,000.00 and (b) a revolving credit facility in an aggregate principal amount not to exceed $7,000,000.00 at any time outstanding. The proceeds of the Loan shall be used to: (i) to refinance the Borrower's existing line of credit of up to $20,000,000; (ii) to pay interest on the Borrower's Senior Notes, issued pursuant to that certain Indenture, dated as of May 15, 1998, by and between the Borrower and IBJ Schroder Bank & Trust Company, as Trustee (the "Senior Notes"); (iii) for general working capital requirements; (iv) for Lender-approved Capital Expenditures (as defined below); (v) for Lender-approved Acquisitions (as defined below); (vi) to purchase the Borrower's Senior Notes on terms to be approved by Lender; and (vii) to pay fees and expenses related to this transaction.. The Lender is willing to extend such credit to the Borrower subject to the terms and conditions hereinafter set forth. In consideration of the premises and the covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS; CERTAIN TERMS SECTION 1.01. Definitions. As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms: "Account Debtor" means each debtor, customer or obligor in any way obligated on or in connection with any Account Receivable. "Account Receivable" means any and all rights of the Borrower to payment for goods sold and services rendered, including accounts, general intangibles and any and all such rights evidenced by chattel paper, instruments or documents, whether due or to become due and whether or not earned by performance, and whether now or hereafter acquired or arising in the future and any proceeds arising therefrom or relating thereto. "Acquisition" means the acquisition of all or substantially all of the Capital Stock of any Person or all or substantially all of the assets of any Person. "Action" has the meaning specified therefor in Section 10.12. 2 "Affiliate" means, as to any Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (i) vote 10% or more of the Capital Stock having ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Notwithstanding anything herein to the contrary, in no event shall the Lender be considered an "Affiliate" of any Loan Party. "Agreement" means this Financing Agreement, together with all Exhibits and Schedules hereto. "Appraisal Fee" has the meaning specified therefor in Section 2.06(b). "Authorized Officer" means the Chief Executive Officer or Chief Financial Officer of the Borrower. "Availability" means, as of any date of determination, if such date is a Business Day, and determined at the close of business on the immediately preceding Business Day, if such date of determination is not a Business Day, the amount that the Borrower is entitled to borrow as Revolving Credit Loans under Section 2.01(b)(i) and (ii) (after giving effect to all then outstanding Obligations and all sublimits and reserves applicable hereunder). "Board" means the Board of Governors of the Federal Reserve System of the United States. "Borrower" has the meaning specified therefor in the preamble hereto. "Borrowing Base" means, at any time, the aggregate amount of those Collections received in the ordinary course of business in connection with or in consideration for providing outdoor advertising services to customers by the Borrower for the period of the preceding four (4) full calendar months prior to such date of determination. "Borrowing Base Certificate" means a certificate signed by the chief financial officer of the Borrower and setting forth the calculation of the Borrowing Base in compliance with Section 6.01(a)(vi), substantially in the form of Exhibit I. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required to close. "Capital Expenditures" means, with respect to any Person for any period, the sum of (i) the aggregate amount of all expenditures by such Person and its Subsidiaries during such period that in accordance with GAAP are or should be included in "property, plant equipment" or similar fixed asset account on its balance sheet, whether such expenditures are paid in cash or financed but excluding all Capitalized Lease Obligations paid or payable during such period, and (ii) to the extent not covered by clause (i) above, the aggregate of all expenditures by such Person and its Subsidiaries to acquire by purchase or otherwise the business or fixed assets of, or the Capital Stock of, any other Person. -2- 3 "Capitalized Lease" means, with respect to any Person, any lease of real or personal property by such Person as lessee which is required under GAAP to be capitalized on the balance sheet of such Person. "Capitalized Lease Obligations" means, with respect to any Person, obligations of such Person and its Subsidiaries under Capitalized Leases, and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof at such time as determined in accordance with GAAP. "Capital Stock" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. "Cash and Cash Equivalents" means all cash and any presently existing or hereafter arising deposit account balances, certificates of deposit or other financial instruments properly classified as cash equivalents under GAAP. "Certificates" has the meaning specified therefor in Section 2.07. "Change of Control" means each occurrence of any of the following: (a) the acquisition, directly or indirectly, by any person or group (within the meaning of Section 13(d)(3) of the Exchange Act) other than the Permitted Holders of beneficial ownership of more than 20% of the aggregate outstanding voting power of the Capital Stock of the Borrower or the Guarantor, as the case may be; (b) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Borrower or the Guarantor, as the case may be, (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Borrower or the Guarantor, as the case may be, was approved by a vote of at least 66 2/3% of the directors of the Borrower or the Guarantor, as the case may be, then still in office who were either directors at the beginning of such period, or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Borrower or the Guarantor, as the case may be, then in office; and (c) (i) the Borrower or the Guarantor, as the case may be, consolidates with or merges into another entity or conveys, transfers or leases all or substantially all of its property and assets to any Person, or (ii) any entity consolidates with or merges into the Borrower or the Guarantor, as the case may be. "Code" means the Internal Revenue Code of 1986, as amended (or any successor statute thereto) and the regulations thereunder. "Collateral" means all of the property and assets and all interests therein and proceeds thereof now owned or hereafter acquired by any Person upon which a Lien is granted or purported to be granted by such Person as security for all or any part of the Obligations. -3- 4 "Collections" means all cash, checks, drafts, notes, money orders, acceptances, instruments, and other items of payment and evidence of Indebtedness (including insurance and condemnation proceeds, cash proceeds of sales and other voluntary or involuntary dispositions of property, rental proceeds, and tax refunds). "Commitment Fee" has the meaning specified therefor in Section 2.06(c). "Commitments" means the Revolving Credit Commitment and the Term Loan Commitment. "Concentration Account" has the meaning specified therefor in Section 7.01(a). "Concentration Account Agreement" means the Concentration Account Agreement, substantially in the form of Exhibit J, by and among the Borrower, the Lender and a depositary bank reasonably satisfactory to Lender. "Concentration Account Bank" means a depositary bank to be determined after the Effective Date, reasonably satisfactory to Lender. "Consolidated EBITDA" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period, plus, without duplication, the sum of the following amounts of such Person and its Subsidiaries for such period and to the extent deducted in determining Consolidated Net Income of such Person for such period: (A) Consolidated Net Interest Expense, (B) income tax expense, (C) depreciation expense, and (D) amortization expense net of negative goodwill amortization. "Consolidated Net Income" means, with respect to any Person for any period, the net income (loss) of such Person and its Subsidiaries for such period, determined on a consolidated basis and in accordance with GAAP, but excluding from the determination of Consolidated Net Income (without duplication) (a) any extraordinary or non-recurring gains or losses or gains or losses from Dispositions, (b) restructuring charges, (c) effects of discontinued operations and (d) interest income. "Consolidated Net Interest Expense" means, with respect to any Person for any period, gross interest expense of such Person and its Subsidiaries for such period determined in conformity with GAAP (including, without limitation, interest expense paid to Affiliates of such Person), less (i) the sum of (A) interest income for such period and (B) gains for such period on Hedging Agreements (to the extent not included in interest income above and to the extent not deducted in the calculation of such gross interest expense), plus (ii) the sum of (A) losses for such period on Hedging Agreements (to the extent not included in such gross interest expense) and (B) the upfront costs or fees for such period associated with Hedging Agreements (to the extent not included in gross interest expense), each determined on a consolidated basis and in accordance with GAAP for such Person and its Subsidiaries. "Contingent Obligation" means, with respect to any Person, any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, (i) the direct or indirect guaranty, -4- 5 endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of a primary obligor, (ii) the obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement, (iii) any obligation of such Person, whether or not contingent, (A) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (B) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (C) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (D) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term "Contingent Obligation" shall not include any products warranties extended in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation with respect to which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto (assuming such Person is required to perform thereunder), as determined by such Person in good faith. "Credit Line to EBITDA Ratio" means, for any period, the ratio of (i) the sum of (A) the aggregate principal amount of the Term Loans outstanding at the end of such period plus (B) the Revolving Loans outstanding at the end of such period plus (C) any other Obligations to (ii) the Consolidated EBITDA of the Borrower. "Debt to EBITDA Ratio" means, for any period, the ratio of (i) Indebtedness of the Borrower at the end of such period to (ii) Consolidated EBITDA of the Borrower and its Subsidiaries for such period, to the extent paid or required to be paid in cash, for such period. "Default" means an event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Disposition" means any transaction, or series of related transactions, pursuant to which any Loan Party or any of its Subsidiaries sells, assigns, transfers or otherwise disposes of any property or assets (whether now owned or hereafter acquired) to any other Person, in each case whether or not the consideration therefor consists of cash, securities or other assets owned by the acquiring Person, excluding any sales of Inventory in the ordinary course of business on ordinary business terms or sales, other dispositions of Permitted Investments, and sales of any assets which become subject to a Capitalized Lease. "Dollar," "Dollars" and the symbol "$" each means lawful money of the United States of America. "Effective Date" means the date, on or before March 27, 2001, on which all of the conditions precedent set forth in Article IV are satisfied (or waived by the Lender) and the initial Loan is made. -5- 6 "Employee Plan" means an employee benefit plan (other than a Multiemployer Plan) covered by Title IV of ERISA and maintained (or was maintained at any time during the six (6) calendar years preceding the date of any borrowing hereunder) for employees of the Borrower or any of its ERISA Affiliates. "Environmental Actions" means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter or other communication from any Governmental Authority involving violations of Environmental Laws or Releases of Hazardous Materials (i) from any assets, properties or businesses of the Borrower or any of its Subsidiaries or any predecessor in interest; (ii) from adjoining properties or businesses; or (iii) onto any facilities which received Hazardous Materials generated by the Borrower or any of its Subsidiaries or any predecessor in interest. "Environmental Laws" means the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.), the Federal Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.) and the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), as such laws may be amended or otherwise modified from time to time, and any other present or future federal, state, local or foreign statute, ordinance, rule, regulation, order, judgment, decree, permit, license or other binding determination of any Governmental Authority imposing liability or establishing standards of conduct for protection of the environment. "Environmental Liabilities and Costs" means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigations and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any environmental condition or a Release of Hazardous Materials from or onto (i) any property presently or formerly owned by the Borrower or any of its Subsidiaries or (ii) any facility which received Hazardous Materials generated by the Borrower or any of its Subsidiaries. "Environmental Lien" means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Affiliate" means, with respect to any Person, any trade or business (whether or not incorporated) which is a member of a group of which such Person is a member and which would be deemed to be a "controlled group" within the meaning of Sections 414(b), (c), (m) and (o) of the Code. -6- 7 "Event of Default" means any of the events set forth in Section 8.01. "Existing Credit Agreement" means the Amended and Restated Credit Agreement, dated as of August 12, 1999, among the Borrower, as borrower, the Existing Lender, and Bank One, NA (f/k/a The First National Bank of Chicago), as Agent, as amended on October 15, 1999, and as the same may be further amended, restated, supplemented or modified. "Existing Lender" means Bank One, NA, as the sole lender under the Existing Credit Agreement. "Expense Deposit" means the expense deposit in the amount of $150,000 paid by the Borrower to the Lender on or prior to the Effective Date to pay the out-of-pocket costs and expenses of the Lender in connection with the performance of due diligence, the appraising and securing of Collateral and other property and assets of the Loan Parties and their respective Subsidiaries, and the preparation of agreements, instruments and other documents in connection with the transactions contemplated hereby and by the other Loan Documents, and otherwise in connection with the consummation of such transactions. "Facility" means, individually and collectively, 3416 Highway 41 South, Tifton, Georgia 31793 and 10th & East Avenue, Baxter Springs, KS 66713, including, without limitation, the land on which such facilities are located, all buildings and other improvements thereon, all fixtures, equipment, inventory and other tangible personal property located at or used in connection with such facilities and all accounts receivable and other intangible personal property relating to the operations of such facilities, all whether now or hereafter existing. "Final Maturity Date" means the third anniversary of the Effective Date, or such earlier date on which any Loan shall become due and payable, in whole or in part, in accordance with the terms of this Agreement and the other Loan Documents. "Financial Statements" means (i) the audited consolidated balance sheet of the Borrower and its Subsidiaries for the Fiscal Years ended December 31, 1999, 1998 and 1997 and the related consolidated statement of operations, shareholders' equity and cash flows for the Fiscal Year then ended and (ii) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries for the twelve (12) months ended December 31, 2000 and the related consolidated statement of operations, shareholder's equity and cash flows for such period. "Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries ending on December 31 of each year. "Funding Fee" has the meaning specified therefor in Section 2.06(a). "GAAP" means generally accepted accounting principles in effect from time to time in the United States, applied on a consistent basis, provided that for the purpose of Section 6.03 hereof and the definitions used therein, "GAAP" shall mean generally accepted accounting principles in effect on the date hereof and consistent with those used in the preparation of the Financial Statements, provided, further, that if there occurs after the date of this Agreement any change in GAAP that affects in any respect the calculation of any covenant contained in Section 6.03 hereof, the Lender and the Borrower shall negotiate in good faith amendments to the -7- 8 provisions of this Agreement that relate to the calculation of such covenant with the intent of having the respective positions of the Lender and the Borrower after such change in GAAP conform as nearly as possible to their respective positions as of the date of this Agreement and, until any such amendments have been agreed upon, the covenants in Section 6.03 hereof shall be calculated as if no such change in GAAP has occurred. "Governmental Authority" means any nation or government, any Federal, state, city, town, municipality, county, local or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantor" means each of (i) the Parent, and (ii) each other Person which guarantees, pursuant to Section 6.01(b) or otherwise, all or any part of the Obligations. "Guaranty" means the guaranty made by the Parent in favor of the Lender pursuant to Section 6.01(b). "Hazardous Materials" means (a) any element, compound or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substances, extremely hazardous substance or chemical, hazardous waste, special waste, or solid waste under Environmental Laws; (b) petroleum and its refined products; (c) polychlorinated biphenyls; (d) any substance exhibiting a hazardous waste characteristic, including, but not limited to, corrosivity, ignitability, toxicity or reactivity as well as any radioactive or explosive materials; and (e) any raw materials, building components, including, but not limited to, asbestos-containing materials and manufactured products containing hazardous substances. "Hedging Agreement" means any interest rate, foreign currency, commodity or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity or equity values (including, without limitation, any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement. "Indebtedness" means, without duplication, with respect to any Person, (i) all indebtedness of such Person for borrowed money; (ii) all obligations of such Person for the deferred purchase price of property or services (other than trade payables or other account payables and insurance premiums incurred in the ordinary course of such Person's business); (iii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments or upon which interest payments are customarily made; (iv) all obligations and liabilities of such Person created or arising under any conditional sales or other title retention agreement with respect to property used and/or acquired by such Person, even though the rights and remedies of the lessor, seller and/or lender thereunder are limited to repossession or sale of such property; (v) all Capitalized Lease Obligations of such Person; (vi) all obligations and liabilities, contingent or otherwise, of such Person, in respect of letters of credit, acceptances and similar facilities; (vii) all obligations and liabilities, calculated on a basis satisfactory to the Lender and in accordance with -8- 9 accepted practice, of such Person under Hedging Agreements; (viii) all Contingent Obligations; (ix) liabilities incurred under Title IV of ERISA with respect to any plan (other than a Multiemployer Plan) covered by Title IV of ERISA and maintained for employees of such Person or any of its ERISA Affiliates; (x) withdrawal liability incurred under ERISA by such Person or any of its ERISA Affiliates to any Multiemployer Plan; and (xi) all obligations referred to in clauses (i) through (x) of this definition of another Person secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien upon property owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. The Indebtedness of any Person shall include the Indebtedness of any partnership of or joint venture in which such Person is a general partner or a joint venturer. "Indemnified Matters" has the meaning specified therefor in Section 10.15. "Indemnitees" has the meaning specified therefor in Section 10.15. "Inventory" means all goods and merchandise of the Borrower, including, without limitation, all raw materials, work-in-process, piece goods, trim and finished goods, whether now owned or hereafter acquired, and all such other property the sale or other disposition of which would give rise to an Account Receivable or cash. "IRS" means the Internal Revenue Service or any successor federal tax Governmental Authority. "Lease" means any lease of real property to which the Borrower or any of its Subsidiaries is a party as lessor or lessee. "Lender" has the meaning specified therefor in the preamble hereto. "Lender Account" means an account at a bank designated by the Lender from time to time as the account into which the Borrower shall make all payments to the Lender under this Agreement and the other Loan Documents. "Lender's Office" means the Lender's office located at 450 Park Avenue, 29th Floor, New York, NY 10022 or at such other office or offices of the Lender as may be designated in writing from time to time by the Lender to the Borrower. "Liabilities" has the meaning specified therefor in Section 2.07. "Lien" means any mortgage, deed of trust, pledge, lien (statutory or otherwise), security interest, charge or other encumbrance or security or preferential arrangement of any nature, including, without limitation, any conditional sale or title retention arrangement, any Capitalized Lease and any assignment, deposit arrangement or financing lease intended as, or having the effect of, security. "Loan" means any of the Term Loan and the Revolving Loans. -9- 10 "Loan Account" means an account maintained hereunder by the Lender on its books of account, at the Lender's office and with respect to the Borrower, in which the Borrower will be charged with all Loans made to, and all other Obligations incurred by, the Borrower. "Loan Documents" means this Agreement, the Notes, the Guaranty, the Security Agreement, the Pledge Agreement, the Mortgage, the Concentration Account Agreement and all other agreements, instruments, and other documents executed and delivered pursuant hereto or thereto or otherwise evidencing or securing any Loan or other Obligation. "Loan Parties" means the Borrower and the Guarantor. "Loan Servicing Fee" has the meaning specified therefor in Section 2.06(b). "Material Adverse Effect" means a material adverse effect on any of (i) the operations, business, assets, properties, condition (financial or otherwise) or prospects of any Loan Party or any one or more of its Subsidiaries, (ii) the ability of any Loan Party to perform any of its obligations under any Loan Document to which it is a party, (iii) the legality, validity or enforceability of this Agreement or any other Loan Document, (iv) the rights and remedies of the Lender under any Loan Document, or (v) the validity, perfection or priority of a Lien in favor of the Lender on any of the Collateral. "Material Contract" means, with respect to any Loan Party, each contract or agreement to which such Loan Party or its Subsidiary is a party involving aggregate consideration payable to or by such Loan Party or such Subsidiary of $50,000 or more (other than purchase orders in the ordinary course of the business of such Loan Party) or otherwise material to the business, operations, condition (financial or otherwise), performance, prospects or properties of the Loan Parties or any Subsidiary. "Moody's" means Moody's Investors Service, Inc. and any successor thereto. "Mortgage" means each Mortgage, Deed of Trust or Deed to Secure Debt, in form and substance satisfactory to the Lender, made by the Borrower or any of its Subsidiaries in favor of the Lender, securing the Obligations and delivered to the Lender pursuant to Article IV or Section 6.01(b). "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA for which the Borrower or any ERISA Affiliate has contributed to, or has been obligated to contribute to, at any time during the preceding six (6) years. "Net Cash Proceeds" means, (i) with respect to any Disposition by any Person, the amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment of deferred consideration) by or on behalf of such Person or any of its Subsidiaries or Affiliates, in connection therewith after deducting therefrom only (A) the principal amount of any Indebtedness secured by any Lien permitted by Section 6.02(a) on any asset (other than Indebtedness assumed by the purchaser of such asset) which is required to be, and is, repaid in connection with such Disposition (other than Indebtedness under this Agreement), (B) reasonable expenses related thereto reasonably incurred by the Borrower or such Affiliate in connection therewith, (C) transfer taxes paid by the Borrower or such Affiliate -10- 11 in connection therewith and (D) net income taxes to be paid in connection with such Disposition (after taking into account any tax credits or deductions and any tax sharing arrangements and (ii) with respect to the issuance or incurrence of any Indebtedness by any Person, or the sale or issuance by any Person of any shares of its Capital Stock, the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment of deferred consideration) by or on behalf of such Person or any of its Subsidiaries or Affiliates in connection therewith after deducting therefrom only reasonable brokerage commissions, underwriting fees and discounts, legal fees and similar fees and commissions. "Notes" means the Revolving Credit Note and the Term Note. "Notice of Borrowing" has the meaning specified therefor in Section 2.02. "Obligations" means (i) the obligations of the Borrower to pay, as and when due and payable (by scheduled maturity, required prepayment, acceleration, demand or otherwise), all amounts from time to time owing by it in respect of the Loan Documents, whether for principal, interest (including, without limitation, all interest that accrues after the commencement of any case, proceeding or other action relating to bankruptcy, insolvency or reorganization of the Borrower), fees, indemnification payments, expense reimbursements or otherwise, and (ii) the obligations of the Borrower and any other Loan Party to perform or observe all of its obligations from time to time existing under the Loan Documents. "Operating Lease Obligations" means all obligations for the payment of rent for any real or personal property under leases or agreements to lease, other than Capitalized Lease Obligations and Site Lease Obligations. "Other Indebtedness" means, without duplication, (i) accounts payable, (ii) deferred revenues and (iii) accrued expenses excluding interest payable on the 11% Senior Notes due 2008, Capitalized Lease Obligations and other obligations for interest payments. "Overadvance" means the amount, if any, by which the outstanding Revolving Loans exceed the lesser of (i) the Borrowing Base, or (ii) the Revolving Loan Commitment. "Participant Register" has the meaning specified therefor in Section 10.07(b)(ii). "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "Permitted Acquisition" has the meaning specified therefor in Section 6.02(e). "Permitted Holders" means Sheldon G. Hurst or Hurst Enterprises, L.P., William G. McLendon, A. Wayne Lamm, Anthony La Marca or any trust existing solely for the benefit of any of the above individuals and the estate or any executor, administrator, conservator or other legal representative of any of the above individuals, Mesirow Capital Partners VI, Mesirow Capital Partners VII or any Affiliate and Caravelle Investment Fund LLC or any Affiliate. "Permitted Indebtedness" means: (a) any Indebtedness owing to the Lender; -11- 12 (b) any other Indebtedness listed on Schedule 6.02(b), and any Indebtedness representing the extension of maturity, refinancing or modification of the terms thereof; provided, however, that (i) such extension, refinancing or modification is pursuant to terms that are not less favorable to the Borrower than the terms of the Indebtedness being extended, refinanced or modified and (ii) after giving effect to the extension, refinancing or modification, such Indebtedness is not greater than the amount of Indebtedness outstanding immediately prior to such extension, refinancing or modification; (c) Indebtedness evidenced by Capitalized Lease Obligations entered into in order to finance Capital Expenditures made by the Borrower or any of its Subsidiaries in accordance with the provisions of Section 6.02(g), which indebtedness, when aggregated in the principal amount of all indebtedness incurred under this clause (c) and clause (d) of this definition, does not exceed $5,000,000 at any time outstanding; (d) Indebtedness secured by Liens permitted by clause (d) of the definition of "Permitted Lien"; and (e) such other Indebtedness as the Lender may consent to in writing from time to time (in its sole and absolute discretion). "Permitted Investments" means (i) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within six months from the date of acquisition thereof; (ii) commercial paper, maturing not more than 270 days after the date of issue rated P-1 by Moody's or A-1 by Standard & Poor's; (iii) certificates of deposit maturing not more than 270 days after the date of issue, issued by commercial banking institutions and money market or demand deposit accounts maintained at commercial banking institutions, each of which is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000; and (iv) repurchase agreements having maturities of not more than 90 days from the date of acquisition which are entered into with major money center banks included in the commercial banking institutions described in clause (iii) above and which are secured by readily marketable direct obligations of the Government of the United States of America or any agency thereof, (v) money market accounts maintained with mutual funds having assets in excess of $2,500,000,000, and (vi) tax exempt securities rated A or better by Moody's or A+ or better by Standard & Poor's. "Permitted Liens" means: (a) Liens securing the Obligations; (b) Liens for taxes, assessments and governmental charges the payment of which is not required under Section 6.01(c); (c) Liens imposed by law, such as carriers', warehousemen's, mechanics', materialmen's and other similar Liens arising (provided they are subordinate to the Lender's Liens on Collateral) in the ordinary course of business and securing obligations (other than Indebtedness for borrowed money) that are not overdue by more than 30 days or are being contested in good faith and by appropriate proceedings promptly initiated and diligently conducted, -12- 13 and a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (d) Liens described on Schedule 6.02(a), but not the extension of coverage thereof to other property or the modification of the terms thereof or the increase of the Indebtedness secured thereby; (e) deposits and pledges securing (i) obligations incurred in respect of workers' compensation, unemployment insurance or other forms of governmental insurance or benefits, (ii) the performance of bids, tenders, leases, contracts (other than for the payment of money) and statutory obligations or (iii) obligations on surety or appeal bonds, but only to the extent such deposits or pledges are incurred or otherwise arise in the ordinary course of business and secure obligations not past due; (f) easements, zoning restrictions and similar encumbrances on real property and minor irregularities in the title thereto that do not (i) secure obligations for the payment of money or (ii) materially impair the value of such property or its use by the Borrower or any of its Subsidiaries in the normal conduct of such Person's business; (g) Liens on assets leased to Borrower pursuant to Capitalized Leases securing Capitalized Lease Obligations with respect to such assets; and (h) such other Liens as the Lender may consent to in writing from time to time (in its sole and absolute discretion). "Person" means an individual, corporation, limited liability company, partnership, association, joint-stock company, trust, unincorporated organization, joint venture or Governmental Authority. "Pledge Agreement" means the Pledge and Security Agreement, dated as of the date hereof, made by Parent, in favor of the Lender in respect of the outstanding Capital Stock of Borrower, substantially in the form of Exhibit D hereto. "Post-Default Rate" means a rate of interest per annum equal to the rate of interest otherwise in effect from time to time pursuant to the terms of this Agreement plus 3%, or, if a rate of interest is not otherwise in effect, the Reference Rate plus 6%. "property" means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. "Rating Agencies" has the meaning specified therefor in Section 2.07. "Reference Bank" means Chase Manhattan Bank, N.A., its successors or any other commercial bank designated by the Lender to the Borrower from time to time. "Reference Rate" means the rate of interest publicly announced by the Reference Bank in New York, New York from time to time as its prime rate or base rate. The prime rate or base rate is determined from time to time by the Reference Bank as a means of pricing some loans -13- 14 to its borrowers and neither is tied to any external rate of interest or index nor necessarily reflects the lowest rate of interest actually charged by the Reference Bank to any particular class or category of customers. Each change in the Reference Rate shall be effective from and including the date such change is publicly announced as being effective. "Register" has the meaning specified therefor in Section 10.07(b)(i). "Registered Loan" has the meaning specified therefor in Section 2.03(c). "Registered Note" has the meaning specified therefor in Section 2.03(c). "Regulation T", "Regulation U" and "Regulation X" mean, respectively, Regulations T, U and X of the Board or any successor, as the same may be amended or supplemented from time to time. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, seeping, migrating, dumping or disposing of any Hazardous Material (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Material) into the indoor or outdoor environment, including ambient air, soil, surface or ground water. "Remedial Action" means all actions taken to (i) clean up, remove, remediate, contain, treat, monitor, assess, evaluate or in any other way address Hazardous Materials in the indoor or outdoor environment; (ii) prevent or minimize a Release or threatened Release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations and post-remedial operation and maintenance activities; or (iv) any other actions authorized by 42 U.S.C. 9601. "Reportable Event" means an event described in Section 4043 of ERISA (other than an event not subject to the provision for 30-day notice to the PBGC under the regulations promulgated under such Section). "Revolving Credit Commitment" means the commitment of the Lender to make Revolving Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed the lesser of (i) $7,000,000.00 and (ii) the Borrowing Base, as such amount may be terminated or reduced from time to time in accordance with the terms of this Agreement. "Revolving Credit Note" means a promissory note of the Borrower, substantially in the form of Exhibit A, made payable to the order of the Lender, evidencing the Indebtedness resulting from the making by the Lender to the Borrower of Revolving Loans and delivered to the Lender pursuant to Article IV, as such promissory note may be amended, supplemented, restated, modified or extended from time to time, and any promissory note or notes issued in exchange or replacement therefor. The term "Revolving Credit Note" shall include any Registered Note evidencing the Revolving Loan and delivered pursuant to Section 2.03(c). "Revolving Loan" means a loan made by the Lender to the Borrower pursuant to Section 2.01(b). -14- 15 "Revolving Loan Commitment Termination Date" means the third anniversary of the Effective Date, or such earlier date on which the Revolving Credit Commitment is terminated in full pursuant to Section 2.05 or 8.01. "SEC" means the Securities and Exchange Commission or any other similar or successor agency of the Federal government administering the Securities Act. "Securities Act" means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time. "Securitization" has the meaning specified therefor in Section 2.07. "Securitization Party" the meaning specified therefor in Section 2.07. "Security Agreement" means the Security Agreement made by the Borrower in favor of the Lender, substantially in the form of Exhibit C. "Seller" means any Person that sells Capital Stock or other property or assets to the Borrower or a Subsidiary of the Borrower in a Permitted Acquisition. "Senior Notes" has the meaning specified therefor in the preamble hereto. "Site Leases" means those leases of real property upon which billboard structures are erected. "Site Lease Obligations" means all obligations for the payment of rent for any real property pursuant to the Site Leases. "Solvent" means, with respect to any Person on a particular date, that on such date (i) the fair value of the property of such Person is not less than the total amount of liabilities of such Person, (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its existing debts as they become absolute and matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital. "Standard & Poor's" means Standard & Poor's Ratings Services, division of The McGraw-Hill Companies, Inc. and any successor thereto. "Subsidiary" means, with respect to any Person at any date, any corporation, limited or general partnership, limited liability company, trust, association or other entity (i) the accounts of which would be consolidated with those of such Person in such Person's consolidated financial statements if such financial statements were prepared in accordance with GAAP or -15- 16 (ii) of which more than 50% of (A) the outstanding Capital Stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors of such corporation, (B) the interest in the capital or profits of such partnership or limited liability company or (C) the beneficial interest in such trust or estate is, at the time of determination, owned or controlled, directly or indirectly through one or more intermediaries, by such Person. "Term Loan" means the loan made by the Lender to the Borrower on the Effective Date pursuant to Section 2.01(a). "Term Loan Commitment" means the commitment of the Lender to make the Term Loan to the Borrower in the principal amount not to exceed the lesser of (i) $13,000,000 and (ii) the difference between thirty percent (30%) of the quick sale of all of the Borrower's outdoor media business and operations as determined by a third party and the Revolving Credit Commitment. "Term Note" means the promissory note of the Borrower, substantially in the form of Exhibit B, made payable to the order of the Lender, evidencing the Indebtedness resulting from the making by the Lender to the Borrower of the Term Loan and delivered to the Lender pursuant to Article IV, as such promissory note may be amended, supplemented, restated, modified or extended from time to time, and any promissory note or notes issued in exchange or replacement therefor. The term "Term Note" shall include any Registered Note evidencing the Term Loan and delivered pursuant to Section 2.03(c). "Termination Event" means (i) a Reportable Event with respect to any Employee Plan, (ii) any event that causes the Borrower or any of its ERISA Affiliates to incur liability under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the Code, (iii) the filing of a notice of intent to terminate an Employee Plan or the treatment of an Employee Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings by the PBGC to terminate an Employee Plan, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Employee Plan. "WARN" has the meaning specified therefor in Section 5.01(j). SECTION 1.02. 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, (a) 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), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and -16- 17 Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) 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. References in this Agreement to "determination" by the Lender include good faith estimates by the Lender (in the case of quantitative determinations) and good faith beliefs by the Lender (in the case of qualitative determinations). SECTION 1.03. Accounting and Other Terms. Unless otherwise expressly provided herein, each accounting term used herein shall have the meaning given it under GAAP applied on a basis consistent with those used in preparing the Financial Statements. All terms used in this Agreement which are defined in Article 8 or Article 9 of the Uniform Commercial Code in effect in the State of New York from time to time and that are not otherwise defined herein shall have the same meanings herein as set forth therein. SECTION 1.04. Time References. Unless otherwise indicated herein, all references to time of day refer to Eastern standard time or Eastern daylight saving time, as in effect in New York City on such day. For purposes of the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding"; provided, however, that with respect to a computation of fees or interest payable to the Lender, such period shall in any event consist of at least one full day. ARTICLE II THE LOANS SECTION 2.01. Commitments. (a) The Lender agrees, on the terms and conditions hereinafter set forth, to make a single loan (the "Term Loan") to the Borrower on the Effective Date in an amount not to exceed the amount of the Term Loan Commitment. Any principal amount of the Term Loan which is repaid or prepaid by the Borrower may not be reborrowed. (b) The Lender agrees, on the terms and conditions hereinafter set forth, to make loans (the "Revolving Loans") to the Borrower from time to time on any Business Day during the period commencing on the date hereof and ending on, but excluding, the Revolving Loan Commitment Termination Date, in an aggregate principal amount at any time outstanding not to exceed the amount of the Revolving Loan Commitment. Within the limit of the amount of the Revolving Credit Commitment the Borrower may borrow, prepay and reborrow Revolving Loans pursuant to this Article II. SECTION 2.02. Making the Loans. The Borrower shall give the Lender prior telephone notice (immediately confirmed in writing, in substantially the form of Exhibit E hereto (a "Notice of Borrowing")), not later than 9:00 a.m. (New York City time) five Business Days prior to the date of the proposed Loan. Such Notice of Borrowing shall be irrevocable and shall specify (i) the principal amount of the proposed Loan, (ii) in the case of Loans requested on the Effective Date, such Loan must be a Term Loan, unless the Borrower has requested Loans in -17- 18 excess of the Term Loan Commitment in which case the Borrower may request Term Loans in an amount equal to the Term Loan Commitments and the balance of the requested Loans may be Revolving Loans, (iii) the use of the proceeds of such proposed Loan and (iv) the proposed borrowing date, which must be a Business Day, and, with respect to the Term Loan, must be the Effective Date. Any Notice of Borrowing for any Loan after the Effective Date, the proceeds of which will be used to finance a Permitted Acquisition, shall include copies of the agreements, instruments and other documents specified in Section 6.02(e)(v)(B). The Lender may act without liability upon the basis of written, telecopied or telephonic notice believed by the Lender in good faith to be from the Borrower (or from any Authorized Officer thereof designated in writing purportedly from the Borrower to the Lender). The Borrower hereby waives the right to dispute the Lender's record of the terms of any such telephonic Notice of Borrowing. Each Notice of Borrowing shall be irrevocable and binding on the Borrower. Each Revolving Loan shall be made in a minimum amount of $500,000 and shall be in an integral multiple of $500,000. No more than one Revolving Loan shall be made in any week. The Lender will make the proceeds of such Loan available to the Borrower on the day of the proposed Loan by causing an amount, in immediately available funds, to be deposited in an account designated by the Borrower to the Lender at a commercial bank reasonably satisfactory to the Lender. SECTION 2.03. Notes; Repayment of Loans. (a) The Term Loan shall be evidenced by a single Term Note, duly executed on behalf of the Borrower, dated the Effective Date, and delivered to and made payable to the order of the Lender in a principal amount equal to the amount of the Term Loan Commitment. All Revolving Loans made by the Lender to the Borrower shall be evidenced by a single Revolving Credit Note, duly executed on behalf of the Borrower, dated the Effective Date, and delivered to and made payable to the order of the Lender in a principal amount equal to $7,000,000. (b) The outstanding principal of each Loan shall be due and payable on the Final Maturity Date. (c) The Borrower agrees to record each Loan on the Register referred to in Section 10.07(c). Each Loan recorded on the Register (the "Registered Loan") may not be evidenced by promissory notes other than the Term Note or the Revolving Credit Note, each of which is a Registered Note (as defined below). Upon the registration of any Loan, any promissory note (other than a Registered Note) evidencing the same shall be null and void and shall be returned to the Borrower. The Borrower agrees, at the request of the Lender, to execute and deliver to Lender a promissory note in registered form to evidence such Registered Loan (i.e. containing the registered note language set forth in Exhibits A and B hereto) and registered as provided in Section 10.07(c) (a "Registered Note"), dated the date hereof, payable to the Lender and otherwise duly completed. Once recorded on the Register, the Loan or Loans evidenced by such Note may not be removed from the Register so long as it remains outstanding, and a Registered Note may not be exchanged for a promissory note that is not a Registered Note. SECTION 2.04. Interest. (a) Loans. The Term Loan and each Revolving Loan shall bear interest on the principal amount thereof from time to time outstanding, from the date of such Loan until such principal amount becomes due, at a rate per annum equal to: -18- 19 (i) in the case of the Term Loans, the greater of (y) the Reference Rate plus three percent (3.00%) and (z) eleven percent (11.00%). (ii) in the case of Revolving Loans, the greater of (y) the Reference Rate plus two percent (2.00%) and (z) ten percent (10.00%). (b) Default Interest. To the extent permitted by law, upon the occurrence and during the continuance of an Event of Default, the principal of, and all accrued and unpaid interest on, all Loans, and all fees, indemnities or any other Obligations of the Borrower under this Agreement, the Notes and other Loan Documents shall bear interest, from the date such Event of Default occurred until such Event of Default is cured or waived in writing in accordance herewith, at a rate per annum equal at all times to the Post-Default Rate. (c) Interest Payment. Interest on each Loan shall be payable monthly, in arrears, on the first day of each month, commencing on the first day of the month following the month in which such Loan is made and at maturity (whether upon demand, by acceleration or otherwise). Interest at the Post-Default Rate shall be payable on demand. The Borrower hereby authorizes the Lender to, and the Lender may, from time to time, charge the Loan Account pursuant to Section 3.01 with the amount of any interest payment due hereunder. (d) General. All interest shall be computed on the basis of a year of 360 days for the actual number of days, including the first day but excluding the last day, elapsed. SECTION 2.05. Reduction of Commitment; Prepayment of Loans. (a) Reduction of Revolving Credit Commitment. The Borrower may, without premium or penalty, reduce the Revolving Credit Commitment to an amount (which may be zero) not less than the sum of (i) the aggregate unpaid principal amount of all Revolving Loans then outstanding and (ii) the aggregate principal amount of all Revolving Loans not yet made as to which a Notice of Borrowing has been given by the Borrower under Section 2.02. Each such reduction shall be in an amount which is an integral multiple of $100,000, shall be made by providing not less than three Business Days' prior written notice to the Lender and shall be irrevocable. Once reduced, the Revolving Credit Commitment may not be increased. (b) Optional Prepayment. The Borrower may, upon at least three Business Days' prior written notice to the Lender, prepay without penalty the principal of any Revolving Loan, in whole or in part subject to prepayment premiums payable in connection with the termination of this Agreement. In the case of a prepayment of all or any portion of the Term Loan or in the event Borrower makes an optional prepayment of Revolving Loans in connection with the Termination of this Agreement, such prepayment shall be made, (i) from the Effective Date until the first anniversary of the Effective Date, with a premium in an amount equal to 3.00% of the greater of (A) the initial Term Loan Commitment and (B) the principal amount of Loans so prepaid, (ii) from the first anniversary of the Effective Date until the second anniversary of the Effective Date, with a premium in an amount equal to 2.00% of the greater of (A) the initial Term Loan Commitment and (B) the principal amount of Loans so prepaid, and (iii) from the second anniversary of the Effective Date until the date that is six months after the second anniversary of the Effective Date, with a premium in an amount equal to 1.00% of the -19- 20 greater of (A) the initial Term Loan Commitment and (B) the principal amount of Loans so prepaid. Each prepayment made pursuant to this clause (b) shall be accompanied by the payment of accrued interest to the date of such payment on the amount prepaid. (c) Mandatory Prepayment. (i) At any time when an Overadvance exists, the Borrower shall immediately prepay the Revolving Loans to the full extent of such Overadvance. On each day that any Revolving Loans are outstanding, the Borrower shall hereby be deemed to represent and warrant to the Lender that the Borrowing Base calculated as of such day equals or exceeds the aggregate principal amount of all Revolving Loans outstanding on such day. (ii) The Borrower shall immediately prepay the outstanding principal amount of the Term Loan in the event that the Revolving Credit Commitment is terminated by the Lender for any