-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VJqh7Z5QJEkO+dVXZJ7hEDIzV8Tj04e0/SBhkauTnxdi0Zyqg2BioZnFaqsy/MA+ siSRnfskHW90aZ0bXAEwDw== 0000950109-98-002312.txt : 19980401 0000950109-98-002312.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950109-98-002312 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIERCE LEAHY CORP CENTRAL INDEX KEY: 0001020569 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC WAREHOUSING & STORAGE [4220] IRS NUMBER: 232588479 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13045 FILM NUMBER: 98580002 BUSINESS ADDRESS: STREET 1: 631 PARK AVE CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 BUSINESS PHONE: 6109928200 10-K 1 FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________ FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT - --- OF 1934 For the fiscal year ended December 31, 1997 OR ____TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 333-9963 PIERCE LEAHY CORP. (Exact name of registrant as specified in its charter) PENNSYLVANIA 23-2588479 (State or other jurisdiction of (IRS Employer incorporated or organization) Identification No.) 631 PARK AVENUE KING OF PRUSSIA, PENNSYLVANIA 19406 (Address of Principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (610) 992-8200 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- --------------------- Common Stock, $.01 par value New York Stock Exchange 11 1/8% Senior Subordinated Notes Due 2006 New York Stock Exchange 9 1/8% Senior Subordinated Notes Due 2007 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ] As of March 16, 1998, the aggregate market value of the voting stock held by non-affiliates of the Registrant was $178,498,277. As of March 16, 1998, 16,477,728 shares of Common Stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Part III Portions of the Registrant's definitive Proxy Statement with respect to the Registrant's 1998 Annual Meeting of Shareholders to be filed no later than 120 days after the end of the Registrant's Fiscal year. ================================================================================ PART I ITEM 1. BUSINESS. - ------ --------- General Pierce Leahy Corp. ("the Company") is the largest hard copy records management company in North America, as measured by its approximately 64 million cubic feet of records under management as of March 1, 1998. The Company operates a total of 188 records management facilities of which 171 are in the United States and 17 are in Canada. The Company is a full-service provider of records management and related services, enabling customers to outsource their data and records management functions. The Company offers storage for all major media, including paper (which has typically accounted for over 90% of the Company's storage revenues), computer tapes, optical discs, microfilm, video tapes and X-rays. In addition, the Company provides next day or same day records retrieval and delivery, allowing customers prompt access to all stored material. The Company also offers other data management services, including customer records management programs, imaging services and records management consulting services. The Company serves a diversified group of over 30,000 customer accounts in a variety of industries such as financial services, manufacturing, transportation, healthcare and law. The Company's storage and related services are typically provided pursuant to contracts that include recurring monthly storage fees, which continue until such records are permanently removed (for which the Company charges a fee), and additional charges for services such as retrieval on a per unit basis. Saved documents, or records, generally fall into two categories: active and inactive. Active records refer to information that is frequently referenced and usually stored on-site by the originator. Inactive records are not needed for frequent access, but must be retained for future reference, legal requirements or regulatory compliance. Inactive records are the principal focus of the records management industry. ACQUISITION HISTORY AND GROWTH STRATEGY The Company expects that acquisitions will remain an important part of its growth strategy. During 1997, the Company completed and integrated 17 acquisitions, totaling approximately 10.3 million cubic feet of records at the time of acquisition. Since January 1, 1998, the Company has completed five acquisitions, totaling approximately 3.9 million cubic feet of records at the time of acquisition. In addition, the Company has signed a definitive agreement to purchase Archivex Inc., a regional records management company in Canada, for Cdn. $90.0 million, which it intends to finance through borrowings under its credit facility or issuance of additional debt securities. The acquisition is subject to customary conditions and is expected to close in April 1998. 2 The following table summarizes certain information for each acquisition since January 1, 1997:
EXISTING/ DATE OF ACQUISITION LOCATION NEW LOCATION ACQUISITION - ------------------------- ---------- -------------- -------------- Security Archives & Storage Company Wilmington Existing January 1997 The Records Center Tampa Existing January 1997 Data Archives Trenton Existing January 1997 Professional Records Storage & Delivery West Palm Existing January 1997 Advanced File Storage Systems Jacksonville Existing April 1997 RMS Various Existing/New April 1997 Austin FileRoom Austin Existing May 1997 Corporate Storage Chicago Existing June 1997 Smithfield Archives El Paso New July 1997 FilExpress Pittsburgh New September 1997 National Records Management Louisville New September 1997 Records Management & Projection New Orleans New October 1997 Davidson Archives Kansas City Existing October 1997 Datafilms, Inc. Denver Existing October 1997 dataLOK Partners San Fernando Existing November 1997 Binyon O'Keefe Ft. Worth Existing December 1997 Records Depository Buffalo New December 1997 Records Archives Corp. Houston Existing January 1998 Automated Records Centre Toronto Existing January 1998 DataStor St. Louis Existing January 1998 Offsite Records Management Dallas Existing February 1998 Deliverex of Denver Denver Existing March 1998