reason. (iii) Dispositions; Casualty Events; Reinvestment. Immediately upon any Disposition by the Borrower or any of its Subsidiaries pursuant to Section 6.02(d)(ii), the Borrower shall prepay the outstanding principal of the Term Loan (or, if the Term Loan has been paid in full, the Borrower shall prepay the Revolving Loans and permanently reduce the Revolving Credit Commitment by the amount of such prepayment) in an amount equal to 100% of the Net Cash Proceeds received by the Borrower or its Subsidiaries in connection with such Disposition. Upon the loss, destruction or taking by condemnation of any Collateral, the Borrower shall immediately prepay the outstanding principal of the Term Loan (or, if the Term Loan has been paid in full, the Revolving Loans and permanently reduce the Revolving Credit Commitment by the amount of such prepayment) in an amount equal to 100% of the proceeds received by the Borrower or its Subsidiaries, in connection therewith, net of any reasonable expenses incurred in collecting such net proceeds. Notwithstanding the foregoing and if no Event of Default has occurred or is continuing, the Borrower may reinvest the Net Cash Proceeds of any Disposition or proceeds from any loss, destruction or condemnation in lieu of prepaying any Loan so long as each of the following conditions is satisfied: (i) the Net Cash Proceeds are used solely for the purchase of assets used in the business within 270 days of the receipt of such Net Cash Proceeds; (ii) Borrower shall give the Lender advance written notice that it intends to reinvest such Net Cash Proceeds in accordance with this subsection (iii); (iii) Lender shall receive a fully perfected, first priority security interest, free and clear of all Liens, in any assets purchased in accordance with this subsection (iii); and (iv) until such Net Cash Proceeds are reinvested, all such Net Cash Proceeds shall be held in a bank account or securities account in which the Lender has a fully perfected, first priority security interest and has received a control agreement, in form and substance satisfactory to the Lender, with respect thereto (the "Net Cash Proceeds Account"); provided; however, that Borrower shall not be obligated to deposit any such Net Cash Proceeds in a Net Cash Proceeds Account (but shall still deposit such Net Cash Proceeds in the Concentration Account) until the aggregate Net Cash Proceeds received in any twelve (12) month period exceed $1,000,000, so long as Borrower provides written notice to Lender of receipt and any reinvestment of such Net Cash Proceeds; provided, further, however, that if at any time Net Cash Proceeds received in any twelve (12) month period exceed $1,000,000, Borrower shall be obligated to deposit the full amount of such Net Cash Proceeds in a Net Cash Proceeds Account, except those Net Cash Proceeds that are used to purchase assets in accordance with clause (i) of this clause (iii). -20- 21 (iv) Upon the issuance or incurrence by the Borrower or any of its Subsidiaries of any Indebtedness representing Permitted Indebtedness under clause (e) of the definition of Permitted Indebtedness or the sale or issuance by the Borrower or any of its Subsidiaries of any shares of its Capital Stock, the Borrower shall immediately prepay the outstanding amount of the Term Loan in an amount equal to 100% of the Net Cash Proceeds received by the Borrower or any of its Subsidiaries in connection therewith. The provisions of this subsection (c)(vii) shall not be deemed to be implied consent to any such issuance, incurrence or sale otherwise prohibited by the terms and conditions hereof. (d) Application of Payments. Unless application of the prepayments is described or referenced in subsection (c) above, each prepayment pursuant to subsection (c) above shall be applied, first, to the Term Loan, and second, to the Revolving Loans. Each such prepayment of the Revolving Loans shall be accompanied by a permanent reduction of the Revolving Credit Commitments in an amount equal to such prepayment. (e) Interest and Fees. Any prepayment made pursuant to this Section 2.05 shall be accompanied by accrued interest on the principal amount being prepaid to the date of prepayment, and if such prepayment would reduce the amount of the outstanding Loans to zero at a time when the Revolving Credit Commitment has been terminated, such prepayment shall be accompanied by the payment of the fees accrued to such date pursuant to Section 2.06. (f) Cumulative Prepayments. Except as otherwise expressly provided in this Section 2.05, payments with respect to any subsection of this Section 2.05 are in addition to payments made or required to be made under any other subsection of this Section 2.05. (g) Term of Agreement. Subject to the right of the Lender to cease making Loans to Borrower upon or after the occurrence of any Default or Event of Default, this Agreement shall be in effect for the period commencing on the Effective Date and ending on the Final Maturity Date, unless sooner terminated as provided in Section 2.05(h). (h) Termination of Agreement by Lender. Lender may terminate this Agreement at any time without notice upon or after the occurrence of an Event of Default. (i) Effect of Termination. All of the Obligations shall be immediately due and payable upon the termination date stated in any notice of termination of this Agreement. All undertakings, agreements, covenants, warranties, and representations of the Borrower and the other Loan Parties contained in the Loan Documents shall survive any such termination, and, notwithstanding such termination, Lender shall retain its Liens in the Collateral, and the Lender shall retain all of its rights and remedies under the Loan Documents, until the Borrower has paid to Lender, all of Borrowers Obligations to Lender, in full, in immediately available funds, together with the applicable termination charge, if any. Notwithstanding the payment in full of the Obligations, Lender shall not be required to terminate its security interests in the Collateral unless, with respect to any loss or damage the Lender may incur as a result of dishonored checks or other items of payment received by the Lender from the Borrower or any Account Debtor and applied to the Obligations, Lender shall, at its option (a) have received a written agreement, executed by the Borrower and by any Person whose loans or other advances to the Borrower are used in whole or in part to satisfy the Obligations, indemnifying the Lender from any such loss or damage, or (b) -21- 22 have retained such monetary reserves, and Lender shall have retained such Liens on the Collateral, for such period of time as Lender, in its reasonable discretion, may deem necessary to protect the Lender from any such loss or damage. SECTION 2.06. Fees. (a) Funding Fee. On or prior to the Effective Date, the Borrower shall pay to the Lender a non-refundable closing fee (the "Funding Fee") equal to $675,000. (b) Loan Servicing Fee. From and after the Effective Date and until the Final Maturity Date, the Borrower shall pay to the Lender a non-refundable loan servicing fee (the "Loan Servicing Fee") equal to $25,000 each quarter, payable quarterly in advance on the first day of each April, July, October and January of each year, commencing April 1, 2001, and on the date the Loans shall be paid in full. (c) Unused Line Fee. From and after the Effective Date and until the Final Maturity Date, the Borrower shall pay to the Lender a non-refundable monthly unused line fee equal to one-half of one percent (0.50%) per annum on the average unused portion of the Revolving Loan Commitment, payable monthly in arrears on the first day of each month, commencing April 1, 2001 and on the Final Maturity Date with the first and last payments being made for the pro rata portion of the month for which the Revolving Credit Commitment was available. (d) Audit, Appraisal, Maintenance and Valuation Charges. Borrower shall pay to the Lender audit, appraisal, maintenance and valuation fees and charges as follows (i) a fee of $1,500 per day, per auditor, plus out-of-pocket expenses for each financial audit of Borrower performed by personnel employed by Lender and (ii) the actual charges paid or incurred by Lender if it elects to employ the services of one or more third Persons to perform financial audits of Borrower, to appraise the Collateral, or any portion thereof, or to assess Borrower's business valuation; provided, however, that unless there has been an Event of Default, Borrower shall be required to pay for financial audits no more than two (2) times per year and appraisals no more than once per year. SECTION 2.07. Securitization. The Borrower hereby acknowledges that the Lender and any of its Affiliates may sell or securitize the Loans (a "Securitization") through the pledge of the Loans as collateral security for loans to the Lender or its Affiliates or through the sale of the Loans or the issuance of direct or indirect interests in the Loans, which loans to the Lender or its Affiliate or direct or indirect interests will be rated by Moody's, Standard & Poor's or one or more other rating agencies (the "Rating Agencies"). The Borrower shall cooperate with the Lender and its Affiliates to effect the Securitization, including, without limitation, by (a) amending this Agreement and the other Loan Documents, and executing such additional documents, as requested by the Lender, any of the Rating Agencies, or any party providing credit support or otherwise participating in the Securitization (collectively, "Securitization Parties"), provided that (i) any such amendment or additional documentation does not impose material additional costs on the Borrower and (ii) any such amendment or additional documentation does not materially adversely affect the rights, or materially increase the obligations, of the Borrower under the Loan Documents or change or affect in a manner adverse to the Borrower the financial -22- 23 terms of the Loans, (b) providing such information as may be reasonably requested by the Lender, any Rating Agency or other Securitization Party in connection with the rating of the Loans or the Securitization, (c) providing in connection with any rating of the Loans, as applicable, a certificate (i) certifying that the Borrower has examined specified sections of the Credit Review Memorandum prepared by the Lender with respect to the Loans, and that such sections of the Credit Review Memorandum do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, (ii) agreeing to indemnify the Lender and any of its Affiliates and other Securitization Parties for any losses, claims, damages or liabilities (the "Liabilities") to which the Lender, its Affiliates or such Securitization Parties may become subject insofar as the Liabilities arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such sections or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such sections or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and such indemnity shall survive any transfer by the Lender or its successors or assigns of the Loans and (iii) agreeing to reimburse the Lender and any of its Affiliates and other Securitization Parties for any legal or other expenses reasonably incurred by such Persons in connection with defending the Liabilities; (d) causing to be rendered such customary opinion letters as shall be requested by the Lender, the Rating Agencies or other Securitization Parties; (e) making such representations, warranties and covenants with respect to the Loan Parties, and their property, as may be requested by the Rating Agencies or other Securitization Parties, but which do not materially adversely affect the rights, or materially increase the obligations, of the Borrower or other Loan Parties under the Loan Documents; and (f) providing such information regarding the Borrower and its Subsidiaries and Affiliates or other Loan Parties, the Collateral and other property, assets and business of the Borrower (including appraisals and valuations) as may be requested by the Rating Agencies and other Securitization Parties. ARTICLE III PAYMENTS AND OTHER COMPENSATION SECTION 3.01. Payments; Computations and Statements. The Borrower will make each payment under this Agreement, the Notes and the other Loan Documents (whether of principal, interest, fees, expense reimbursements or otherwise) not later than 11:00 a.m. (New York City time) on the day when due, in lawful money of the United States of America and in immediately available funds, to the Lender at the Lender Account. All such payments received by the Lender after 11:00 a.m. (New York City time) on any Business Day will be credited to the Loan Account on the next succeeding Business Day. All such payments shall be made by the Borrower without defense, set-off or counterclaim to the Lender. The Borrower hereby authorizes the Lender to, and the Lender may, from time to time charge the Loan Account with all Obligations and any other amount due and payable under any Loan Document to which the Borrower is a party, whether or not any Event of Default or Default shall have occurred or be continuing or whether any of the conditions precedent in Section 4.02 have been satisfied. Any amount charged to the Loan Account shall be deemed a Revolving Loan hereunder made by the Lender to the Borrower. The Borrower confirms that any charges which the Lender may so make to the Loan Account as herein provided will be made as an accommodation to the Borrower and -23- 24 solely at the Lender's discretion. It is expressly understood and agreed by the Borrower that the Lender shall have no responsibility to inquire into the correctness of the apportionment, allocation or disposition of the Loans made to the Borrower or any fees, costs or expenses for which the Borrower is obligated under this Agreement. Whenever any payment to be made under any such Loan Document shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in such case be included in the computation of interest or fees, as the case may be, provided that, if any such payment is made by a charge to the Loan Account, such charge may be made by the Lender on any day, whether or not a Business Day. All computations of interest and fees shall be made by the Lender on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fee is payable. Each determination by the Lender of an interest rate, fees or expense reimbursement hereunder shall be conclusive and binding for all purposes in the absence of manifest error. SECTION 3.02. All Loans to Constitute One Obligation. The Loans shall constitute one general Obligation of the Borrower, and shall be secured by Lender's Lien upon all of the Collateral. SECTION 3.03. Loan Account; Statements of Account. Lender shall enter all Loans as debits to the Loan Account and also shall record in the Loan Account all payments made by the Borrower on any Obligations and all proceeds of Collateral which are finally paid to the Lender, and may record therein, in accordance with its customary practices, other debits and credits, including interest and all charges and expenses properly chargeable to the Borrower. Lender will account to the Borrower monthly with a statement of Loans, charges, and payments made pursuant to this Agreement, and such accounting rendered by Lender shall be deemed final, binding and conclusive upon the Borrower unless Lender is notified by the Borrower in writing to the contrary within 30 days of the date each accounting is mailed to the Borrower. Such notice only shall be deemed an objection to those items specifically objected to therein. ARTICLE IV CONDITIONS TO LOANS SECTION 4.01. Conditions Precedent to Effectiveness and the Initial Loan. The obligation of the Lender to make the initial Loan is subject to the fulfillment, in a manner satisfactory to the Lender, of each of the following conditions precedent: (a) Payment of Fees, Etc. The Borrower shall have paid on or before the date of this Agreement all fees, costs, expenses and taxes then payable pursuant to Sections 2.06 and 10.04 (it being understood that the Expense Deposit will be applied to reduce the amount of such fees, costs, expenses and taxes). (b) Representations and Warranties; No Event of Default. The following statements shall be true and correct: (i) the representations and warranties contained in Article V and in each other Loan Document, certificate or other writing delivered to the Lender pursuant hereto or thereto on or prior to the Effective Date are true and correct on and as of the Effective Date as though made on and as of such date and (ii) no Default or Event of Default shall -24- 25 have occurred and be continuing on the Effective Date or would result from this Agreement or the other Loan Documents becoming effective in accordance with its or their respective terms, both immediately before and immediately after giving effect to the initial Loan. (c) Legality. The making of the initial Loan shall not contravene any law, rule or regulation applicable to the Lender, the Borrower or any other Loan Party. (d) Delivery of Documents. The Lender shall have received on or before the Effective Date the following, each in form and substance satisfactory to the Lender and, unless indicated otherwise, dated the Effective Date: (i) the Term Note payable to the order of the Lender, duly executed by the Borrower; (ii) the Revolving Credit Note payable to the order of the Lender, duly executed by the Borrower; (iii) the Security Agreement, duly executed by the Borrower and Parent; (iv) the Concentration Account Agreement, duly executed by each of the parties thereto; (v) a Mortgage on the Tifton, Georgia facility, duly executed and acknowledged by the Borrower; (vi) evidence of the recording of the Mortgage in such office or offices as may be necessary or, in the opinion of the Lender, desirable to perfect each Lien purported to be created thereby or to otherwise protect the rights of the Lender thereunder; (vii) an estoppel certificate duly executed by each Person (other than the Lender) having a Lien on the Facility as of the Effective Date, certifying and covenanting as to such matters relating thereto as the Lender may reasonably request; (viii) a Pledge Agreement, duly executed by the Parent, together with (A) such original stock certificates or other certificated securities or instruments representing all of the Capital Stock of the Borrower owned by the Guarantor, (B) undated stock powers executed in blank with signature guaranteed, (C) such opinion of counsel and such approving certificate of the issuer of such Capital Stock as the Lender may reasonably request with respect to complying with any legend on any such certificate or any other matter relating to such Capital Stock, and (D) all promissory notes evidencing Indebtedness owing to the Borrower or the Guarantor in the principal amount exceeding $10,000, duly endorsed in blank, and Borrower shall use its reasonable best efforts to obtain an estoppel certificate after the Effective Date from the maker of each such promissory note; (ix) appropriate financing statements on Form UCC-1, duly executed by the Borrower and duly filed in such office or offices as may be necessary or, in the opinion of the Lender, desirable to perfect the security interests purported to be created by the Security Agreement, the Pledge Agreement and the Mortgages; (x) certified copies of request for copies of information on Form UCC-11, listing all effective financing statements which name as debtor any Loan Party or -25- 26 any of its Subsidiaries and which are filed in the offices referred to in paragraph (ix) above, together with copies of such financing statements, none of which, except as otherwise agreed in writing by the Lender, shall cover any of the Collateral and the results of searches for any tax Lien and judgment Lien filed against such Person or its property, which results, except as otherwise agreed to in writing by the Lender, shall not show any such Liens; (xi) a copy of the resolutions of each Loan Party, certified as of the Effective Date by the Secretary of such Loan Party thereof, authorizing (A) the borrowings hereunder and the transactions contemplated by the Loan Documents to which such Loan Party is or will be a party, and (B) the execution, delivery and performance by such Loan Party of each Loan Document and the execution and delivery of the other documents to be delivered by such Person in connection herewith and therewith; (xii) a certificate of the Secretary of each Loan Party, certifying the names and true signatures of the representatives of such Loan Party authorized to sign each Loan Document to which such Loan Party is or will be a party and the other documents to be executed and delivered by such Loan Party in connection herewith and therewith, together with evidence of the incumbency of such authorized officers; (xiii) a certificate of the appropriate official(s) of the state of organization and each state of foreign qualification of each Loan Party certifying as to the subsistence in good standing of, and the payment of taxes by, such Loan Party in such states, together with confirmation by telephone or telegram (where available) on the Effective Date from such official(s) as to such matters; (xiv) a true and complete copy of the charter, certificate of formation, certificate of limited partnership or other publicly filed organizational document of each Loan Party certified as of a date not more than 30 days prior to the Effective Date by an appropriate official of the state of organization of such Loan Party; (xv) a copy of the charter and by-laws, limited liability company agreement, operating agreement, agreement of limited partnership or other organizational document of each Loan Party, together with all amendments thereto, certified as of the Effective Date by the Secretary of such Loan Party; (xvi) an opinion of St. John & Wayne LLC, counsel to the Loan Parties, substantially in the form of Exhibit F and as to such other matters as the Lender may reasonably request; (xvii) a certificate of an Authorized Officer of the Borrower, certifying as to the matters set forth in subsection (b) of this Section 4.01; (xviii) a copy of the Financial Statements, together with a certificate of an Authorized Officer of the Borrower setting forth all existing Indebtedness, pending or threatened litigation or claims and other contingent liabilities of the Borrower and its Subsidiaries; (xix) evidence of the insurance coverage required by Section 6.01 and the terms of the Mortgage and the Security Agreement and such other insurance coverage with respect to the business and operations of the Borrower and its Affiliates as the Lender may reasonably request, in each case, where requested by the Lender, with such indorsements as to the named insureds or loss payees thereunder as the Lender may request and -26- 27 providing that such policy may be terminated or canceled (by the insurer or the insured thereunder) only upon 30 days' prior written notice to the Lender and each such named insured or loss payee, together with evidence of the payment of all premiums due in respect thereof for such period as the Lender may request; (xx) a certificate of the chief financial officer of the Borrower, setting forth in reasonable detail the calculations required to establish compliance with each of the financial covenants contained in Section 6.03; (xxi) a certificate of an Authorized Officer of the Borrower, certifying the names and true signatures of the persons that are authorized to provide Notices of Borrowings and all other notices under this Agreement and the other Loan Documents; (xxii) copies of the Material Contracts as in effect on the Effective Date, certified as true and correct copies thereof by an Authorized Officer of the Borrower, together with a certificate of an Authorized Officer of the Borrower stating that such agreements remain in full force and effect and that the Borrower and its Subsidiaries have not breached or defaulted in any of their obligations under such agreements; (xxiii) a termination and release agreement with respect to the Existing Credit Agreement and all related documents, duly executed by the Borrower and the Existing Lender, together with UCC-3 termination statements for all UCC-1 financing statements filed by the Existing Lender and covering any portion of the Collateral; (xxiv) consents to the transactions contemplated by this Agreement from Mesirow Capital Partners and Caravelle Investment Fund LLC; (xxv) an opinion of McDowell, Rice, Smith & Gaar, P.C., special Kansas counsel to the Loan Parties, substantially in the form of Exhibit G hereto; (xxvi) an opinion of Moser & Terry, special Georgia counsel to the Loan Parties, substantially in the form of Exhibit H hereto; and (xxv) such other agreements, instruments, approvals, opinions and other documents, each satisfactory to the Lender in form and substance, as the Lender may reasonably request. (e) Material Adverse Change. The Lender shall have determined, in its sole judgment, that no material adverse change shall have occurred in the business, operations, condition (financial or otherwise), properties or prospects of the Borrower or any Affiliate of the Borrower since December 31, 1999; (f) Proceedings; Receipt of Documents. All proceedings in connection with the making of the initial Loan and the other transactions contemplated by this Agreement and the other Loan Documents, and all documents incidental hereto and thereto, shall be satisfactory to the Lender and its counsel, and the Lender and such counsel shall have received all such information and such counterpart originals or certified or other copies of such documents as the Lender or such counsel may reasonably request. (g) Management Reference Checks. The Lender shall have received satisfactory reference checks for key management of the Borrower. -27- 28 (h) Due Diligence. The Lender shall have completed its due diligence with respect to each Loan Party and its Subsidiaries and the results thereof shall be acceptable to the Lender, in its sole and absolute discretion. Without limiting the foregoing, the Lender shall have received (i) an appraisal of the Collateral, dated not earlier than 30 days prior to the Effective Date, from such appraisal firm as selected by Lender, and such appraisal and the results thereof shall be acceptable to the Lender, in its sole and absolute discretion; (ii) the Borrower's business plan, which shall be acceptable to the Lender, in its sole and absolute discretion. (i) Availability. The Borrower shall have availability under the Revolving Credit Commitment and cash on hand of not less than $3,000,000 in the aggregate, after giving pro forma effect to the payment of all financing fees and expenses related to the transactions contemplated by this Agreement and provided the Borrower's accounts payable are at a level and in a condition reasonably satisfactory to Lender. (j) Rating. The Rating Agencies shall have completed their preliminary review of the Loans, and the preliminary rating estimate therefor shall be satisfactory to the Lender in its sole and absolute discretion. SECTION 4.02. Conditions Precedent to Subsequent Loans. The obligation of the Lender to make any Loan (subsequent to the initial Loan) is subject to the fulfillment, in a manner satisfactory to the Lender, of each of the following conditions precedent: (a) Payment of Fees, Etc. The Borrower shall have paid all fees, costs, expenses and taxes then payable by the Borrower pursuant to this Agreement and the other Loan Documents, including, without limitation, Sections 2.06 and 10.04 hereof. (b) Representations and Warranties; No Event of Default. The following statements shall be true and correct, and the submission by the Borrower to the Lender of a Notice of Borrowing with respect to such Loan, and the Borrower's acceptance of the proceeds of such Loan, shall each be deemed to be a representation and warranty by the Borrower on the date of such Loan that: (i) the representations and warranties contained in Article V and in each other Loan Document, certificate or other writing delivered to the Lender pursuant hereto or thereto on or prior to the date of such Loan are true and correct on and as of such date as though made on and as of such date, (ii) at the time of and after giving effect to the making of such Loan and the application of proceeds thereof, no Default or Event of Default has occurred and is continuing or would result from the making of the Loan to be made on such date and (iii) the conditions set forth in this Section 4.02 have been satisfied as of the date of such request. (c) Legality. The making of such Loan shall not contravene any law, rule or regulation applicable to the Lender, the Borrower or any other Loan Party. (d) Borrowing Notice. The Lender shall have received a Notice of Borrowing pursuant to Section 2.02. (e) Delivery of Documents. The Lender shall have received such other agreements, instruments, approvals, opinions and other documents, each in form and substance satisfactory to the Lender, as the Lender may reasonably request. -28- 29 (f) Proceedings; Receipt of Documents. All proceedings in connection with the making of such Loan and the other transactions contemplated by this Agreement and the other Loan Documents, and all documents incidental hereto and thereto, shall be satisfactory to the Lender and its counsel, and the Lender and such counsel shall have received all such information and such counterpart originals or certified or other copies of such documents, in form and substance satisfactory to the Lender, as the Lender or such counsel may reasonably request. ARTICLE V REPRESENTATIONS AND WARRANTIES SECTION 5.01. Representations and Warranties. Each of the Loan Parties hereby represents and warrants to the Lender as follows: (a) Organization, Good Standing, Etc. Each of the Loan Parties and its respective Subsidiaries (i) is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of the state of its organization, (ii) has all requisite power and authority to conduct its business as now conducted and as presently contemplated and, in the case of the Borrower, to make the borrowings hereunder, and to execute and deliver each Loan Document to which it is a party, and to consummate the transactions contemplated thereby, and (iii) is duly qualified to do business and is in good standing in each state set forth on Exhibit K hereto. (b) Authorization, Etc. The execution, delivery and performance by each of the Loan Parties and its respective Subsidiaries of each Loan Document to which it is or will be a party, (i) have been duly authorized by all necessary action, (ii) do not and will not contravene its charter or by-laws, its limited liability company or operating agreement or its certificate of partnership or partnership agreement, as applicable, or any applicable law or any contractual restriction binding on or otherwise affecting it or any of its properties, (iii) do not and will not result in or require the creation of any Lien (other than pursuant to any Loan Document) upon or with respect to any of its properties, and (iv) do not and will not result in any suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to its operations or any of its properties. (c) Governmental Approvals. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required in connection with the due execution, delivery and performance by any Loan Party or any of its Subsidiaries of any Loan Document to which it is or will be a party. (d) Enforceability of Loan Documents. This Agreement is, and each other Loan Document to which any Loan Party or any of its Subsidiaries is or will be a party, when delivered hereunder, will be, a legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws. (e) Capitalization. On the Effective Date, after giving effect to the transactions contemplated hereby to occur on the Effective Date, the authorized Capital Stock of -29- 30 the Borrower and the issued and outstanding Capital Stock of the Borrower are as set forth on Schedule 5.01(e). All of the issued and outstanding shares of Capital Stock of the Borrower have been validly issued and are fully paid and nonassessable, and the holders thereof are not entitled to any preemptive, first refusal or other similar rights. There are no securities issuable under any stock option or similar equity incentive plan. Except as described on Schedule 5.01(e), as of the Effective Date, there are no outstanding debt or equity securities of the Borrower or any of its Subsidiaries, and no outstanding obligations of the Borrower or any of its Subsidiaries, convertible into or exchangeable for, or warrants, options or other rights for the purchase or acquisition from the Borrower, or other obligations of the Borrower to issue, directly or indirectly, any shares of Capital Stock of the Borrower. (f) Subsidiaries. Schedule 5.01(f) is a complete and correct description of the name, jurisdiction of incorporation and ownership of the outstanding Capital Stock of such Subsidiaries of the Borrower in existence on the date hereof. All of the issued and outstanding shares of Capital Stock of such Subsidiaries have been validly issued and are fully paid and nonassessable, and the holders thereof are not entitled to any preemptive, first refusal or other similar rights. Except as indicated on such Schedule, all such Capital Stock is owned by the Borrower or one or more of its wholly-owned Subsidiaries, free and clear of all Liens. There are no outstanding debt or equity securities of the Borrower or any of its Subsidiaries and no outstanding obligations of the Borrower or any of its Subsidiaries convertible into or exchangeable for, or warrants, options or other rights for the purchase or acquisition from the Borrower or any of its Subsidiaries, or other obligations of any Subsidiary to issue, directly or indirectly, any shares of Capital Stock of any Subsidiary of the Borrower. (g) Litigation. Except as set forth in Schedule 5.01(g), there is no pending or, to the knowledge of any Loan Party or any of its Subsidiaries, threatened action, suit or proceeding affecting such Loan Party or any of its Subsidiaries before any court or other Governmental Authority or any arbitrator that (i) if adversely determined, could have a Material Adverse Effect or (ii) relates to this Agreement, the Notes or any other Loan Document or any transaction contemplated hereby or thereby. (h) Financial Condition. (i) The Financial Statements, copies of which have been delivered to the Lender, fairly present the consolidated financial condition of the Borrower and its Subsidiaries as at the respective dates thereof and the consolidated results of operations of the Borrower and its Subsidiaries for the fiscal periods ended on such respective dates, all in accordance with GAAP, and since December 31, 1999, no event or development has occurred that has had or could have a Material Adverse Effect. (ii) The Borrower has heretofore furnished to the Lender (i) projected monthly balance sheets, income statements and statements of cash flows of the Borrower and its Subsidiaries for the period from January 1, 2001 through December 31, 2001 and (ii) projected annual balance sheets, income statements and statements of cash flows of the Borrower and its Subsidiaries for the Fiscal Years ending in 2001 through 2005, in each case as updated from time to time pursuant to Section 6.01(a)(vii). Such projections, as so updated, are believed by the Borrower at the time furnished to be reasonable, have been prepared on a -30- 31 reasonable basis and in good faith by the Borrower, and have been based on assumptions believed by the Borrower to be reasonable at the time made and upon the best information then reasonably available to the Borrower, and the Borrower is not aware of any facts or information that would lead it to believe that such projections, as so updated, are incorrect or misleading in any material respect. (i) Compliance with Law, Etc. None of the Loan Parties nor any of their respective Subsidiaries is in violation of its organizational documents, any law, rule, regulation, judgment or order of any Governmental Authority applicable to it or any of its property or assets, or any material term of any agreement or instrument (including, without limitation, any Material Contract) binding on or otherwise affecting it or any of its properties, and no Default or Event of Default has occurred and is continuing. (j) ERISA. Except as set forth on Schedule 5.01(j), (i) each Employee Plan is in substantial compliance with ERISA and the Code, (ii) no Termination Event has occurred nor is reasonably expected to occur with respect to any Employee Plan, (iii) the most recent annual report (Form 5500 Series) with respect to each Employee Plan, including any required Schedule B (Actuarial Information) thereto, copies of which have been filed with the Internal Revenue Service and delivered to the Lender, is complete and correct and fairly presents the funding status of such Employee Plan, and since the date of such report there has been no material adverse change in such funding status, (iv) no Employee Plan had an accumulated or waived funding deficiency or permitted decreases which would create a deficiency in its funding standard account or has applied for an extension of any amortization period within the meaning of Section 412 of the Code at any time since the 5 year period immediately preceding the Effective Date, and (v) no Lien imposed under the Code or ERISA exists or is likely to arise on account of any Employee Plan within the meaning of Section 412 of the Code at any time since the 5 year period immediately preceding the Effective Date. Except as set forth on Schedule 5.01(j), none of the Borrower or any of its ERISA Affiliates have incurred any withdrawal liability under ERISA with respect to any Multiemployer Plan, or are aware of any facts indicating that the Borrower or any of its ERISA Affiliates may in the future incur any such withdrawal liability. Except as required by Section 4980B of the Code, none of the Borrower or any of its ERISA Affiliates maintains an employee welfare benefit plan (as defined in Section 3(1) of ERISA) which provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of the Borrower or any of its ERISA Affiliates or coverage after a participant's termination of employment. None of the Borrower or any of its ERISA Affiliates has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act ("WARN") or similar state law, which remains unpaid or unsatisfied. (k) Taxes, Etc. All Federal, state and local tax returns and other reports required by applicable law to be filed by the Borrower and each of its Subsidiaries have been filed, or extensions have been obtained, and all taxes, assessments and other governmental charges imposed upon the Borrower or any of its Subsidiaries or any property of the Borrower or any of its Subsidiaries and which have become due and payable on or prior to the date hereof have been paid, except to the extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof. -31- 32 (l) Regulation U. Neither the Borrower nor any of its Subsidiaries is nor will be engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T, U or X), and no proceeds of any Loan will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. (m) Nature of Business. Neither the Borrower nor any of its Subsidiaries is engaged in any business other than highway directional outdoor advertising. (n) Adverse Agreements, Etc. Neither the Borrower nor any of its Subsidiaries is a party to any agreement or instrument, or subject to any charter, limited liability company agreement, partnership agreement or other corporate, partnership or limited liability company restriction or any judgment, order, regulation, ruling or other requirement of a court or other Governmental Authority, which has, or in the future could have, a Material Adverse Effect. (o) Permits, Etc. Each of the Borrower and its Subsidiaries has, and is in compliance with, all permits, licenses, authorizations, approvals, entitlements and accreditations required for such Person lawfully to own, lease, manage or operate, or to acquire, each business currently owned, leased, managed or operated, or to be acquired, by such Person. No condition exists or event has occurred which, in itself or with the giving of notice or lapse of time or both, would result in the suspension, revocation, impairment, forfeiture or non-renewal of any such permit, license, authorization, approval, entitlement or accreditation, and there is no claim that any thereof is not in full force and effect. (p) Properties. (i) Each of the Borrower and its Subsidiaries has good and marketable title to, or valid leasehold interests in, all property and assets material to its business, free and clear of all Liens except Permitted Liens. The properties are in good working order and condition, ordinary wear and tear excepted. (ii) Schedule 5.01(p) sets forth a complete and accurate list as of the Effective Date of the location, by state and street address, of all real property owned or leased by any of the Borrower and its Subsidiaries, except for the Site Leases which are identified by county and state only, not by street address. As of the Effective Date, each of the Borrower and its Subsidiaries has valid leasehold interests in the Leases described on Schedule 5.01(p) to which it is a party. Schedule 5.01(p) sets forth with respect to each such Lease, the commencement date, termination date and annual base rents. Each such Lease is valid and enforceable in accordance with its terms in all material respects and is in full force and effect. No consent or approval of any landlord or other third party in connection with any such Lease is necessary for the Borrower or any of its Subsidiaries to enter into and execute the Loan Documents to which it is a party, except as set forth on Schedule 5.01(p). To the knowledge of the Borrower, no other party to any such Lease is in default of its obligations thereunder, and none of the Borrower and its Subsidiaries (or any other party to any such Lease) has not at any time delivered or received any notice of default which remains uncured under any such Lease and, as of the Effective Date, no event has occurred which, with the giving of notice or the passage of time or both, would constitute a default under any such Lease. -32- 33 (q) Full Disclosure. The Borrower has disclosed to the Lender all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could result in a Material Adverse Effect. None of the other reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Lender in connection with the negotiation of this Agreement or delivered hereunder (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 it was 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. There is no contingent liability or fact that may have a Material Adverse Effect which has not been set forth in a footnote included in the Financial Statements or a schedule hereto. (r) Operating Lease Obligations. On the Effective Date, neither the Borrower nor any of its Subsidiaries has any obligations as lessee for the payment of rent for any real or personal property other than the Operating Lease Obligations set forth on Schedules 5.01(p) and 5.01(r). (s) Environmental Matters. Except as set forth on Schedule 5.01(s), (i) the operations of each of the Borrower and its Subsidiaries are in compliance with Environmental Laws; (ii) there has been no Release at any of the properties owned or operated by the Borrower or its Subsidiaries or a predecessor in interest, or at any disposal or treatment facility which received Hazardous Materials generated by the Borrower or its Subsidiaries or any predecessor in interest which could have a Material Adverse Effect; (iii) no Environmental Action has been asserted against the Borrower or its Subsidiaries or any predecessor in interest nor does the Borrower or any of its Subsidiaries have knowledge or notice of any threatened or pending Environmental Action against the Borrower or its Subsidiaries or any predecessor in interest which could have a Material Adverse Effect; and (iv) no Environmental Actions have been asserted against any facilities that may have received Hazardous Materials generated by the Borrower or its Subsidiaries or any predecessor in interest which could have a Material Adverse Effect. (t) Insurance. Each of the Borrower and its Subsidiaries keeps its property adequately insured and maintains (i) insurance to such extent and against such risks, including fire, as is customary with companies in the same or similar businesses, (ii) workmen's compensation insurance in the amount required by applicable law, (iii) public liability insurance, which shall include product liability insurance, in the amount customary with companies in the same or similar business against claims for personal injury or death on properties owned, occupied or controlled by it, and (iv) such other insurance as may be required by law or as may be reasonably required by the Lender (including, without limitation, against larceny, embezzlement or other criminal misappropriation). Schedule 5.01(t) sets forth a list of all insurance maintained by the Borrower and its Subsidiaries on the Effective Date. (u) Use of Proceeds. The proceeds of the Loans shall be used for the purposes set forth in the preamble hereto. -33- 34 (v) Solvency. After giving effect to the transactions contemplated by this Agreement and before and after giving effect to each Loan, each of the Borrower and its Subsidiaries is, and the Borrower and its Subsidiaries on a consolidated basis are, Solvent. (w) Location of Bank Accounts. Schedule 5.01(w) sets forth a complete and accurate list as of the Effective Date of all deposit, checking and other bank accounts, all securities and other accounts maintained with any broker dealer and all other similar accounts maintained by the Borrower, or any of its Subsidiaries, together with a description thereof (i.e., the bank or broker dealer at which such deposit or other account is maintained and the account number and the purpose thereof). (x) Intellectual Property. Except as set forth on Schedule 5.01(x), each of the Borrower and its Subsidiaries owns or licenses or otherwise has the right to use all licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, tradenames, copyrights, copyright applications, franchises, authorizations and other intellectual property rights that are necessary for the operations of its businesses, without infringement upon or conflict with the rights of any other Person with respect thereto, except for such infringements and conflicts which, individually or in the aggregate, could not have a Material Adverse Effect. Set forth on Schedule 5.01(x) is a complete and accurate list as of the Effective Date of all such material licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, tradenames, copyrights, copyright applications, franchises, authorizations and other intellectual property rights of the Borrower and its Subsidiaries. No slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower or its Subsidiaries infringes upon or conflicts with any rights owned by any other Person, and no claim or litigation regarding any of the foregoing is pending or threatened, except for such infringements and conflicts which could not have, individually or in the aggregate, a Material Adverse Effect. To the best knowledge of the Borrower, no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or proposed, which, individually or in the aggregate, could have a Material Adverse Effect. (y) Material Contracts. Set forth on Schedule 5.01(y) is a complete and accurate list as of the Effective Date of all Material Contracts of the Borrower and its Subsidiaries, showing the parties and subject matter thereof and amendments and modifications thereto. Each such Material Contract (i) is in full force and effect and is binding upon and enforceable against each of the Borrower and its Subsidiaries that is a party thereto and, to the best knowledge of the Borrower, all other parties thereto in accordance with its terms, (ii) has not been otherwise amended or modified, and (iii) is not in default due to the action of the Borrower or its Subsidiaries or, to the best knowledge of the Borrower, any other party thereto. (z) Holding Company and Investment Company Acts. None of the Loan Parties nor any of their respective Subsidiaries is (i) a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, or (ii) an "investment company" or an "affiliated person" or "promoter" of, or "principal underwriter" of or for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. -34- 35 (aa) Employee and Labor Matters. (i) There is (A) no unfair labor practice complaint pending or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries before any Governmental Authority and no grievance or arbitration proceeding pending or threatened against the Borrower or any of its Subsidiaries which arises out of or under any collective bargaining agreement, (B) no strike, labor dispute, slowdown, stoppage or similar action or grievance pending or threatened against the Borrower or any of its Subsidiaries and (C) to the best knowledge of the Borrower, no union representation question existing with respect to the employees of the Borrower or any of its Subsidiaries and no union organizing activity taking place with respect to any of the employees of any of them. (bb) Customers and Suppliers. There exists no actual or threatened termination, cancellation or limitation of, or modification to or change in, the business relationship between (A) the Borrower or any of its Subsidiaries, on the one hand, and any customer or any group thereof, on the other hand, whose agreements with the Borrower or any such Subsidiary are individually or in the aggregate material to the business or operations of the Borrower or any of its Subsidiaries, or (B) the Borrower or any of its Subsidiaries, on the one hand, and any material supplier thereof, on the other hand; and there exists no present state of facts or circumstances that could give rise to or result in any such termination, cancellation, limitation, modification or change. (cc) No Bankruptcy Filing. None of the Loan Parties nor any of their respective Subsidiaries is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of the Borrower's or such Subsidiary's assets or property, and neither the Borrower nor any of its Subsidiaries has any knowledge of any Person contemplating the filing of any such petition against it. (dd) Separate Existence. (i) All customary formalities regarding the corporate existence of each of the Loan Parties and their respective Subsidiaries have been at all times since its formation and will continue to be observed. (ii) Each of the Loan Parties and their respective Subsidiaries has at all times since its formation accurately maintained, and will continue to accurately maintain, its financial statements, accounting records and other organizational documents separate from those of any Affiliate of the Borrower and its Subsidiaries and any other Person. Neither the Borrower nor any of its Subsidiaries has at any time since its formation commingled, and will not commingle, its assets with those of any of its Affiliates or any other Person. Each of the Borrower and its Subsidiaries has at all times since its formation accurately maintained, and will continue to accurately maintain its own bank accounts and separate books of account. (iii) Each of the Loan Parties and their respective Subsidiaries has at all times since its formation paid, and will continue to pay, its own liabilities from its own separate assets. (iv) Each of the Loan Parties and their respective Subsidiaries has at all times since its formation identified itself, and will continue to identify itself, in all dealings with the public, under its own name and as a