DESCRIPTION OF SERVICES The Company's records management services are focused on storage, retrieval and data management of hard copy documents. Storage Storage revenues were 59% of total revenues during 1997. Nearly all of the Company's storage fees are derived from hard copy storage. During 1997, the Company generated 94% of its storage revenues from hard copy storage and 6% from vault storage for special items such as computer tapes, X-rays, films or other valuable items. Storage charges typically are billed monthly on a per cubic foot basis. The Company tracks all of its records stored in cartons, from initial pick-up through permanent removal, with the use of its Pierce Leahy User Solution(R) (PLUS(R)) computer system. Bar-coded boxes are packed by the customer and transported by the Company's transportation department to the appropriate facility where they are scanned and placed into storage at the locations designated by PLUS(R). At such time, the Company's data input personnel enter the data twice (i.e., double key verifying) to enhance the integrity of the information entered into the system. The Company offers secure, climate-controlled facilities for the storage of non-paper forms of media such as computer tapes, optical discs, microfilm, video tapes and X-rays. These types of media often require special facilities due to the nature of the records. The Company's storage fees for non-paper media, are higher than for typical paper storage. The Company also provides ancillary services for non-paper records in the same manner as it provides for its hard copy storage operations. Service and Storage Material Sales The Company's principal services include adding records to storage, temporary removal of records from storage to support a customer's need to review the files, replacing temporarily removed records and permanent withdrawals from storage or destruction of records. Pick-up and delivery of customer records can be tailored to a customer's specific needs and range from standard service (typically requests received 3 by 10:30 a.m. are delivered or picked up that afternoon and requests received by 3:30 p.m. are delivered or picked up the next day) to emergency service (typically within three hours or less). Pick-up and delivery operations are supported by the Company's fleet of over 500 owned or leased vehicles. The Company charges for pick-up and delivery services on a per-unit basis depending on the immediacy of delivery requested. A small percentage of the Company's customers manage their records on a file by file basis, allowing the customer direct access and traceability of a specific file (rather than on a box by box basis). The Company provides data entry services to such customers to input the file by file listings into the PLUS(R) system. The Company also offers a records destruction service, which provides customers with a secure, controlled program to periodically review and remove records which no longer need to be retained. Although boxes destroyed no longer generate monthly storage fees, the Company charges for the destruction of records and increases its available shelving space as a result. In addition to providing traditional storage, customers may contract with the Company to manage their on-site records or file services center. Such management services generally include providing Company personnel to manage the customer's active files (including records storage and tracking) at the customer's facilities, supplemented by off-site storage at the Company's facilities. As part of this service, the Company can use its own internally developed file management software, or maintain the customer's existing system. The Company also provides consulting and other services on an individualized basis, including advisory work for customers setting up in-house records management systems. In addition, the Company sells cardboard boxes and other storage containers to its customers. CUSTOMER SERVICE Customer calls are routed into one of the Company's two centralized customer service departments located in the Company's U.S. and Canadian corporate headquarters. Both customer service departments are staffed and can receive customer calls 24 hours a day, seven days a week. Routine pick-up and delivery requests are dispatched directly by customer service representatives to local facilities as directed by PLUS(R). As a complement to its centralized customer service departments, the Company provides client service representatives to work with existing customers at the local level. In addition to maintaining personal contacts with customers, the local client service representatives help meet the Company's customers' changing records management needs through advice in efficient record keeping procedures, and, when appropriate, by offering the sale of additional services. MANAGEMENT INFORMATION SYSTEMS The Company believes that PLUS(R), its core management information system, is the most sophisticated records management system in the industry, and provides the Company with a significant customer service and cost advantage in attracting and retaining major accounts with records storage needs in multiple locations and acquiring other records management companies. The Company's centralized customer service and billing functions eliminate the need for redundant functions at individual facilities. In addition, the PLUS(R) system enables the Company to offer its customers full life cycle records management, from file creation to destruction, and coordinates inventory control, order entry, billing, material sales, service activity, accounts receivable and management reporting on a centralized basis. PLUS(R) utilizes database technology, proprietary software and extensive bar coding in a flexible, enterprise-wide, client/server environment. PLUS(R) offers several additional features which enhance the Company's customer support functions. The system is continuously updated when any account activity is undertaken, providing customers