separate and distinct Person. Each of the -35- 36 Loan Parties and their respective Subsidiaries has not at any time since its formation identified itself, and will not identify itself, as being a division or a part of any other Person. (ee) Location of Inventory; Place of Business; Chief Executive Office. There is no location at which each of the Loan Parties and their respective Subsidiaries has any Inventory (except for Inventory in transit) other than (i) those locations listed on Schedule 5.01(ee) and (ii) any other locations approved in writing by the Lender. Schedule 5.01(ee) hereto contains a true, correct and complete list, as of the Effective Date, of the legal names and addresses of each warehouse at which Inventory of each of the Loan Parties and their respective Subsidiaries is stored. None of the receipts received by each of the Loan Parties and their respective Subsidiaries from any warehouse states that the goods covered thereby are to be delivered to bearer or to the order of a named Person or to a named Person and such named Person's assigns. Schedule 5.01(ee) sets forth a complete and accurate list as of the date hereof of (A) each place of business (except Site Leases) of each of the Loan Parties and their respective Subsidiaries and (B) the chief executive office of each of the Loan Parties and their respective Subsidiaries. ARTICLE VI COVENANTS OF THE BORROWER SECTION 6.01 Affirmative Covenants. So long as any principal of or interest on any Loan or any other Obligations (whether or not due) shall remain unpaid or the Lender shall have any Commitment hereunder, the Borrower will, unless the Lender shall otherwise consent in writing: (a) Reporting Requirements. Furnish to the Lender: (i) as soon as available and in any event within 45 days after the end of each fiscal quarter of the Borrower and its Subsidiaries, consolidated balance sheets, consolidated statements of operations and retained earnings and consolidated statements of cash flows of the Borrower and its Subsidiaries as at the end of such quarter, and for the period commencing at the end of the immediately preceding Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the figures for the corresponding date or period of the immediately preceding Fiscal Year, all in reasonable detail and certified by an Authorized Officer as fairly presenting, in all material respects, the financial position of the Borrower and its Subsidiaries as of the end of such quarter and the results of operations and cash flows of the Borrower and its Subsidiaries for such quarter, in accordance with GAAP applied in a manner consistent with that of the most recent audited financial statements of the Borrower and its Subsidiaries furnished to the Lender, subject to normal year-end adjustments; (ii) as soon as available, and in any event within 90 days after the end of each Fiscal Year consolidated balance sheets, consolidated statements of operations and retained earnings and consolidated statements of cash flows of the Borrower and its Subsidiaries as at the end of such Fiscal Year, setting forth in comparative form the corresponding figures for the immediately preceding Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, and accompanied by a report and an unqualified opinion, -36- 37 prepared in accordance with generally accepted auditing standards, of independent certified public accountants of recognized standing selected by the Borrower and satisfactory to the Lender (which opinion shall be without (A) a "going concern" or like qualification or exception, (B) any qualification or exception as to the scope of such audit or (C) any qualification which relates to the treatment or classification of any item and which, as a condition to the removal of such qualification, would require an adjustment to such item, the effect of which would be to cause any noncompliance with the provisions of Section 6.03), together with a written statement of such accountants (1) to the effect that, in making the examination necessary for their certification of such financial statements, they have not obtained any knowledge of the existence of an Event of Default or a Default and (2) if such accountants shall have obtained any knowledge of the existence of an Event of Default or such Default, describing the nature thereof; (iii) as soon as available, and in any event within 30 days of the end of each fiscal month of the Borrower and its Subsidiaries internally prepared consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows for such fiscal month of the Borrower and its Subsidiaries for such fiscal month and for the period from the beginning of such Fiscal Year to the end of such fiscal month, all in reasonable detail and certified by an Authorized Officer as fairly presenting, in all material respects, the financial position of the Borrower and its Subsidiaries as of the end of such fiscal month and the results of operations and cash flows of the Borrower and its Subsidiaries for such fiscal month, in accordance with GAAP applied in a manner consistent with that of the most recent audited financial statements furnished to the Lender, subject to normal year-end adjustments; (iv) simultaneously with the delivery of the financial statements of the Borrower required by clauses (i), (ii) and (iii) of this Section 6.01(a), a certificate of an Authorized Officer (A) stating that such Authorized Officer has reviewed the provisions of this Agreement and the other Loan Documents and has made or caused to be made under his or her supervision a review of the condition and operations of the Borrower and its Subsidiaries during the period covered by such financial statements with a view to determining whether the Borrower and its Subsidiaries were in compliance with all of the provisions of such Loan Documents at the times such compliance is required by the Loan Documents, and that such review has not disclosed, and such Authorized Officer has no knowledge of, the existence during such period of an Event of Default or Default or, if an Event of Default or Default existed, describing the nature and period of existence thereof and the action which the Borrower and its Subsidiaries propose to take or have taken with respect thereto and (B) attaching a schedule showing the calculations specified in Section 6.03; (v) as soon as available and in any event within 20 days of the end of each fiscal month of the Borrower, or more frequently as Lender may reasonably request from time to time, summary reports (A) listing all Accounts Receivable of the Borrower and its Subsidiaries as of the last Business Day of such month, which shall include the amount and age of each Account Receivable, showing separately those which are more than 30, 60, 90 and 120 days old and a description of all Liens, set-offs, defenses and counterclaims with respect thereto, together with a reconciliation of such schedule with the schedule delivered to the Lender pursuant to this clause (v)(A) for the immediately preceding month, the name and mailing address of each Account Debtor with respect to each such Account Receivable and such other information as the Lender may request, (B) listing all accounts payable of the Borrower and its Subsidiaries as of the last Business Day of such month which shall include the amount and age -37- 38 of each account payable, the name and mailing address of each account creditor and such other information as the Lender may request, and (C) listing all Inventory of the Borrower and its Subsidiaries as of the last Business Day of such month, and containing a breakdown of such Inventory by type and amount, the cost and the current market value thereof (by location), the date of acquisition, the warehouse and production facility location and such other information as the Lender may request, all in detail and in form satisfactory to the Lender; provided, however, that if Lender requests a more detailed report than the aforementioned summary, Borrower shall provide a report in detail satisfactory to the Lender and certified by an Authorized Officer as being accurate and complete; (vi) by the third Business Day of each week, a Borrowing Base Certificate as of the close of business on the last day of the prior week supported by schedules showing the derivation thereof and containing such detail and other information as the Lender may request from time to time provided, that (A) the Borrowing Base set forth in the Borrowing Base Certificate shall be effective from and including the date such Borrowing Base Certificate is duly received by the Lender but not including the date on which a subsequent Borrowing Base Certificate is received by the Lender, unless the Lender disputes the eligibility of any property for inclusion in the calculation of the Borrowing Base or the valuation thereof by notice of such dispute to the Borrower and (B) in the event of any dispute about the eligibility of any property for inclusion in the calculation of the Borrowing Base or the valuation thereof, the Lender's good faith judgment shall control; (vii) on or before December 15 of each year, preliminary financial projections (A) supplementing and superseding the financial projections for such period referred to in Section 5.01(h)(ii), prepared on a monthly basis and otherwise in form and substance satisfactory to the Lender, for the immediately succeeding Fiscal Year for the Borrower and its Subsidiaries; provided, however, that final financial projections shall be provided to Lender by January 31 of the fiscal year covered by such projections, and the final projections shall be substantially similar in all material respects to the preliminary projections previously provided and (B) on or before the 45th day after the end of a fiscal quarter, financial projections supplementing and superseding the financial projections for such period referred to in Section 5.01(h)(ii), prepared on a monthly basis and otherwise in form and substance satisfactory to the Lender, for each remaining quarterly period in such Fiscal Year, all such financial projections to be reasonable, to be prepared on a reasonable basis and in good faith, and to be based on assumptions believed by the Borrower to be reasonable at the time made and from the best information then available to the Borrower; (viii) promptly after submission to any Governmental Authority, all documents and information furnished to such Governmental Authority in connection with any investigation of the Borrower or any of its Subsidiaries other than routine inquiries by such Governmental Authority; (ix) as soon as possible, and in any event within three days after the occurrence of an Event of Default or Default or the occurrence of any event or development that could have a Material Adverse Effect, the written statement of an Authorized Officer setting forth the details of such Event of Default, Default, other event or development and the action which the Borrower and its Subsidiaries propose to take with respect thereto; -38- 39 (x) (A) as soon as possible and in any event (1) within 10 days after the Borrower or any ERISA Affiliate thereof knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Employee Plan has occurred, (2) within 10 days after the Borrower or any ERISA Affiliate thereof knows or has reason to know that any other Termination Event with respect to any Employee Plan has occurred, or (3) within 10 days after the Borrower or any ERISA Affiliate thereof knows or has reason to know that an accumulated funding deficiency has been incurred or an application has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including installment payments) or an extension of any amortization period under Section 412 of the Code with respect to an Employee Plan, a statement of an Authorized Officer setting forth the details of such occurrence and the action, if any, which the Borrower or such ERISA Affiliate propose to take with respect thereto, (B) promptly and in any event within three days after receipt thereof by the Borrower or any ERISA Affiliate thereof from the PBGC, copies of each notice received by the Borrower or any ERISA Affiliate thereof of the PBGC's intention to terminate any Plan or to have a trustee appointed to administer any Plan, (C) promptly and in any event within 10 days after the filing thereof with the Internal Revenue Service if requested by the Lender, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Employee Plan and Multiemployer Plan, (D) promptly and in any event within 10 days after the Borrower or any ERISA Affiliate thereof knows or has reason to know that a required installment within the meaning of Section 412 of the Code has not been made when due with respect to an Employee Plan, (E) promptly and in any event within three days after receipt thereof by the Borrower or any ERISA Affiliate thereof from a sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice received by the Borrower or any ERISA Affiliate thereof concerning the imposition or amount of withdrawal liability under Section 4202 of ERISA or indicating that such Multiemployer Plan may enter reorganization status under Section 4241 of ERISA, and (F) promptly and in any event within 10 days after the Borrower or any ERISA Affiliate thereof send notice of a plant closing or mass layoff (as defined in WARN) to employees, copies of each such notice sent by the Borrower or any ERISA Affiliate thereof; (xi) promptly after the commencement thereof but in any event not later than 5 days after service of process with respect thereto, or the obtaining of knowledge thereof by, the Borrower or any Subsidiary, notice of each action, suit or proceeding before any court or other Governmental Authority or other regulatory body or any arbitrator which, if adversely determined, could have a Material Adverse Effect; (xii) promptly after the sending or filing thereof, copies of all statements, reports and other information the Borrower or any of its Subsidiaries sends to any holders of its Indebtedness or its securities or files with the SEC or any national (domestic or foreign) securities exchange; (xiii) promptly upon receipt thereof, copies of all financial reports (including, without limitation, management letters), if any, submitted to the Borrower or any of its Subsidiaries by its auditors in connection with any annual or interim audit of the books thereof; and (xiv) promptly upon request, such other information concerning the condition or operations, financial or otherwise, of the Borrower or any of its Affiliates as the Lender from time to time may reasonably request. -39- 40 (b) Additional Guaranties and Collateral Security. Cause: (i) each Subsidiary of the Borrower not in existence on the Effective Date, to execute and deliver to the Lender promptly and in any event within three days after the formation, acquisition or change in status thereof (A) a Guaranty guaranteeing the Obligations, (B) a Security Agreement, (C) if such Subsidiary has any Subsidiaries, a Pledge Agreement together with (x) certificates evidencing all of the Capital Stock of any Person owned by such Subsidiary, (y) undated stock powers executed in blank with signature guaranteed, and (z) such opinion of counsel and such approving certificate of such Subsidiary as the Lender may reasonably request in respect of complying with any legend on any such certificate or any other matter relating to such shares, (D) one or more Mortgages creating on the real property of such Subsidiary a perfected, first priority Lien on such real property, a title insurance policy covering such real property, a current ALTA survey thereof and a surveyor's certificate, each in form and substance satisfactory to the Lender, together with such other agreements, instruments and documents as the Lender may require whether comparable to the documents required under Section 6.01 (m) or otherwise, and (E) such other agreements, instruments, approvals, legal opinions or other documents reasonably requested by the Lender in order to create, perfect, establish the first priority of or otherwise protect any Lien purported to be covered by any such Security Agreement, Pledge Agreement or Mortgage or otherwise to effect the intent that such Subsidiary shall become bound by all of the terms, covenants and agreements contained in the Loan Documents and that all property and assets of such Subsidiary shall become Collateral for the Obligations; and (ii) each owner of the Capital Stock of any such Subsidiary to execute and deliver promptly and in any event within three days after the formation or acquisition of such Subsidiary a Pledge Agreement, together with (A) certificates evidencing all of the Capital Stock of such Subsidiary, (B) undated stock powers or other appropriate instruments of assignment executed in blank with signature guaranteed, (C) such opinion of counsel and such approving certificate of such Subsidiary as the Lender may reasonably request in respect of complying with any legend on any such certificate or any other matter relating to such shares and (D) such other agreements, instruments, approvals, legal opinions or other documents requested by the Lender; (c) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects with all applicable laws, rules, regulations and orders (including, without limitation, all Environmental Laws), such compliance to include, without limitation, (i) paying before the same become delinquent all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any of its properties, and (ii) paying all lawful claims which if unpaid might become a Lien or charge upon any of its properties, except to the extent contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof. (d) Preservation of Existence, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain duly qualified and in good standing in each jurisdiction in which the character of the -40- 41 properties owned or leased by it or in which the transaction of its business makes such qualification necessary. (e) Keeping of Records and Books of Account. Keep, and cause each of its Subsidiaries to keep, adequate records and books of account, with complete entries made in accordance with GAAP. (f) Inspection Rights. Permit, and cause each of its Subsidiaries to permit, the Lender or any agents or representatives thereof at any time and from time to time (i) prior to the occurrence of an Event of Default, during normal business hours on reasonable notice, and (ii) after the occurrence and during the continuance of an Event of Default, at such times as Lender, or any of its agents or representatives shall determine, in each case at the expense of the Borrower, to examine and make copies of and abstracts from their records and books of account, to visit and inspect their properties, to verify materials, leases, notes, accounts receivable, deposit accounts and other assets of the Borrower, any Loan Party and their respective Subsidiaries, to conduct audits, physical counts, valuations, appraisals, environmental assessments or examinations and to discuss their affairs, finances and accounts with any of the officers thereof, who shall take reasonable efforts to make the directors, managerial employees, independent accountants or other representatives thereof available to Lender. The Borrower agrees to pay the reasonable cost of such audit, appraisal, assessment or examination. (g) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of their properties which are necessary or useful in the proper conduct of their business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its Subsidiaries to comply, at all times with the provisions of all leases to which each of them is a party as lessee or under which each of them occupies property, so as to prevent any loss or forfeiture thereof or thereunder. (h) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to their properties (including all real properties leased or owned by them) and business, in such amounts and covering such risks as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated and in any event in amount, adequacy and scope reasonably satisfactory to the Lender. All policies covering the Collateral are to be made payable to the Lender, as its interests may appear, in case of loss, under a standard non-contributory "lender" or "secured party" clause and are to contain such other provisions as the Lender may require to fully protect the Lender's interest in the Collateral and to any payments to be made under such policies. All certificates of insurance are to be delivered to the Lender and the policies are to be premium prepaid, with the loss payable and additional insured endorsement in favor of Lender and such other Persons as the Lender may designate for time to time, and shall provide for not less than 30 days' prior written notice to the Lender of the exercise of any right of cancellation. If the Borrower or any of its Subsidiaries fails to maintain such insurance, the Lender may arrange for such insurance, but at the Borrower's expense and without any responsibility on the Lender's part for obtaining the insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims. -41- 42 Upon the occurrence of an Event of Default, the Lender shall have the sole right, in the name of the Lender and the Borrower and its Subsidiaries, to file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies. (i) Obtaining of Permits, Etc. Obtain, maintain and preserve, and cause each of its Subsidiaries to obtain, maintain and preserve, all permits, licenses, authorizations, approvals, entitlements and accreditations which are necessary or useful in the proper conduct of its business and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary. (j) Environmental. (i) Keep any property either owned or operated by it or any of its Subsidiaries free of any Environmental Liens; (ii) comply, and cause its Subsidiaries to comply, in all material respects with Environmental Laws and provide to the Lender documentation of such compliance which the Lender reasonably requests; (iii) immediately notify the Lender of any Release of a Hazardous Material in excess of any reportable quantity from or onto property owned or operated by the Borrower or any of its Subsidiaries and take any Remedial Actions required by law to abate said Release; (iv) promptly provide the Lender with written notice within 10 days of the receipt of any of the following: (A) notice that an Environmental Lien has been filed against any property of the Borrower or any of its Subsidiaries; (B) commencement of any Environmental Action or notice that an Environmental Action will be filed against the Borrower or any of its Subsidiaries; and (C) notice of a violation, citation or other administrative order which could have a Material Adverse Effect and (v) defend, indemnify and hold harmless the Lender and its transferees, and their respective employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses (including, without limitation, attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses) arising out of (A) the presence, disposal, Release or threatened Release of any Hazardous Materials on any property at any time owned or occupied by the Borrower or any of its Subsidiaries (or its respective predecessors in interest or title) or at any disposal facility which received Hazardous Materials generated by the Borrower or any of its Subsidiaries (or its respective predecessors in interest or title), (B) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials, (C) any investigation, lawsuit brought or threatened, settlement reached or government order relating to such Hazardous Materials, (D) any violation of any Environmental Law and/or (E) any Environmental Action. (k) Further Assurances. Take such action and execute, acknowledge and deliver, and cause each of its Subsidiaries to take such action and execute, acknowledge and deliver, at its sole cost and expense, such agreements, instruments or other documents as the Lender may require from time to time in order (i) to carry out more effectively the purposes of this Agreement and the other Loan Documents, (ii) to subject to valid and perfected first priority Liens any of the Collateral or any other property of the Borrower and its Subsidiaries, (iii) to establish and maintain the validity and effectiveness of any of the Loan Documents and the validity, perfection and priority of the Liens intended to be created thereby, and (iv) to better assure, -42- 43 convey, grant, assign, transfer and confirm unto the Lender the rights now or hereafter intended to be granted to the Lender under this Agreement or any other Loan Document. (l) Change in Collateral; Collateral Records. (i) Give the Lender not less than 30 days' prior written notice of any change in the location of any Collateral, other than to locations set forth on Schedule 6.01(l) and with respect to which the Lender has filed financing statements and otherwise fully perfected its Liens thereon, (ii) advise the Lender promptly, in sufficient detail, of any material adverse change relating to the type, quantity or quality of the Collateral or the Lien granted thereon and (iii) execute and deliver, and cause each of its Subsidiaries to execute and deliver, to the Lender for the benefit of the Lender from time to time, solely for the Lender's convenience in maintaining a record of Collateral, such written statements and schedules as the Lender may reasonably require, designating, identifying or describing the Collateral. (m) After Acquired Real Property. Upon the acquisition by the Borrower or any of its Subsidiaries after the date hereof of any interest (whether fee or leasehold) in any real property (wherever located) (each such interest being an "After Acquired Property") (x) with a Current Value (as defined below) in excess of $250,000 in the case of a fee interest, or (y) requiring the payment of annual rent exceeding in the aggregate $36,000 in the case of a leasehold interest, immediately so notify the Lender, setting forth with specificity a description of the interest acquired, the location of the real property, any structures or improvements thereon and either an appraisal or the Borrower's good-faith estimate of the current value of such real property (for purposes of this Section, the "Current Value"). The Lender shall notify the Borrower whether it intends to require a Mortgage and the other documents referred to below or in the case of leasehold, a leasehold mortgage. Upon receipt of such notice requesting a mortgage, the Person which has acquired such After Acquired Property shall immediately furnish to the Lender the following, each in form and substance satisfactory to the Lender: (i) a mortgage and an Environmental Indemnity Agreement with respect to such real property and related assets, each duly executed by such Person and in recordable form; (ii) evidence of the recording of the mortgage referred to in clause (i) above in such office or offices as may be necessary or, in the opinion of the Lender, desirable to create and perfect a valid and enforceable first priority lien on the property purported to be covered thereby or to otherwise protect the rights of the Lender thereunder, (iii) a title insurance policy, (iv) a survey of such real property, certified to the Lender and to the issuer of the Title Insurance Policy by a licensed professional survey or reasonably satisfactory to the Lender, (v) phase I environmental assessment reports with respect to such real property, certified to the Lender by a company reasonably satisfactory to the Lender, (vi) in the case of a leasehold interest, a certified copy of the lease between the landlord and such Person with respect to such real property in which such Person has a leasehold interest, and the certificate of occupancy with respect thereto, and (vii) such other documents or instruments (including guarantees and opinions of counsel) as the Lender may reasonably require. The Borrower shall pay all fees and expenses, including reasonable attorneys' fees and expenses, and all title insurance charges and premiums, in connection with its obligations under this Section 6.01(m). (n) Fiscal Year. Cause the Fiscal Year of the Borrower and its Subsidiaries to end on December 31 of each calendar year unless the Lender consents to a change in such Fiscal Year (and appropriate related changes to this Agreement). -43- 44 (o) Hiring of Chief Financial Officer. Hire, within six (6) months of the Effective Date, a Chief Financial Officer reasonably satisfactory to Lender. (p) Good Standing. Within forty-five (45) days, obtain good standing status in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, other than in those jurisdictions where the failure to qualify would not have a Material Adverse Effect. SECTION 6.02. Negative Covenants. So long as any principal of or interest on any Loan or any other Obligation (whether or not due) shall remain unpaid or the Lender shall have any Commitment hereunder, the Borrower shall not, unless the Lender shall otherwise consent in writing: (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon or with respect to any of its property, whether now owned or hereafter acquired, to file or suffer to exist under the Uniform Commercial Code or any similar law or statute of any jurisdiction, a financing statement (or the equivalent thereof) that names the Borrower or any of its Subsidiaries as debtor, to sign or suffer to exist any security agreement authorizing any secured party thereunder to file such financing statement (or the equivalent thereof), to sell any of its property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable) with recourse to the Borrower or any of its Subsidiaries or assign or otherwise transfer, or permit any of its Subsidiaries to assign or otherwise transfer, any account or other right to receive income, other than Permitted Liens. (b) Indebtedness. Create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to, or permit any of its Subsidiaries to create, incur, assume, guarantee or suffer to exist or otherwise become or remain liable with respect to, any Indebtedness other than Permitted Indebtedness. (c) Fundamental Changes. Wind-up, liquidate or dissolve itself (or permit or suffer any thereof) or merge, consolidate or amalgamate with any Person, convey, sell, lease or sublease, transfer or otherwise dispose of, whether in one transaction or a series of related transactions, all or any part of its business, property or assets, whether now owned or hereafter acquired, or (agree to do any of the foregoing) or purchase or otherwise acquire, whether in one transaction or a series of related transactions, all or substantially all of the assets of any Person (or any division thereof) (or agree to do any of the foregoing), or permit any of its Subsidiaries to do any of the foregoing; provided, however, that (i) any wholly owned Subsidiary of the Borrower may be merged into the Borrower or another such wholly owned Subsidiary of the Borrower, or may consolidate with another such wholly owned Subsidiary of the Borrower, so long as (A) no other provision of this Agreement would be violated thereby, (B) the Borrower gives the Lender at least 60 days' prior written notice of such merger or consolidation, (C) no Default or Event of Default shall have occurred and be continuing either before or after giving effect to such transaction, (iv) the Lender's rights in any Collateral, including, without limitation, the existence, perfection and priority of any Lien thereon, are not adversely affected by such merger or -44- 45 consolidation and (v) the surviving Subsidiary, if any, is a party to a Guaranty and Security Agreement and the Capital Stock of which Subsidiary is the subject of a Pledge Agreement, in each case which is in full force and effect on the date of and immediately after giving effect to such merger or consolidation; and (ii) any of the Borrower and its Subsidiaries may (A) sell Inventory in the ordinary course of business, (B) dispose of obsolete or worn-out equipment in the ordinary course of business, (C) sell or otherwise dispose of other property or assets for cash in an aggregate amount not less than the fair market value of such property or assets, provided that the Net Cash Proceeds of such Dispositions do not exceed $1,000,000 in the aggregate in any consecutive twelve-month period and are paid to the Lender pursuant to the terms of Section 2.05(c)(iii), and (D) sell assets that are leased back pursuant to a Capitalized Lease. (d) Change in Nature of Business. Make, or permit any of its Subsidiaries to make, any change in the nature of its business as carried on at the date hereof. (e) Loans, Advances, Investments, Etc. Make or commit or agree to make any loan, advance guarantee of obligations, other extension of credit or capital contributions to, or hold or invest in or commit or agree to hold or invest in, or purchase or otherwise acquire or commit or agree to purchase or otherwise acquire any shares of the Capital Stock, bonds, notes, debentures or other securities of, or make or commit or agree to make any other investment in, any other Person, or purchase or own any futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or permit any of its Subsidiaries to do any of the foregoing, except for: (i) Investments existing on the date hereof, as set forth on Schedule 6.02(e) hereto, but not any increase in the amount thereof as set forth in such Schedule or any other modification of the terms thereof, (iii) Permitted Investments, (iv) loans to employees made in the ordinary course of its business, not to exceed at any one time outstanding an aggregate of $100,000 for all such loans; provided, however, that no such loans will be made to William G. McLendon, Sheldon G. Hurst, A. Wayne Lamm or Anthony La Marca or any successor thereo, and (v) any Acquisition by the Borrower or any wholly owned Subsidiary of the Borrower to the extent that each of the following conditions shall have been satisfied (a "Permitted Acquisition"): (A) to the extent the Acquisition will be financed in whole or in part with the proceeds of any Loan, the conditions set forth in Article IV shall have been satisfied; (B) the Borrower shall have furnished to the Lender at least 10 Business Days prior to the consummation of such Acquisition (1) an executed term sheet and/or commitment letter (setting forth in reasonable detail the terms and conditions of such Acquisition) and, at the request of the Lender, such other information and documents that the Lender may request, including, without limitation, executed counterparts of the respective agreements, documents or instruments pursuant to which such Acquisition is to be consummated (including, without limitation, any related management, non-compete, employment, option or other material agreements), any schedules to such agreements, documents or instruments and all other material ancillary agreements, instruments and documents to be executed or delivered in connection -45- 46 therewith, (2) pro forma financial statements of the Borrower and its Subsidiaries after the consummation of such Acquisition, (3) a certificate of the chief financial officer of the Borrower, demonstrating on a pro forma basis compliance with all covenants set forth in Section 6.03 after the consummation of such Acquisition, and (4) copies of such other agreements, instruments and other documents (including, without limitation, the Loan Documents required by Section 6.01(b)) as the Lender shall reasonably request; (C) the agreements, instruments and other documents referred to in paragraph (B) above shall provide that (1) neither the Borrower nor any of its Subsidiaries shall, in connection with such Acquisition, assume or remain liable in respect of any Indebtedness of the Seller or Sellers, or other obligation of the Seller or Sellers (except for obligations incurred in the ordinary course of business in operating the property so acquired and necessary and desirable to the continued operation of such property and except for Indebtedness that the Lender otherwise expressly consents to in writing after its review of the terms of the proposed Acquisition), and (2) all property to be so acquired in connection with such Acquisition shall be free and clear of any and all Liens, except for Permitted Liens (and if any such property is subject to any Lien not permitted by this clause (2) then concurrently with such Acquisition such Lien shall be released); (D) the Subsidiary to be acquired or formed as a result of such Acquisition shall be engaged in the same business as the Borrower and such Subsidiary will be a direct, wholly owned Subsidiary of the Borrower; (E) such Acquisition shall be effected in such a manner so that the acquired Capital Stock or assets are owned either by the Borrower or a wholly owned Subsidiary of the Borrower and, if effected by merger or consolidation involving the Borrower, the Borrower shall be the continuing or surviving Person; (F) any such Subsidiary (and its equityholders) shall execute and deliver the agreements, instruments and other documents required by Section 6.01(b); and (H) the Lender shall otherwise have consented to the Acquisition. (f) Lease Obligations. Create, incur or suffer to exist, or permit any of its Subsidiaries to create, incur or suffer to exist, any obligations as lessee (i) for the payment of rent for any real or personal property in connection with any sale and leaseback transaction, or (ii) for the payment of rent for any real or personal property under leases or agreements to lease other than (A) Capitalized Lease Obligations which would not cause the aggregate amount of all obligations under Capitalized Leases entered into after the Effective Date owing by the Borrower and its Subsidiaries in any Fiscal Year to exceed the amounts set forth in clause (c) of the definition of "Permitted Indebtedness", (B) Operating Lease Obligations which would not cause the aggregate amount of all Operating Lease Obligations owing by the Borrower and its Subsidiaries in any Fiscal Year to exceed $5,000,000, and (C) Site Leases. (g) Capital Expenditures. Make or commit or agree to make, or permit any of its Subsidiaries to make or commit or agree to make, any Capital Expenditure (by purchase but -46- 47 excluding by Capitalized Lease) that would cause the aggregate amount of all such Capital Expenditures made by the Borrower and its Subsidiaries at the end of each fiscal quarter of Borrower to exceed the amount set forth below; provided, however, that any difference between actual Capital Expenditures and the Capital Expenditure Limit during any one fiscal quarter (the "Carried Over Amount") may be carried over to increase the Capital Expenditure Limit during the immediately following fiscal quarter by such Carried Over Amount; provided, further, however, that the Carried Over Amount may only be carried over to such immediately following fiscal quarter and may not be carried over to any subsequent fiscal quarter:

(h) Restricted Payments. (i) Declare or pay any dividend or other distribution, direct or indirect, on account of any Capital Stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding, (ii) make any repurchase, redemption, retirement, defeasance, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Capital Stock of the Borrower or any direct or indirect parent of the Borrower, now or hereafter outstanding, (iii) make any payment to retire, or to obtain the surrender of, any outstanding warrants, options or other rights for the purchase or acquisition of shares of any class of Capital Stock of the Borrower, now or hereafter outstanding, (iv) return any capital to any shareholders or other equity holders of the Borrower or any of its Subsidiaries, or make any other distribution of property, assets, shares of Capital Stock, warrants, rights, options, obligations or securities thereto as such, (v) make any repurchase, redemption, retirement, defeasance, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any of the 11% Senior Notes due 2008 without the prior written consent of Lender, or (vi) pay any management fees or any other fees or expenses (including the reimbursement thereof by the Borrower or any of its Subsidiaries) pursuant to any management, consulting or other services -47- 48 agreement to any of the shareholders or other equityholders of the Borrower or any of its Subsidiaries or other Affiliates, or to any other Subsidiaries or Affiliates or the Borrower; provided, however, that: (A) Subsidiaries of the Borrower may declare and pay cash and stock dividends, return capital and make distributions of assets to the Borrower; (B) the Borrower may (y) declare and pay dividends and distributions payable solely in shares of the Borrower's common stock, and (z) purchase or otherwise acquire shares of its Capital Stock concurrently with proceeds received from the issue of new shares of its Capital Stock; and (C) Management fees may be paid to Parent not to exceed $50,000 in any one year. (i) Federal Reserve Regulations. Permit any Loan or the proceeds of any Loan under this Agreement to be used for any purpose that would cause such Loans to be margin loans under the provisions of Regulation T, U or X of the Board. (j) Transactions with Affiliates. Enter into, renew, extend or be a party to, or permit any of its Subsidiaries to enter into, renew, extend or be a party to any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any of its Affiliates, except in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to the Borrower or such Subsidiary than would be obtainable in a comparable arm's length transaction with a Person that is not an Affiliate thereof. (k) Limitations on Dividends and Other Payment Restrictions Affecting Subsidiaries. Create or otherwise cause, incur, assume, suffer or permit to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any of its Subsidiaries (i) to pay dividends or to make any other distribution on any shares of Capital Stock of such Subsidiary owned by the Borrower or any of its Subsidiaries, (ii) to pay or prepay or to subordinate any Indebtedness owed to the Borrower or any of its Subsidiaries, (iii) to make loans or advances to the Borrower or any of its Subsidiaries or (iv) to transfer any of its property or assets to the Borrower or any of its Subsidiaries, or permit any of its Subsidiaries to do any of the foregoing; provided, however, that nothing in any of clauses (i) through (iv) of this Section 6.02(k) shall prohibit or restrict: (A) this Agreement and the other Loan Documents; (B) any applicable law, rule or regulation (including, without limitation, applicable currency control laws and applicable state corporate statutes restricting the payment of dividends in certain circumstances); (C) in the case of clause (iv) any agreement setting forth customary restrictions on the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract of similar property or assets; or -48- 49 (D) in the case of clause (iv) any holder of a Permitted Lien from restricting on customary terms the transfer of any property or assets subject thereto. (l) Limitation on Issuance of Capital Stock. (i) Issue or sell or enter into any agreement or arrangement for the issuance and sale of any shares of its Capital Stock, any securities convertible into or exchangeable for its Capital Stock or any warrants, options or other rights for the purchase or acquisition of any of its Capital Stock. (ii) Permit any of its Subsidiaries to issue or sell or enter into any agreement or arrangement for the issuance and sale of any shares of its Capital Stock, any securities convertible into or exchangeable for its Capital Stock or any warrants. (m) Modifications of Indebtedness, Organizational Documents and Certain Other Agreements; Etc. (i) Amend, modify or otherwise change (or permit the amendment, modification or other change in any manner of) any of the provisions of any Indebtedness of the Borrower or any of its Subsidiaries or of any instrument or agreement (including, without limitation, any purchase agreement, indenture, loan agreement or security agreement) relating to any such Indebtedness if such amendment, modification or change would shorten the final maturity or average life to maturity of, or require any payment to be made earlier than the date originally scheduled on, such Indebtedness, would increase the interest rate applicable to such Indebtedness, or would change the subordination provision, if any, of such Indebtedness, or would otherwise be adverse to the issuer of such Indebtedness in any respect, (ii) except for the Obligations, make any voluntary or optional payment, prepayment, redemption or other acquisition for value of any Indebtedness of the Borrower or any of its Subsidiaries (including, without limitation, by way of depositing money or securities with the trustee therefor before the date required for the purpose of paying any portion of such Indebtedness when due), or refund, refinance, replace or exchange any other Indebtedness for any such Indebtedness, or make any prepayment, redemption or repurchase of any outstanding Indebtedness as a result of any asset sale, change of control, issuance and sale of debt or equity securities or similar event, or give any notice with respect to any of the foregoing, or (iii) amend, modify or otherwise change its certificate of incorporation or bylaws (or other similar organizational documents), including, without limitation, by the filing or modification of any certificate of designation, or any agreement or arrangement entered into by it, with respect to any of its Capital Stock (including any shareholders' agreement), or enter into any new agreement with respect to any of its Capital Stock except any such amendments, modifications or changes or any such new agreements or arrangements pursuant to this clause (iii) that either individually or in the aggregate, could have a Material Adverse Effect. (n) Investment Company Act of 1940. Engage in any business, enter into any transaction, use any securities or take any other action or permit any of its Subsidiaries to do any of the foregoing, that would cause it or any of its Subsidiaries to become subject to the registration requirements of the Investment Company Act of 1940, as amended, by virtue of being an "investment company" or a company "controlled" by an "investment company" not entitled to an exemption within the meaning of such Act. -49- 50 (o) Compromise of Accounts Receivable. Compromise or adjust any Account Receivable (or extend the time of payment thereof) or grant any discounts, allowances or credits or permit any of its Subsidiaries to do so other than, provided no Default or Event of Default has occurred and is continuing, in the ordinary course of business of the Borrower; provided, however, in no event shall any such discount, allowance or credit exceed $1,500,000 in the aggregate in any one year and no such extension of the time for payment extend beyond 150 days from the original due date. (p) Environmental. Permit the use, handling, generation, storage, treatment, release or disposal of Hazardous Materials at any property owned or leased by the Borrower or any of its Subsidiaries except in compliance with Environmental Laws and so long as such use, handling, generation, storage, treatment, release or disposal of Hazardous Materials does not result in a Material Adverse Effect. SECTION 6.03 Financial Covenants. So long as any principal of or interest on any Loan or any other Obligations (whether or not due) shall remain unpaid or the Lender shall have any Commitment hereunder, the Borrower will not, unless the Lender shall otherwise consent in writing: -50- 51 (a) Debt to EBITDA Ratio. Permit the Debt to EBITDA Ratio for each period of four (4) consecutive fiscal quarters of the Borrower ending on a date set forth below to be less than the ratio set forth opposite such date:

-51- 52 (b) Credit Line to EBITDA Ratio. Permit the Credit Line to Consolidated EBITDA Ratio for each period of four (4) consecutive fiscal quarters of the Borrower for which the last quarter ends on a date set forth below to be less than the amount set forth opposite such date:

-52- 53 (c) Consolidated EBITDA. Permit Consolidated EBITDA of the Borrower at the end of each fiscal quarter of the Borrower to be less than the applicable amount set forth below:

(d) Liquidity. In the case of the Borrower, allow its and its Subsidiaries' unencumbered and unrestricted Cash and Cash Equivalents, on a consolidated basis and valued on a lower of cost or market basis plus the amount of Availability, to be less than $500,000 at any one time. (e) Other Indebtedness. In the case of the Borrower, allow its and its Subsidiaries' Other Indebtedness, other than any Obligations under this Agreement, on a consolidated basis, to be more than $4,000,000 at any one time. -53- 54 ARTICLE VII MANAGEMENT, COLLECTION AND STATUS OF ACCOUNTS RECEIVABLE AND OTHER COLLATERAL SECTION 7.01. Collection of Accounts Receivable; Management of Collateral. (a) Borrower shall establish, within 60 days of the Effective Date, and at all times maintain a concentration account (the "Concentration Account") at the Concentration Account Bank and promptly deposit all Collections received by the Borrower from any source immediately upon receipt into the Concentration Account. The Borrower, Lender, and the Concentration Account Bank shall enter into a concentration account agreement, in form and substance satisfactory to Lender, relative to the Concentration Account (the "Concentration Account Agreement"). Neither the Concentration Account Agreement nor the arrangement contemplated thereby shall be modified by the Borrower without the prior written consent of Lender. Upon the occurrence of an Event of Default, upon the terms and subject to the conditions set forth in the Concentration Account Agreement, all amounts received in the Concentration Account shall be wired each Business Day into the Lender Account. Upon the occurrence and during the continuation of an Event of Default, or if the Lender deems itself insecure with respect to the Lender's good faith belief or suspicion that the Borrower has engaged in defalcation, intentional misrepresentation, or fraud, the Lender shall have the right to require the Borrower to establish, and thereafter maintain, lockbox arrangements satisfactory to Lender in respect of the Collections and to instruct all Account Debtors of Borrower to remit all Collections to such lockboxes. With respect to the Account Receivables, the Borrower shall and shall cause its Subsidiaries to, irrevocably instruct the Account Debtors to remit to the Concentration Account all payments to be made by check or other draft and all payments to be made by wire transfer. Until the Lender has advised the Borrower to the contrary after the occurrence and during the continuance of an Event of Default, the Borrower and its Subsidiaries may and will enforce, collect and receive all amounts owing on the Account Receivables for the Lender's benefit and on the Lender's behalf, but at the Borrower's expense; such privilege shall terminate, at the election of the Lender, upon the occurrence and during the continuance of any Event of Default. All Collections received directly by the Borrower or any Subsidiary from any Account Debtor or any other source (exclusive of Lender), whether as proceeds from Accounts Receivable, or as proceeds of any other Collateral, or otherwise, shall be received and held by the Borrower in trust for the Lender and deposited by the Borrower in original form and no later than the next Business Day after receipt thereof into the Concentration Account. The Borrower shall not commingle such collections with the Borrower's own funds or the funds of any Subsidiary or Affiliate of the Borrower or with the proceeds of any assets not included in the Collateral. All funds received in the Lender Account pursuant to this Section 7.01(a) shall be credited to the Loan Account for application at the end of each Business Day to reduce the then principal balance of the Revolving Loans, conditional upon final payment to the Lender. No checks, drafts or other instruments received by the Lender shall constitute final payment to the Lender unless and until such instruments have actually been collected. (b) After the occurrence and during the continuance of an Event of Default, the Lender may send a notice of assignment and/or notice of the Lender's security interest to any and all Account Debtors or third parties holding or otherwise concerned with any -54- 55 of the Collateral, and thereafter the Lender shall have the sole right to collect the Accounts Receivable and/or take possession of the Collateral and the books and records relating thereto. The Borrower shall not, and shall not permit its Subsidiaries to, without prior written consent of the Lender, grant any extension of time of payment of any Account Receivable, compromise or settle any Account Receivable for less than the full amount thereof, release, in whole or in part, any Person or property liable for the payment thereof, or allow any credit or discount whatsoever thereon, except, in the absence of a continuing Event of Default, as permitted by Section 6.02(o). (c) The Borrower hereby appoints the Lender or its designee on behalf of the Lender as the Borrower's attorney-in-fact with power exercisable during the continuance of any Default or Event of Default to endorse the Borrower's name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Accounts Receivable, to sign the Borrower's name on any invoice or bill of lading relating to any of the Accounts Receivable, drafts against Account Debtors with respect to Accounts Receivable, assignments and verifications of Accounts Receivable and notices to Account Debtors with respect to Accounts Receivables, to send verification of Accounts Receivable, and, to notify the Postal Service authorities to change the address for delivery of mail addressed to the Borrower or any of its Subsidiaries to such address as the Lender may designate and to do all other acts and things necessary to carry out this Agreement. All acts of said attorney or designee are hereby ratified and approved, and said attorney or designate shall not be liable for any acts of omission or commission (other than acts or omissions constituting gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction), or for any error of judgment or mistake of fact or law; this power being coupled with an interest is irrevocable until all of the Loans and other Obligations under the Loan Documents are paid in full and all of the Loan Documents are terminated. (d) Nothing herein contained shall be construed to constitute the Lender as agent of the Borrower or any Subsidiary for any purpose whatsoever, and the Lender shall not be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof (other than from acts or omissions of the Lender constituting gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction). The Lender shall not, under any circumstance or in any event whatsoever, have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Accounts Receivable or any instrument received in payment thereof or for any damage resulting therefrom (other than acts or omissions of the Lender constituting gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction). The Lender, by anything herein or in any assignment or otherwise, does not assume any of the obligations under any contract or agreement assigned to the Lender and shall not be responsible in any way for the performance by the Borrower or any Subsidiary of any of the terms and conditions thereof. (e) If any Account Receivable includes a charge for any tax payable to any Governmental Authority, the Lender is hereby authorized (but in no event obligated) in its discretion to pay the amount thereof to the proper taxing authority for the Borrower's account and to charge the Borrower therefor. The Borrower shall notify the Lender if any Account Receivable includes any taxes due to any such Governmental Authority and, in the absence of -55- 56 such notice, the Lender shall have the right to retain the full proceeds of such Account Receivable and shall not be liable for any taxes that may be due by reason of the sale and delivery creating such Account Receivable. SECTION 7.02. Accounts Receivable Documentation. The Borrower will at such intervals as the Lender may require, execute and deliver confirmatory written assignments of the Accounts Receivable to the Lender and furnish such further schedules and/or information as the Lender may require relating to the Accounts Receivable, including, without limitation, sales invoices or the equivalent, credit memos issued, remittance advises, reports and copies of deposit slips and copies of original shipping or delivery receipts for all merchandise sold. In addition, the Borrower shall notify the Lender of any non-compliance in respect of the representations, warranties and covenants contained in Section 7.03. The items to be provided under this Section 7.02 are to be in form reasonably satisfactory to the Lender and are to be executed and delivered to the Lender from time to time solely for its convenience in maintaining records of the Collateral. The Borrower's failure to give any of such items to the Lender shall not affect, terminate, modify or otherwise limit the Lender's Lien on the Collateral. The Borrower has not re-dated any invoice or sale or made sales on extended dating beyond that customary in the Borrower's industry, and shall not re-bill any Accounts Receivable without promptly disclosing the same to the Lender and providing the Lender with copy of such re-billing, identifying the same as such. If the Borrower becomes aware of anything materially detrimental to any of the Borrower's customers' credit, the Borrower will promptly advise the Lender thereof. SECTION 7.03. Status of Accounts Receivable and Other Collateral. With respect to Collateral of the Borrower at the time the Collateral becomes subject to the Lender's Lien, the Borrower covenants, represents and warrants: (a) the Borrower shall be the sole owner, free and clear of all Liens except in the favor of the Lender or otherwise permitted hereunder, and fully authorized to sell, transfer, pledge and/or grant a security interest in each and every item of said Collateral; (b) each Account Receivable shall be a good and valid account representing an undisputed bona fide indebtedness incurred or an amount indisputably owed by the Account Debtor therein named, for a fixed sum as set forth in the invoice relating thereto with respect to any absolute sale and delivery upon the specified terms of goods sold or services rendered by the Borrower; (c) except as disclosed in writing to Lender or as is customary in the Borrower's business, no Account Receivable shall be subject to any defense, offset, counterclaim, discount or allowance except as may be stated in the invoice relating thereto; (d) none of the transactions underlying or giving rise to any Account Receivable shall violate any applicable state or federal laws or regulations, and all documents relating thereto shall be legally sufficient under such laws or regulations and shall be legally enforceable in accordance with their terms; (e) no agreement under which any deduction or offset of any kind, other than normal trade discounts, may be granted or shall have been made by the Borrower at or before the time such Account Receivable is created; (f) all agreements, instruments and other documents relating to any Account Receivable shall be true and correct and in all material respects what they purport to be the Borrower shall not re-date any invoice or sale or make sales on extended dating beyond that which is customary in the ordinary course of its business and in the industry; and (g) all signatures and endorsements that appear on all material agreements, instruments and other documents relating to any Account Receivable shall be genuine and all signatories and endorsers shall have full capacity to contract. The Borrower shall maintain books and records pertaining to -56- 57 said Collateral in such detail, form and scope as the Lender shall reasonably require. The Borrower shall immediately notify the Lender if any accounts arise out of contracts with the United States or any department, agency, or instrumentality thereof and will execute any instruments and take any steps required by the Lender in order that all monies due or to become due under any such contract shall be assigned to the Lender and notice thereof given to the United States Government under the Federal Assignment of Claims Act. The Borrower will, immediately upon learning thereof, report to the Lender any material loss or destruction of, or substantial damage to, any of the Collateral, and any other matters affecting the value, enforceability or collectibility of any of the Collateral. If any amount payable under or in connection with any Account Receivable is evidenced by a promissory note or other instrument, such promissory note or instrument shall be immediately pledged, endorsed, assigned and delivered to the Lender as additional Collateral. The Borrower shall conduct a physical count of the Inventory at such intervals as the Lender may request and the Borrower shall promptly supply the Lender with a copy of such count accompanied by a report of the value (based on the lower of cost (on a first in first out basis) and market value) of such Inventory. The Borrower is not and shall not be entitled to pledge the Lender's credit on any purchases or for any purpose whatsoever. SECTION 7.04. Collateral Custodian. Upon the occurrence and during the continuance of any Default or Event of Default, the Lender may at any time and from time to time employ and maintain on the premises of the Borrower a custodian selected by the Lender who shall have full authority to do all acts necessary to protect the Lender's interests. The Borrower hereby agrees to, and to cause its Subsidiaries to, cooperate with any such custodian and to do whatever the Lender may reasonably request to preserve the Collateral. All costs and expenses incurred by the Lender by reason of the employment of the custodian shall be the responsibility of the Borrower and charged to the Loan Account. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.01. Events of Default. If any of the following Events of Default shall occur and be continuing: (a) the Borrower fails to pay when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) any Obligation within the meaning of clause (i) of such term, including, without limitation any principal of or interest on any Loan or any fee or other amount due hereunder; (b) any representation or warranty made or deemed made by or on behalf of any Loan Party or by any officer of the foregoing under or in connection with any Loan Document or under or in connection with any report, certificate, or other document delivered to the Lender pursuant to any Loan Document shall have been incorrect in any material respect when made or deemed made; (c) the Borrower fails to perform or comply with any covenant -57- 58 or agreement contained in Article VI, or any Loan Party fails to perform or comply with any covenant or agreement contained in Sections 4 or 5 of any Security Agreement to which it is a party or Section 7 of any Pledge Agreement to which it is a party; (d) any Loan Party fails to perform or comply with any other term, covenant or agreement contained in any Loan Document (except the Mortgage, a Default under which shall be remedied in accordance with its terms and shall not be deemed an Event of Default under this Agreement) to be performed or observed by it and, except as set forth in subsections (a), (b) and (c) of this Section 8.01, such failure, if capable of being remedied, shall remain unremedied for 15 days after the earlier of the date a senior officer of any Loan Party becomes aware of such failure and the date written notice of such default shall have been given by the Lender to the Borrower; (e) any Loan Party fails to pay any principal of or interest on any of its Indebtedness (excluding Indebtedness evidenced by the Notes) in excess of $1,000,000, or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness, or any other default under any agreement or instrument relating to any such Indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased or an offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; (f) any Loan Party (i) shall institute any proceeding or voluntary case seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for any such Person or for any substantial part of its property, (ii) shall be generally not paying its debts as such debts become due or shall admit in writing its inability to pay its debts generally, (iii) shall make a general assignment for the benefit of creditors, or (iv) shall take any action to authorize or effect any of the actions set forth above in this subsection (f); (g) any proceeding shall be instituted against any Loan Party seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation, winding up, reorganization, arrangement, adjustment, protection, relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for any such Person or for any substantial part of its property, and either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against any such Person or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property) shall occur; (h) any provision of any Loan Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or -58- 59 enforceable against any Loan Party intended to be a party thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by any Loan Party or any Governmental Authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or any Loan Party shall deny in writing that it has any liability or obligation purported to be created under any Loan Document; (i) any Security Agreement, any Mortgage, any Pledge Agreement or any other security document, after delivery thereof pursuant hereto, shall for any reason fail or cease to create a valid and perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien in favor of the Lender on any Collateral purported to be covered thereby; (j) one or more judgments or orders for the payment of money exceeding $250,000 in the aggregate shall be rendered against any Loan Party and remain unsatisfied and either (i) enforcement proceedings shall have been commenced by any creditor upon any such judgment or order, or (ii) there shall be a period of 10 consecutive days after entry thereof during which a stay of enforcement of any such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; provided, however, that any such judgment or order shall not give rise to an Event of Default under this subsection (j) if and for so long as (A) the amount of such judgment or order is covered by a valid and binding policy of insurance between the defendant and the insurer covering full payment thereof and (B) such insurer has been notified, and has not disputed the claim made for payment, of the amount of such judgment or order; or (k) the Borrower or any of its Subsidiaries or any of their ERISA Affiliates shall have made a complete or partial withdrawal from a Multiemployer Plan, and, as a result of such complete or partial withdrawal, the Borrower or any of its Subsidiaries or such ERISA Affiliate incurs a withdrawal liability in an annual amount exceeding $100,000; or a Multiemployer Plan enters reorganization status under Section 4241 of ERISA, and, as a result thereof, the Borrower's or such Subsidiary's, or such ERISA Affiliate's annual contribution requirement with respect to such Multiemployer Plan increases in an annual amount exceeding $200,000; (l) any Termination Event with respect to any Employee Plan shall have occurred, and, 30 days after notice thereof shall have been given to the Borrower by the Lender, (i) such Termination Event (if correctable) shall not have been corrected, and (ii) the then current value of such Employee Plan's vested benefits exceeds the then current value of assets allocable to such benefits in such Employee Plan by more than $100,000 (or, in the case of a Termination Event involving liability under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the Code, the liability is in excess of such amount); (m) a Change of Control shall have occurred; or (n) an event or development occurs which has a Material Adverse Effect, then, and in any such event, the Lender may, by notice to the Borrower, (i) terminate the Commitments, whereupon the Commitments shall terminate immediately, (ii) declare -59- 60 all Loans then outstanding to be due and payable, whereupon the aggregate principal of such Loans, all accrued and unpaid interest thereon, all fees and all other amounts payable under this Agreement shall become due and payable immediately, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower and (iii) exercise any and all of its other rights and remedies under applicable law, hereunder and under the other Loan Documents; provided, however, that upon the occurrence of any Event of Default with respect to the Borrower described in subsection (f) or (g) of this Section 8.01, without any notice to the Borrower or any other Person or any act by the Lender, the Commitments shall automatically terminate and the Loans then outstanding, together with all accrued and unpaid interest thereon, all fees and all other amounts due under this Agreement shall become due and payable automatically and immediately, without presentment, demand, protest or notice of any kind, all of which are expressly waived by the Borrower. ARTICLE IX GUARANTY SECTION 9.01. Guaranty; Limitation of Liability. The Guarantor hereby unconditionally and irrevocably guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of the Borrower now or hereafter existing under any Loan Document, whether for principal, interest, fees, expenses or otherwise (such obligations, to the extent not paid by the Borrower, being the "Guaranteed Obligations"), and agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred by the Lender in enforcing any rights under the guaranty set forth in this Article. Without limiting the generality of the foregoing, the Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrower to the Lender under any Loan Document but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower. SECTION 9.02. Guaranty Absolute. The Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Lender with respect thereto. The obligations of the Guarantor under this Article are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against the Guarantor to enforce such obligations, irrespective of whether any action is brought against the Borrower or whether the Borrower is joined in any such action or actions. The liability of the Guarantor under this Article shall be irrevocable, absolute and unconditional irrespective of, and the Guarantor hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following: (a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the -60- 61 Guaranteed Obligations resulting from the extension of additional credit to the Borrower or otherwise; (c) any taking, exchange, release or non-perfection of any Collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) any change, restructuring or termination of the corporate, limited liability company or partnership structure or existence of the Borrower; or (e) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Lender that might otherwise constitute a defense available to, or a discharge of, the Guarantor, the Borrower or any other guarantor or surety. This Article shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Lender or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made. SECTION 9.03. Waiver. The Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Article and any requirement that the Lender exhaust any right or take any action against the Borrower or any other Person or any collateral. The Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated herein and that the waiver set forth in this Section 9.03 is knowingly made in contemplation of such benefits. The Guarantor hereby waives any right to revoke this Article, and acknowledges that this Article is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. SECTION 9.04. Continuing Guaranty; Assignments. This Article is a continuing guaranty and shall (a) remain in full force and effect until the later of the cash payment in full of the Guaranteed Obligations (other than indemnification obligations as to which no claim has been made) and all other amounts payable under this Article and the Revolving Credit Termination Date, (b) be binding upon the Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Lender and its successors, pledgees, transferees and assigns. Without limiting the generality of the foregoing clause (c), the Lender may pledge, assign or otherwise transfer all or any portion of its rights and obligations under this Agreement (including, without limitation, all or any portion of its Commitments, the Loans owing to it and any Note held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted the Lender herein or otherwise, in each case as provided in Section 11.07. SECTION 9.05. Subrogation. The Guarantor will not exercise any rights that it may now or hereafter acquire against the Borrower or any other insider guarantor that arise from the existence, payment, performance or enforcement of the Guarantor's obligations under this Article, including, without limitation, any right of subrogation, reimbursement, exoneration, -61- 62 contribution or indemnification and any right to participate in any claim or remedy of the Lender against the Borrower or any other insider guarantor or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Article shall have been paid in full in cash and the Revolving Commitment Termination Date shall have occurred. If any amount shall be paid to the Guarantor in violation of the immediately preceding sentence at any time prior to the later of the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Article and the Revolving Commitment Termination Date, such amount shall be held in trust for the benefit of the Lender and shall forthwith be paid to the Lender to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Article, whether matured or unmatured, in accordance with the terms of this Agreement, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Article thereafter arising. If (i) the Guarantor shall make payment to the Lender of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Article shall be paid in full in cash and (iii) the Revolving Commitment Termination Date shall have occurred, the Lender will, at the Guarantor's request and expense, execute and deliver to the Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Guarantor of an interest in the Guaranteed Obligations resulting from such payment by the Guarantor. ARTICLE X MISCELLANEOUS SECTION 10.01. Notices, Etc. All notices and other communications provided for hereunder shall be in writing and shall be mailed, telecopied or delivered, if to the Borrower, at the following address: Tri-State Outdoor Media Group, Inc. 3416 Highway 41 South Tifton, GA 31793 Attention: Sheldon G. Hurst Telephone: (800) 732-8261 Telecopier: (912) 386-0203 with a copy to: St. John & Wayne LLC Two Penn Plaza East Newark, NJ 07105-2249 Attention: William P. Oberdorf -62- 63 Telephone: (973) 491-3600 Telecopier: (973) 491-3555 if to the Lender, to it at the following address: Ableco Finance LLC 450 Park Avenue, 28th Floor New York, New York 10022 Attention: Tim Hynes Telephone: (212) 891-1548 Telecopier: (212) 909-1421 with a copy to: Brobeck, Phleger & Harrison LLP 550 South Hope Street Los Angeles, CA 90071 Attention: John F. Hilson, Esq. Telephone: (213) 489-4060 Telecopier: (213) 745-3345 or, as to each party, at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 10.01. All such notices and other communications shall be effective, (i) if mailed, when received or five days after deposited in the mails, whichever occurs first, (ii) if telecopied, when transmitted and confirmation received, or (iii) if delivered, upon delivery, except that notices to the Lender pursuant to Article II shall not be effective until received by the Lender. SECTION 10.02. Amendments, Etc. No amendment or waiver of any provision of this Agreement, any Note or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 10.03. No Waiver; Remedies, Etc. No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right under any Loan Document preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Lender provided herein and in the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Lender under any Loan Document against any party thereto are not conditional or contingent on any attempt by the Lender to exercise any of their rights under any other Loan Document against such party or against any other Person. SECTION 10.04. Expenses; Taxes; Attorneys' Fees. The Borrower will pay on demand, all costs and expenses incurred by or on behalf of the Lender, regardless of whether the -63- 64 transactions contemplated hereby are consummated, including, without limitation, reasonable fees, costs, client charges and expenses of counsel for the Lender (including the Lender's in-house counsel), accounting, due diligence, periodic field audits, physical counts, valuations, fees of Rating Agencies associated with the rating of the Loans, investigations, monitoring of assets, appraisals of Collateral, environmental assessments, miscellaneous disbursements, examination, travel, lodging and meals, arising from or relating to: (a) the negotiation, preparation, execution, delivery, performance and administration of this Agreement and the other Loan Documents, (including, without limitation, the preparation of any additional Loan Documents, pursuant to Section 6.01(b) or the review of any of the agreements, instruments and documents