with real time access to information regarding box location and retrievals. The PLUS(R) system is flexible and allows the Company to design and implement customized records management solutions for various industries 4 utilizing a set of standardized options. The PLUS(R) system's on-line customer support network allows certain customers to place orders for both records storage and retrieval directly from their own in-house terminals resulting in a more efficient system of records management. SALES AND MARKETING During the past five years, the Company has invested significant effort in developing its sales and marketing department, which is currently comprised of approximately 110 employees in the United States and Canada. Sales representatives are trained to sell a "total systems approach," in which a customer's records management requirements are surveyed and evaluated in order to determine the file management system which best meets the customer's needs and offer recommendations on how to implement such a system. The Company's sales and marketing department is divided into five regions: Northeast; South; Midwest; West; and Canada. The Company's Vice President, Sales and Marketing directs five regional sales managers. In addition, the Company's sales force is divided between sales representatives who focus on large accounts which are frequently multi-location and a recently expanded group of sales representatives who focus on smaller, single-location customers. The sales force is primarily compensated on a commission basis with incentives tied to the Company's sales goals. The Company also uses telemarketing, direct response and print advertising to assist in its marketing programs. CUSTOMERS The Company serves a diversified group of over 30,000 customer accounts in a variety of industries, including financial services, manufacturing, transportation, healthcare and law. The Company tracks customer accounts, which are based on invoices. Accordingly, depending on how invoices have been arranged at the request of a customer, one customer may have multiple customer accounts. None of the Company's customers accounted for more than 3% of the Company's total revenues during 1997. The Company services all types of customers from small to medium size companies (such as professional groups and law firms that often have one location) to Fortune 500 companies that have operations in multiple locations. The Company's contracts with larger, typically multi-location customers usually provide for an initial term of five or more years, and contracts with other customers typically provide for initial terms of one or two years. Both types of contracts generally provide for annual renewals thereafter (with either party having the right to terminate the contract). Customers are generally charged monthly storage fees until their records are destroyed or permanently removed, for which fees are charged. COMPETITION The Company competes with numerous records management companies in all geographic areas in which it operates. The Company believes that competition for customers is based on price, reputation for reliability, quality of service and scope and scale of technology, and believes that it generally competes effectively based on these factors. Management believes that, except for Iron Mountain Incorporated, all of these competitors have records management revenues significantly lower than those of the Company. The Company believes that the trend towards consolidation in the industry will continue and the Company also faces competition in identifying attractive acquisition candidates. In addition, the Company faces competition from the internal document handling capability of its current and potential customers. The substantial majority of the Company's revenues are derived from the storage of paper records and from related services. Alternative technologies for generating, capturing, managing, transmitting and storing information have been developed, many of which require significantly less space than paper. Such technologies include computer media, microforms, audio/video tape, film, CD-ROM and optical disc. Management believes that conversion of paper documents into these smaller storage media is currently not cost effective for inactive records, primarily due to the high labor cost of preparing the documents for 5 imaging, indexing the images for subsequent retrieval, and ensuring that all the documents were imaged legibly. EMPLOYEES As of December 31, 1997, the Company had 2,295 employees, including 260 employees in Canada. None of the Company's employees are covered by a collective bargaining agreement. Management considers its employee relations to be good. INSURANCE The Company carries comprehensive property insurance covering replacement costs of real and personal property. Subject to certain limitations and deductibles, such policies also cover extraordinary expenses associated with business interruption and damage or loss from fire, flood or earthquakes (in certain geographic areas), and losses at the Company's facilities up to approximately $400 million. ENVIRONMENTAL MATTERS The Company's properties and operations may be subject to liability under various environmental laws, regardless of fault, for the investigation, removal or remediation of soil or groundwater, on or off-site, resulting from the release or threatened release of hazardous materials, as well as damages to natural resources. The owner or operator of contaminated property may also be subject to claims for damages and remediation costs from third parties based upon the migration of any hazardous materials to other properties. At certain of the properties owned or leased by the Company, petroleum products or other hazardous materials are or were stored in underground storage tanks ("USTs"). Some formerly used USTs have been removed; others were abandoned in place. The Company believes all of the USTs are registered, where required under applicable law. The Company also is aware of the presence in some of its facilities of asbestos-containing materials, but believes that no action is presently required to be taken as a result of such material. At the Company's New Jersey facility, certain contamination has been discovered resulting from operations of the prior owner thereof. The prior owner, which has agreed to be responsible for the cost of such remediation, is completing remediation of the property under a consent order with the New Jersey Department of Environmental Protection ("NJDEP"). The prior owner has posted a $1.1 million letter of credit with the NJDEP. The Company has purchased an environmental liability insurance policy covering the cleanup costs to the Company, if any, resulting from any on- or off-site environmental condition existing at the time of the Company's acquisition of this property, with a $250,000 deductible and policy limits of $4 million per occurrence/$8 million in the aggregate, provided the claim first arises during the term of the policy, which is August 10, 1995 through August 11, 1998. The Company has not received any written notice from any governmental authority or third party asserting, and is not otherwise aware of, any material noncompliance, liability or claim under environmental laws applicable to the Company other than as described above. No assurance can be given that there are no environmental conditions for which the Company may be liable in the future or that future regulatory action, or compliance with future environmental laws, will not require the Company to incur costs that could have a material adverse effect on the Company's financial condition or results of operations. 6 ITEM 2. PROPERTIES. - ------- ----------- As of March 1, 1998, the Company operated a total of 188 records management facilities of which 171 are in the United States and 17 are in Canada. Of the 13.6 million square feet of floor space (representing over 95.8 million cubic feet of storage capacity) in the Company's records facilities, approximately 35.6% and 64.4% (37.9% and 62.1% on a cubic footage basis) are in owned and leased facilities, respectively. The Company's facilities are located as follows:
Records Management Cubic Feet Region Facilities of Capacity - --------------------------------------------------------- ---------- ------------ United States Southern Region........................................ 26 10.7 million (includes Alabama, Florida, Georgia, Kentucky, Louisiana, North Carolina, and Tennessee) Northern Region........................................ 52 43.0 million (includes Connecticut, Delaware, Maryland, Massachusetts, New Jersey New York, Ohio, Pennsylvania and Virginia) Midwest Region......................................... 69 24.5 million (includes Colorado, Illinois Indiana, Michigan, Missouri, New Mexico, Oklahoma and Texas) Western Region......................................... 24 8.4 million --- ------------ (includes Arizona, California, Nevada, Utah and Washington) Total U.S.................................. 171 86.6 million Canada................................................. 17 9.2 million --- ------------- (includes Calgary, Montreal, Ottawa, Toronto and Vancouver) Total.................................................. 188 95.8 million === =============
Item 3. LEGAL PROCEEDINGS. - ------- ------------------ The Company is involved in litigation from time to time in the ordinary course of its business. In the opinion of management, no material legal proceedings are pending to which the Company, or any of its property, is subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------- ---------------------------------------------------- Not Applicable 7 ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT. - -------- ------------------------------------- The following is a list of the Company's executive officers, their ages and their positions. Each executive officer serves at the pleasure of the Company's Board of Directors.
Other Position held Name Age Position in the last five years - ------------------------------------ --- --------------------------- ----------------------- J. Peter Pierce .................. 52 President, Chief Executive Chief Operating Officer and Director Officer (1995 - Present) (1984-1995) Douglas B. Huntley ............ 37 Vice President, Chief Assistant to the Financial Officer President and Director (1993) (1994 - Present) Joseph A. Nezi .................. 51 Vice President Sales and Marketing (1991 - Present) David Marsh ..................... 49 Vice President, Chief Assistant to the Information Officer President (1994), (1995 - Present) Manager Mass. Institute of Tech. (1986-1994) Ross Engelman .................. 34 Vice President, Operations Vice President South Information Services (1994 - Present) Services (1993-1994) J. Michael Gold ................ 38 Vice President, Operations Northeast (1993 - Present) Christopher J. Williams...... 39 Vice President, Operations West (1993 - Present) Joseph P. Linaugh ............ 48 Vice President, Treasurer Vice President, Chief (1994 - Present) Financial Officer and Director (1990-1993)
8 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER - ------- ----------------------------------------------------------------- MATTERS. - ------- MARKET INFORMATION The Company's Common Stock began trading publicly on the New York Stock Exchange ("NYSE") under the symbol "PLH" on July 1, 1997. Prior to that date there was no market for the Company's Common Stock. The following table sets forth, for the periods indicated, the range of high and low closing prices for the Common Stock as reported on the New York Stock Exchange, Inc. Composite Transaction Tape. QUARTER ENDED HIGH LOW - ---------------------------------------- -------- -------- September 30, 1997 $29 5/16 $23 9/16 December 31, 1997 $31 1/16 $15 7/16 HOLDERS OF RECORD Based on requests for proxy materials, the Company believes there are approximately 1,700 holders of the Company's Common Stock. DIVIDENDS Since the Company's initial public offering of Common Stock in July 1997, the Company has not paid any cash dividends on its Common Stock and does not anticipate paying any cash dividends on its Common Stock in the foreseeable future. The Company intends to retain any future earnings for use in its business. Additionally, the Company's ability to pay cash dividends is limited by the terms of its senior subordinated notes and its credit facility. 9 ITEM 6. SELECTED FINANCIAL DATA - -------------------------------