referred to in Section 6.02(f)), (b) any requested amendments, waivers or consents to this Agreement or the other Loan Documents whether or not such documents become effective or are given, (c) the preservation and protection of any of the Lender's rights under this Agreement or the other Loan Documents, (d) the defense of any claim or action asserted or brought against the Lender by any Person that arises from or relates to this Agreement, any other Loan Document, the Lender's claims against the Borrower and each other Loan Party, or any and all matters in connection therewith, (e) the commencement or defense of, or intervention in, any court proceeding arising from or related to this Agreement or any other Loan Document, (f) the filing of any petition, complaint, answer, motion or other pleading by the Lender, or the taking of any action in respect of the Collateral or other security, in connection with this Agreement or any other Loan Document, (g) the protection, collection, lease, sale, taking possession of or liquidation of, any Collateral or other security in connection with this Agreement or any other Loan Document, (h) any attempt to enforce any Lien or security interest in any Collateral or other security in connection with this Agreement or any other Loan Document, (i) any attempt to collect from the Borrower or any other Loan Party, (j) the receipt by the Lender of any advice from its professionals with respect to any of the foregoing, (k) all liabilities and costs arising from or in connection with the past, present or future operations of the Borrower, its Subsidiaries and each other Loan Party involving any damage to real or personal property or natural resources or harm or injury alleged to have resulted from any Release of Hazardous Materials on, upon or into such property, (l) any Environmental Liabilities and Costs incurred in connection with the investigation, removal, cleanup and/or remediation of any Hazardous Materials present or arising out of the operations of any facility of the Borrower and its Subsidiaries and any other Loan Party, or (m) any Environmental Liabilities and Costs incurred in connection with any Environmental Lien. Without limitation of the foregoing or any other provision of any Loan Document: (x) the Borrower agrees to pay all stamp, document, transfer, recording or filing taxes or fees and similar impositions now or hereafter determined by the Lender to be payable in connection with this Agreement or any other Loan Document, and the Borrower agrees to save the Lender harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such taxes, fees or impositions, (y) the Borrower agrees to pay all broker fees that may become due in connection with the transactions contemplated by this Agreement, and (z) if the Borrower fails to perform any covenant or agreement contained herein or in any other Loan Document, the Lender may itself perform or cause performance of such covenant or agreement, and the expenses of the Lender incurred in connection therewith shall be reimbursed on demand by the Borrower. SECTION 10.05. Right of Set-off. (a) Upon the occurrence and during the continuance of any Event of Default and in addition to (and without limitation of) any right of set-off, banker's lien, or counterclaim Lender may otherwise have, Lender may, and is hereby authorized by Borrower to, at any time and from time to time, without notice to the Borrower -64- 65 (any such notice being expressly waived by the Borrower) and to the fullest extent permitted by law, set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Lender to or for the credit or the account of the Borrower against any and all obligations of either now or hereafter existing under any Loan Document, irrespective of whether or not Lender shall have made any demand hereunder or thereunder and although such obligations may be contingent or unmatured. The Lender agrees to notify the Borrower promptly after any such set-off and application made by the Lender provided that the failure to give such notice shall not affect the validity of such set-off and application. (b) Nothing contained in this Section 10.05 shall require Lender to exercise any such right or shall affect the right of Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of Borrower. If, under any applicable bankruptcy, insolvency or other similar law, Lender receives a secured claim in lieu of a set-off to which this Section 10.05 applies, Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of Lenders SECTION 10.06. Severability. Any provision of this Agreement, which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 10.07. Assignments and Participations. (a) This Agreement and the Notes shall be binding upon and inure to the benefit of the Borrower and the other the Loan Parties and the Lender and their respective successors and assigns; provided, however, that (i) each of the Borrower and the other Loan Parties may not assign or transfer any of its rights hereunder, or under the Notes, without the prior written consent of the Lender and any such assignment without the Lender's prior written consent shall be null and void, and (ii) the Lender may pledge, assign or transfer any of its rights hereunder, or under the Notes, to any Person without notice to or the prior written consent of the Borrower. Except as provided in this Section 10.07, this Agreement shall not inure to the benefit of any party other than the Borrower and the Lender. (b) The Lender may at any time sell, assign or participate to an Affiliate of the Lender or any other Person its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Loans made by it, and the Notes held by it) without notice to or the consent of the Borrower or any other Loan Party. The Borrower and each other Loan Party shall execute and deliver such Notes and any amendment or other modification restatement of this Agreement or any Loan Document as may be requested by the Lender to reflect any such sale or assignment. (i) the Borrower shall maintain, or cause to be maintained, a register (the "Register") on which it enters the name of the Lender as the registered owner of the Loan held by the Lender. A Registered Loan (and the Registered Note, if any, evidencing the same) may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register (and each Registered Note shall expressly so provide). Any assignment or sale of all or part of such Registered Loan (and the Registered Note, if any, evidencing the same) may be effected only by registration of such assignment or sale on the Register, together with the -65- 66 surrender of the Registered Note, if any, evidencing the same duly endorsed by (or accompanied by a written instrument of assignment or sale duly executed by) the holder of such Registered Note, whereupon, at the request of the designated assignee(s) or transferee(s), one or more new Registered Notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s). Prior to the registration of assignment or sale of any Registered Loan (and the Registered Note, if any evidencing the same), the Borrower shall treat the Person in whose name such Loan (and the Registered Note, if any, evidencing the same) is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding notice to the contrary. (ii) In the event that the Lender sells participations in the Registered Loan, the Lender shall maintain a register on which it enters the name of all participants in the Registered Loans held by it (the "Participant Register"). A Registered Loan (and the Registered Note, if any, evidencing the same) may be participated in whole or in part only by registration of such participation on the Participant Register (and each Registered Note shall expressly so provide). Any participation of such Registered Loan (and the Registered Note, if any, evidencing the same) may be effected only by the registration of such participation on the Participant Register. (iii) Any foreign Person who purchases or is assigned or participates in any portion of such Loan shall provide the Borrower (in the case of a purchase or assignment) or the Lender (in the case of a participation) with a completed Internal Revenue Service Form W-8 (Certificate of Foreign Status) or a substantially similar form for such purchaser, participant or any other affiliate who is a holder of beneficial interests in the Loan. SECTION 10.08. Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. SECTION 10.09. GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. SECTION 10.10. CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY HEREBY IRREVOCABLY ACCEPT IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH LOAN PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS FOR NOTICES AS SET FORTH IN SECTION 10.01, SUCH SERVICE TO BECOME EFFECTIVE -66- 67 TEN (10) DAYS AFTER SUCH MAILING. EACH LOAN PARTY HEREBY IRREVOCABLY APPOINTS THE SECRETARY OF STATE OF THE STATE OF NEW YORK AS ITS AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST EACH LOAN PARTY IN ANY OTHER JURISDICTION. EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT EACH LOAN PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH LOAN PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. SECTION 10.11. WAIVER OF JURY TRIAL, ETC. EACH LOAN PARTY AND THE LENDER HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, THE NOTES OR OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH LOAN PARTY CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT. SECTION 10.12. Consent by the Lender. Except as otherwise expressly set forth herein to the contrary, if the consent, approval, satisfaction, determination, judgment, acceptance or similar action (an "Action") of the Lender shall be permitted or required pursuant to any provision hereof or any provision of any other agreement to which the Borrower and any other Loan Party are parties and to which the Lender has succeeded thereto, such Action shall be required to be in writing and may be withheld or denied by the Lender with or without any reason, and without being subject to question or challenge on the grounds that such Action was not taken in good faith. SECTION 10.13. No Party Deemed Drafter. Each of the parties hereto agrees that no party hereto shall be deemed to be the drafter of this Agreement. -67- 68 SECTION 10.14. Reinstatement; Certain Payments. If any claim is ever made upon the Lender for repayment or recovery of any amount or amounts received by the Lender in payment or on account of any of the Obligations, the Lender shall give prompt notice of such claim to the Borrower, and if the Lender repays all or part of such amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over the Lender or any of its property, or (ii) any good faith settlement or compromise of any such claim effected by the Lender with any such claimant, then and in such event the Borrower agrees that (A) any such judgment, decree, order, settlement or compromise shall be binding upon it notwithstanding the cancellation of any Note or other instrument evidencing the Obligations or the other Loan Documents or the termination of this Agreement or the other Loan Documents, and (B) it shall be and remain liable to the Lender hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by the Lender. SECTION 10.15. Indemnification. In addition to the Borrower's other Obligations under this Agreement, the Borrower agrees to defend, protect, indemnify and hold harmless the Lender, any Securitization Party and all of their respective officers, directors, employees, attorneys, consultants and agents (collectively called the "Indemnitees") from and against any and all losses, damages, liabilities, obligations, penalties, fees, reasonable costs and expenses (including, without limitation, reasonable attorneys' fees, costs and expenses) incurred by such Indemnitees, whether prior to or from and after the Effective Date, whether direct, indirect or consequential, as a result of or arising from or relating to or in connection with any of the following: (i) the negotiation, preparation, execution or performance or enforcement of this Agreement, any other Loan Document or of any other document executed in connection with the transactions contemplated by this Agreement, (ii) the Lender's furnishing of funds to the Borrower under this Agreement, including, without limitation, the management of any such Loans, (iii) any matter relating to the financing transactions contemplated by this Agreement or the other Loan Documents or by any document executed in connection with the transactions contemplated by this Agreement or the other Loan Documents, or (iv) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto (collectively, the "Indemnified Matters"); provided, however, that the Borrower shall not have any obligation to any Indemnitee under this Section 10.15 for any Indemnified Matter caused by the gross negligence or willful misconduct of such Indemnitee, as determined by a final judgment of a court of competent jurisdiction. Such indemnification for all of the foregoing losses, damages, fees, costs and expenses of the Indemnitees are chargeable against the Loan Account. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section 10.15 may be unenforceable because it is violative of any law or public policy, the Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees. This Indemnity shall survive the repayment of the Obligations and the discharge of the Liens granted under the Loan Documents. SECTION 10.16. Records. The unpaid principal of and interest on the Notes, the interest rate or rates applicable to such unpaid principal and interest, the duration of such applicability, the Revolving Credit Commitment, and the accrued and unpaid fees payable pursuant to Section 2.06 hereof, including, without limitation, the Funding Fee, Loan Servicing Fee, the Appraisal Fee and Commitment Fee, shall at all times be ascertained from the records of the Lender, which shall be conclusive and binding absent manifest error. -68- 69 SECTION 10.17. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and the Lender and when the conditions precedent set forth in Section 4.01 hereof have been satisfied or waived in writing by the Lender, and thereafter shall be binding upon and inure to the benefit of the Borrower and the Lender, and their respective successors and assigns, except that the Borrower shall not have the right to assign their rights hereunder or any interest herein without the prior written consent of the Lender, and any assignment by the Lender shall be governed by Section 10.07 hereof. SECTION 10.18. Joint and Several. The obligations of the Loan Parties hereunder are joint and several. The Lender may, in its sole and absolute discretion, enforce the provisions hereof against either of the Loan Parties and shall not be required to proceed against both Loan Parties jointly or seek payment from the Loan Parties ratably. In addition, the Lender may, in its sole and absolute discretion, select the Collateral of any one or more of the Loan Parties for sale or application to the Obligations, without regard to the ownership of such Collateral, and shall not be required to make such selection ratably from the Collateral owned by each of the Loan Parties. The release or discharge of any Loan Party by the Lender shall not release or discharge the other Loan Party from the obligations of such Person hereunder. SECTION 10.19. Confidentiality. The Lender agrees (on behalf of itself and each of its affiliates, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with its customary procedures for handling confidential information of this nature and in accordance with safe and sound practices of comparable commercial finance companies, any non-public information supplied to it by the Borrower pursuant to this Agreement or the other Loan Documents which is identified by the Borrower as being confidential at the time the same is delivered to such Person (and which at the time is not, and does not thereafter become, publicly available or available to such Person from another source not known to be subject to a confidentiality obligation to such Person not to disclose such information), provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for the Lender, (iii) to examiners, auditors, accountants or Securitization Parties, (iv) in connection with any litigation to which the Lender is a party or (v) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) first agrees, in writing, to be bound by confidentiality provisions similar in substance to this Section 10.19. The Lender agrees that, upon receipt of a request or identification of the requirement for disclosure pursuant to clause (iv) hereof, it will make reasonable efforts to keep the Borrower informed of such request or identification; provided that the Borrower acknowledges that the Lender may make disclosure as required or requested by any Governmental Authority or representative thereof and that the Lender may be subject to review by Securitization Parties or other regulatory agencies and may be required to provide to, or otherwise make available for review by, the representatives of such parties or agencies any such non-public information. SECTION 10.20. Additional Debt Financing. The Borrower shall give reasonable notice to the Lender that the Borrower intends to seek debt financing in addition to the Loans provided by the Lender hereunder or other Permitted Indebtedness in accordance with this Agreement (the "Additional Debt Notice"). The Additional Debt Notice shall set forth all of -69- 70 the terms agreed to with such third party lender, as such terms are memorialized in an executed term sheet or commitment letter. SECTION 10.21. Power of Attorney. Borrower hereby irrevocably designates, makes, constitutes, and appoints Lender (and all Persons designated by Lender) as Borrower's true and lawful attorney (and agent-in-fact), and Lender, or Lender's agent, may, without notice to Borrower and in either Borrower's or Lender's name, but at the cost and expense of Borrower: (a) At such time or times upon or after the occurrence of a Default or an Event of Default as Lender or said agent, in its sole discretion, may determine, endorse Borrower's name on any checks, notes, acceptances, drafts, money orders, or any other evidence of payment or proceeds of the Collateral which come into the possession of Lender or under Lender's control and shall deposit such item of payment into the Lender's Account or credit the amount thereof (in accordance with the provisions of this Agreement) to the Obligations. (b) At such time or times upon or after the occurrence of an Event of Default as Lender or its agent, in its sole discretion, may determine: (i) demand payment of the Accounts from the Account Debtors, enforce payment of the Accounts by legal proceedings or otherwise, and generally exercise all of Borrower's rights and remedies with respect to the collection of the Accounts, (ii) settle, adjust, compromise, discharge, or release any of the Accounts or other Collateral or any legal proceedings brought to collect any of the Accounts or other Collateral, (iii) sell or assign any of the Accounts and other Collateral upon such terms, for such amounts, and at such time or times as Lender deems advisable, (iv) take control, in any manner, of any item of payment or proceeds relating to any Collateral, (v) prepare, file, and sign Borrower's name to a proof of claim in bankruptcy or similar document against any Account Debtor, or to any notice of lien, assignment, or satisfaction of lien or similar document in connection with any of the Collateral, (vi) receive, open and dispose of all mail addressed to Borrower, and notify postal authorities to change the address for delivery thereof to such address as Lender may designate, (vii) endorse the name of Borrower upon any of the items of payment or proceeds relating to any Collateral, and deposit the same to the account of Lender on account of the Obligations, (viii) endorse the name of Borrower upon any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document, or agreement relating to the Accounts, Inventory and any other Collateral, (ix) use Borrower's stationery and sign the name of Borrower to verifications of the Accounts and notices thereof to Account Debtors, (x) use the information recorded on or contained in any data processing equipment, computer hardware, and software relating to the Accounts, Inventory, Equipment, and any other Collateral, (xi) make and adjust claims under policies of insurance, and (xii) do all other acts and things necessary, in Lender's determination, to fulfill Borrower's obligations under this Agreement. -70- 71 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: -------- TRI-STATE OUTDOOR MEDIA GROUP, INC. By: ------------------------------- Name: Title: LENDER: ------- ABLECO FINANCE LLC By: ------------------------------- Name: Title: GUARANTOR: ---------- SGH HOLDINGS, INC. By: ------------------------------- Name: Title: -71- 72 EXECUTION COPY FINANCING AGREEMENT Dated as of March 27, 2001 by and among TRI-STATE OUTDOOR MEDIA GROUP, INC., ABLECO FINANCE LLC and SGH HOLDINGS, INC. 73 TABLE OF CONTENTS

-i- 74 ARTICLE VII MANAGEMENT, COLLECTION AND STATUS OF ACCOUNTS RECEIVABLE AND OTHER COLLATERAL........................54 SECTION 7.01. Collection of Accounts Receivable; Management of Collateral.............................54 SECTION 7.02. Accounts Receivable Documentation.......................................................56 SECTION 7.03. Status of Accounts Receivable and Other Collateral......................................56 SECTION 7.04. Collateral Custodian....................................................................57 ARTICLE VIII EVENTS OF DEFAULT...................................................................................57 SECTION 8.01. Events of Default.......................................................................57 ARTICLE IX GUARANTY.............................................................................................60 SECTION 9.01. Guaranty; Limitation of Liability........................................................60 SECTION 9.02. Guaranty Absolute........................................................................60 SECTION 9.03. Waiver.................................................................................. 61 SECTION 9.04. Continuing Guaranty; Assignments.........................................................61 SECTION 9.05. Subrogation..............................................................................61 ARTICLE X MISCELLANEOUS..........................................................................................62 SECTION 10.01. Notices, Etc...........................................................................62 SECTION 10.02. Amendments, Etc........................................................................63 SECTION 10.03. No Waiver; Remedies, Etc...............................................................63 SECTION 10.04. Expenses; Taxes; Attorneys' Fees.......................................................63 SECTION 10.05. Right of Set-off.......................................................................64 SECTION 10.06. Severability...........................................................................65 SECTION 10.07. Assignments and Participations.........................................................65 SECTION 10.08. Counterparts...........................................................................66 SECTION 10.09. GOVERNING LAW..........................................................................66 SECTION 10.10. CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE..................................66 SECTION 10.11. WAIVER OF JURY TRIAL, ETC..............................................................67 SECTION 10.12. Consent by the Lender..................................................................67 SECTION 10.13. No Party Deemed Drafter................................................................67 SECTION 10.14. Reinstatement; Certain Payments........................................................68 SECTION 10.15. Indemnification........................................................................68

-ii- 75 SECTION 10.16. Records................................................................................68 SECTION 10.17. Binding Effect.........................................................................69 SECTION 10.18. Joint and Several......................................................................69 SECTION 10.19. Confidentiality........................................................................69 SECTION 10.20. Additional Debt Financing..............................................................69 SECTION 10.21. Power of Attorney......................................................................70

-iii- 76 Schedule 5.01(e) Capitalization Schedule 5.01(f) Subsidiaries Schedule 5.01(g) Litigation Schedule 5.01(j) ERISA Schedule 5.01(p) Real Property Schedule 5.01(r) Operating Lease Obligations Schedule 5.01(s) Environmental Matters Schedule 5.01(t) Insurance Schedule 5.01(w) Bank Accounts Schedule 5.01(x) Intellectual Real Property Schedule 5.01(y) Material Contracts Schedule 5.01(ee) Location of Inventory; Place of Business; Chief Executive Office Schedule 6.01(l) Collateral Locations Schedule 6.02(a) Permitted Liens Schedule 6.02(b) Permitted Indebtedness Schedule 6.02(e) Existing Investments Exhibit A Form of Revolving Credit Note Exhibit B Form of Term Note Exhibit C Form of Security Agreement Exhibit D Form of Pledge Agreement Exhibit E Form of Notice of Borrowing Exhibit F Form of Opinion of St. John & Wayne LLC Exhibit G Form of Opinion of McDowell, Rice, Smith & Gaar, P.C. Exhibit H Form of Opinion of Moser & Terry Exhibit I Form of Borrowing Base Certificate Exhibit J Form of Concentration Account Agreement Exhibit K States of Good Standing

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