Year Ended December 31, (dollars in thousands) 1997 1996 1995 1994 1993 --------------------------------------------------------- ------------ Statement of Operations Data: Revenues Storage $ 107,879 $ 75,900 $ 55,501 $ 47,123 $ 42,122 Service and storage material sales 75,638 53,848 39,895 35,513 31,266 ------------ ------------ ------------ ------------ ------------ Total Revenues 183,517 129,748 95,396 82,636 73,388 Cost of sales, excluding depreciation and amortization 101,940 73,870 55,616 49,402 45,391 Selling, general, & administrative 30,070 20,007 16,148 15,882 11,977 Depreciation & amortization 21,528 12,869 8,163 8,436 6,888 Special compensation charge 1,752 -- -- -- -- Foreign currency exchange 702 -- -- -- -- Consulting payments to related parties -- -- 500 500 -- Non-recurring charge -- 3,254 -- -- -- ------------ ------------ ------------ ------------ ------------ Operating income 27,525 19,748 14,969 8,416 9,132 Interest expense 29,262 17,225 9,622 7,216 6,160 ------------ ------------ ------------ ------------ ------------ Income (loss) before income taxes and extraordinary (1,737) 2,523 5,347 1,200 2,972 Income taxes 7,424 -- -- -- -- Extraordinary Charge 6,036 2,015 3,279 5,991 9,174 ------------ ------------ ------------ ------------ ------------ Net Income (loss) (15,197) 508 2,068 (4,791) (6,202) Accretion (cancellation) of redeemable warrants -- 1,561 889 16 (746) ------------ ------------ ------------ ------------ ------------ Net Income (loss) applicable to Common Shareholders $ (15,197) $ (1,053) $ 1,179 $ (4,807) $ (5,456) ============ ============ ============ ============ ============ BASIC AND DILUTED EARNINGS PER COMMON SHARE Income (loss) before extraordinary charge $ (0.69) $ 0.09 $ 0.41 $ 0.18 $ 0.34 Extraordinary charge (0.45) (0.19) (0.30) (0.56) (0.85) ------------ ------------ ------------ ------------ ------------ Basic and diluted income (loss) per Common share $ (1.14) $ (0.10) $ 0.11 $ (0.38) $ (0.51) ------------ ------------ ------------ ------------ ------------ Shares used in computing net income (loss) per Common share 13,385,243 10,546,871 10,591,090 10,591,090 10,591,090 Shares used in computing diluted net income (loss) per Common share 13,385,243 10,630,922 10,890,188 10,888,441 10,782,025 ------------ ------------ ------------ ------------ ------------ Pro forma Data (unaudited): Pro forma net loss applicable to Common Shareholders $ (9,225) ============ Pro forma basic and diluted net loss per Common share: Loss before extraordinary charge $ (0.24) Extraordinary charge (0.45) ------------ Pro forma basic and diluted net loss per Common share $ (0.69) ============ Shares used in computing pro forma basic and diluted net loss per Common share 13,385,243 ============ Other Data: EBITDA(a) $ 51,507 $ 35,871 $ 23,632 $ 17,352 $ 16,020 EBITDA margin 28.1% 27.6% 24.8% 21.0% 21.8% Balance Sheet Data: Working capital deficit $ (12,906) $ (23,933) $ (8,139) $ (5,202) $ (9,143) Total assets 394,713 234,820 131,328 79,746 74,621 Total debt (including redeemable warrants) 279,197 217,423 120,071 77,683 69,736 Shareholders' equity (deficit) 59,323 (25,438) (18,201) (19,341) (14,508)
(a) Earnings before interest, taxes, depreciation and amortization, non-recurring charges, special compensation charge, and foreign currency exchange (EBITDA) 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - ------- ----------------------------------------------------------- AND RESULTS OF OPERATIONS. -------------------------- GENERAL The Company is the largest hard copy records management company in North America, as measured by its 64.0 million cubic feet of records currently under management. The Company's operations date to 1957 when its predecessor company, L.W. Pierce Co., Inc., was founded to provide filing systems and related equipment to companies in the Philadelphia area. The Company expanded primarily through internal growth until 1990, when it acquired Leahy Business Archives, which effectively doubled its size. Since 1992, the Company has pursued an expansion strategy combining growth from new and existing customers with the completion and successful integration of 43 acquisitions through 1997 and the completion of three acquisitions in January 1998, one in February 1998, and one March 1998. The Company's income (loss) was $(15.2) million, $.5 million and $2.1 million in 1997, 1996, and 1995, respectively. Although the Company's operating income has increased over the three years, net income (loss) has fluctuated as a result of increases in interest expense, income taxes related to the termination of the Company's status as a Subchapter S corporation, and extraordinary charges related to the early extinguishment of debt due to refinancings in 1997, 1996 and 1995. Another tool for measuring the performance of records management companies is EBITDA. Substantially all of the Company's financing agreements, including its 11.125% Senior Subordinated Notes due 2006 ("1996 Notes") and its 9.125% Senior Subordinated Notes due 2007 ("1997 Notes"; together, the "Notes"), contain covenants in which EBITDA is used as a measure of financial performance. However, EBITDA should not be considered an alternative to operating or net income (as determined in accordance with generally accepted accounting principles ("GAAP")), as an indicator of the Company's performance or to cash flow from operations (as determined in accordance with GAAP) as a measure of liquidity. 11 The following table illustrates the growth in stored cubic feet from new and existing customers, and acquisitions from 1993 through 1997: Net Additions of Cubic Feet of Storage by Category (cubic feet in thousands)
Year Ended December 31, ---------------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Additions of Cubic Feet: New and Existing Customer Accounts(a) 8,170 3,956 2,740 2,695 2,660 Acquisitions ........................ 10,285 6,931 4,623 440 117 ------- ------- ------- ------- ------- Total ............................... 18,455 10,887 7,363 3,135 2,777 % Increase From: New and Existing Customer Accounts(a) 20% 13% 12% 14% 16% Acquisitions ........................ 26% 24% 21% 2% 1% ------- ------- ------- ------- ------- Total ............................... 46% 37% 33% 16% 17% Cubic Feet Under Management: Beginning of Period ................. 40,410 29,523 22,160 19,025 16,248 End of Period ....................... 58,865 40,410 29,523 22,160 19,025
(a)Net of permanent removals. Includes effect of records destruction program of 475 and 372 cubic feet of records in 1996 and 1995, respectively, for a major customer, as recommended by the Company pursuant to a consulting agreement with the Company. Revenues The Company's revenues consist of storage revenues (58.8% of total revenues in 1997), and related service and storage material sales revenues (41.2% of total revenues in 1997). The Company provides records storage and related services under annual or multi-year contracts that typically provide for recurring monthly storage fees which continue until such records are permanently removed (for which the Company charges a service fee) and service charges based on activity with respect to such records. While the Company's total revenues have increased from 1995 to 1997, total revenue per annual average cubic foot during such period has declined. The decline is principally attributable to (i) increases in sales to large volume accounts under long-term contracts with discounted rates, which generate lower revenue per cubic foot, but typically generate increased operating income, (ii) renegotiation of contracts with existing customers to provide for longer term contracts at lower rates, and (iii) competition. Operating Expenses and Productivity Operating expenses consist primarily of cost of sales, selling, general and administrative expenses, and depreciation and amortization. Cost of sales are comprised mainly of wages and benefits, facility occupancy costs, equipment costs and supplies. The major components of selling, general and administrative expenses are management, administrative, marketing and data processing wages and benefits and also include travel, communication and data processing expenses, professional fees and office expenses. The Company's depreciation and amortization charges result primarily from the capital-intensive nature of its business and the completed acquisitions. The principal components of depreciation relate to shelving, facilities and leasehold improvements, equipment for new facilities and computer systems. Amortization primarily relates to the amortization of intangible assets associated with acquisitions, including goodwill, and the amortization of client acquisition costs. The Company has accounted for all of its acquisitions under the purchase method except for two small acquisitions, which were accounted for under the pooling 12 of interests method. Since the purchase price for records management companies is usually substantially in excess of the fair market value of their assets, these purchases have given rise to significant goodwill and, accordingly, significant levels of amortization. Although amortization is a non-cash charge, it does impact reported net income (loss). Capital Expenditures and Client Acquisition Costs The majority of the Company's capital expenditures are related to expansion. The largest single component is the purchase of shelving, which is directly related to the addition of new records. Shelving has a relatively long life and rarely needs to be replaced. Most of the Company's storage facilities (both in number and square feet) are leased, but the Company will purchase facilities on an opportunistic basis. The Company's data processing capital expenditures are also largely related to growth. The Company often incurs client acquisition costs, primarily sales commissions and move-in costs. Client acquisition costs are capitalized and amortized over six years, which is the average initial contract term of new customer accounts. In 1997, the Company incurred $10.6 million of client acquisition costs or approximately $2.04 per cubic foot of client records moved in from new clients. Amortization of client acquisition costs amounted to $3.2 million in 1997. Extraordinary Charge To provide capital to fund its growth oriented business strategy, the Company has incurred substantial indebtedness. The Company has completed several expansions of its credit facilities, primarily utilizing bank debt, which have resulted in one-time charges, including the repurchase of warrants and the write-off of deferred financing costs, of $6.0 million, $2.0 million and $3.3 million in 1997, 1996 and 1995, respectively. Year 2000 Compliance The Company has developed a plan designed to make its systems compliant with the requirements to process transactions in the year 2000. Review of the Company's core PLUS system databases and programs has been completed and code modifications and testing are scheduled to be completed by December 31, 1998. The present version of the Company's internal financial accounting system is not year 2000 compliant and is scheduled to be upgraded by December 31, 1998. The Company is also working with its other internal information systems and network providers to ensure all systems are year 2000 compliant. The Company estimates that the expenses and capital expenditures associated with achieving year 2000 compliance will not have a material effect on its financial results in 1998 or 1999. 13 Results of Operations The following table sets forth, for the periods indicated, information derived from the Company's consolidated statements of operations, expressed as a percentage of revenue. There can be no assurance that the trends in revenue growth or operating results shown below will continue in the future.
Years Ended December 31, ------------------------ 1997 1996 1995 ---- ---- ---- REVENUES: Storage 58.8% 58.5% 58.2% Service and storage material sales 41.2% 41.5% 41.8% ------- ------- ------- Total revenues 100.0% 100.0% 100.0% OPERATING EXPENSES: Cost of sales, excluding depreciation and amortization 55.5% 57.0% 58.3% Selling, general and administrative 16.4% 15.4% 16.9% Depreciation and amortization 11.7% 9.9% 8.6% Special compensation charge 1.0% 0.0% 0.0% Foreign currency exchange 0.4% 0.0% 0.0% Non-recurring charge 0.0% 2.5% 0.0% Consulting payments to related parties 0.0% 0.0% 0.5% ------- ------- ------- Total operating expenses 85.0% 84.8% 84.3% Operating income 15.0% 15.2% 15.7% INTEREST EXPENSE 15.9% 13.3% 10.1% ------- ------- ------- Income (loss) before income taxes and extraordinary item -0.9% 1.9% 5.6% INCOME TAXES 4.1% 0.0% 0.0% ------- ------- ------- Income (loss) before extraordinary charge -5.0% 1.9% 5.6% EXTRAORDINARY ITEM-loss on early extinguishment of debt, net of $4,014 tax benefit in 1997 and none in 1996 and 1995 3.3% 1.5% 3.4% ------- ------- ------- NET INCOME (LOSS) -8.3% 0.4% 2.2% ======= ======= ======= EBITDA 28.1% 27.6% 24.8% ======= ======= =======
14 Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 Total revenues increased from $129.7 million in 1996 to $183.5 million in 1997, an increase of $53.8 million or 41.4%. Revenues from acquisitions represented $34.9 million of this increase. Approximately $18.9 million of the total revenue growth resulted from sales to new customers and increases in cubic feet stored from existing customers, a base business revenue growth of approximately 16% year over year. Storage revenues increased from $75.9 million in 1996 to $107.9 million in 1997, an increase of $32.0 million or 42.1%. Service and storage material sales revenues increased from $53.8 million in 1996 to $75.6 million in 1997, an increase of $21.8 million or 40.5%. Cost of sales (excluding depreciation and amortization) increased from $73.9 million in 1996 to $101.9 million in 1997, an increase of $28.1 million or 38.0%, but decreased slightly as a percentage of total revenues from 57.0% in 1996 to 55.5% in 1997. The $28.1 million increase was due primarily to increases in wages and benefits resulting from an increased number of employees and to increases in facility occupancy costs resulting from an increase in cubic feet associated with the growth in business and entry into 14 new markets during 1997. Capacity utilization is generally lower in new markets than in existing markets. The decrease as a percentage of total revenue was due primarily to increased labor operating efficiencies. Selling, general and administrative expenses increased from $20.0 million in 1996 to $30.1 million in 1997, an increase of $10.1 million or 50.3%, and increased as a percentage of total revenues from 15.4% in 1996 to 16.4% in 1997. The increase as a percentage of total revenues was due to increases in sales personnel and training costs associated with the increased staff, enhancements to the PLUS(R) computer system, and temporarily carrying duplicate administrative costs from recent acquisitions. A special compensation charge of $1.8 million was incurred during 1997. This charge relates to the write-off of the unamortized compensation expense due to the acceleration of the vesting of the stock options granted on January 1, 1997 in conjunction with the Company's initial public offering of Common Stock. Depreciation and amortization expenses increased from $12.9 million in 1996 to $21.5 million in 1997, an increase of $8.7 million or 67.3%, and increased as a percentage of total revenues from 9.9% in 1996 to 11.7% in 1997. This increase was the result of increased capital expenditures for shelving, building, and improvements to records management facilities and information systems and the amortization of goodwill from the Company's acquisitions and client acquisition costs. The Company incurred a foreign currency exchange adjustment during 1997 of $0.7 million during which time the Company had an intercompany loan with its Canadian subsidiary. This exchange adjustment was directly related to the decrease in the Canadian dollar to U.S. dollar exchange rate during the last quarter of 1997. The Company incurred non-recurring charges of $3.3 million, or 2.5% of total revenues, in 1996 in connection with the assumption of leasehold interests in certain facilities from affiliated parties completed in connection with the sale of the 1996 Notes and with the establishment of a pension for Leo W. Pierce, Sr. Interest expense increased from $17.2 million in 1996 to $29.3 million in 1997, an increase of $12.0 million or 69.9%. The increase was primarily attributable to increased indebtedness related to financing acquisitions and capital expenditures, as well as the higher interest rate on the 1997 Notes issued in July 1997 and a full year of interest expense on the 1996 Notes compared to the bank debt repaid upon the issuance of the 1997 Notes and 1996 Notes. Interest expense was also affected by the proceeds of the Company's initial public stock offering. 15 As a result of the foregoing factors, the Company had a loss before income taxes and extraordinary charge of $1.7 million (0.9% of revenues) for 1997 compared to income of $2.5 million (1.9% of revenues) in 1996. The Company recorded a provision for income taxes of $7.4 million (or 4.1% of revenues) for 1997. These taxes were comprised of the tax effect from the termination of the Company's Subchapter S corporation status ($6.6 million) and the provision for the results of operations after the termination of its status as a S corporation on July 1, 1997 ($0.8 million). There was no provision for income taxes in the year ended 1996 since the Company operated as a Subchapter S corporation during the period. The Company recorded extraordinary charges of $6.0 million in 1997 and $2.0 million in 1996 related to the early extinguishment of debt as a result of refinancing and expanding its existing credit agreement in 1997 and 1996. As a result of the foregoing items, the Company had a net loss of $15.2 million and net income of $0.5 million for 1997 and 1996, respectively. EBITDA increased from $35.9 million in 1996 to $51.5 million in 1997, an increase of $15.6 million or 43.6%, and increased as a percentage of total revenues from 27.6% in 1996 to 28.1% in 1997. The increase as a percentage of the total revenues reflected growth in the Company's business, economies of scale and increased operating efficiencies. Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 Total revenues increased from $95.4 million in 1995 to $129.7 million in 1996, an increase of $34.3 million or 36.0%. Revenues from acquisitions represented $25.7 million or 74.9% of this increase, including $16.3 million from a full year of operations of five acquisitions made in 1995 and $9.4 million from a partial year of operations of twelve acquisitions made in 1996. Approximately $8.6 million or 25.1% of the total revenue growth resulted from sales to new customers and increases in cubic feet stored from existing customers. Storage revenues increased from $55.5 million in 1995 to $75.9 million in 1996, an increase of $20.4 million or 36.8%. Service and storage material sales revenues increased from $39.9 million in 1995 to $53.8 million in 1996, an increase of $13.9 million or 35.0%. Cost of sales (excluding depreciation and amortization) increased from $55.6 million in 1995 to $73.9 million in 1996, an increase of $18.3 million or 32.8%, but decreased as a percentage of total revenues from 58.3% in 1995 to 57.0% in 1996. The $18.3 million increase was due primarily to increases in wages and benefits resulting from an increased number of employees and increases in facility occupancy costs associated with the growth in business. The decrease as a percentage of total revenue was due primarily to increased operating and storage efficiencies. Selling, general and administrative expenses increased from $16.1 million in 1995 to $20.0 million in 1996, an increase of $3.9 million or 23.9%, and decreased as a percentage of total revenues from 16.9% in 1995 to 15.4% in 1996. The decrease as a percentage of total revenues was due to operating efficiencies and the implementation of programs to control and reduce certain administrative expenses. The purchase of certain real estate interests from affiliates in August 1996 contributed $0.9 million to the reduction in cost of sales or 0.7% as a percentage of revenues. Depreciation and amortization expenses increased from $8.2 million in 1995 to $12.9 million in 1996, an increase of $4.7 million or 57.7%, and increased as a percentage of total revenues from 8.6% in 1995 to 9.9% in 1996. This increase was the result of increased capital expenditures for shelving and improvements to record management facilities and information systems and the amortization of goodwill from the Company's acquisitions. 16 The Company incurred non-recurring charges of $3.3 million in 1996 in connection with the assumption of leasehold interests in certain facilities from affiliated parties and with the establishment of a pension for Leo W. Pierce, Sr. As a result of the foregoing factors, excluding the non-recurring charges in 1996, operating income increased from $15.0 million in 1995 to $23.0 million in 1996, an increase of 53.7%, and increased as a percentage of total revenues from 15.7% in 1995 to 17.7% in 1996. The increase reflected the growth in the Company's business, economies of scale and increased operating efficiencies. Interest expense increased from $9.6 million in 1995 to $17.2 million in 1996, an increase of $7.6 million or 79.0%, due primarily to higher levels of indebtedness. The Company recorded extraordinary charges of $2.0 million in 1996 and $3.3 million in 1995 related to the early extinguishment of debt as a result of refinancing and expanding its existing credit agreement in 1996 and 1995. As a result of the foregoing factors, net income was $0.5 million in 1996 compared to net income of $2.1 million in 1995. EBITDA increased from $23.6 million in 1995 to $35.9 million in 1996, an increase of $12.3 million or 51.8%, and increased as a percentage of total revenues from 24.8% in 1995 to 27.7% in 1996. The increase as a percentage of the total revenues reflected growth in the Company's business, economies of scale and increased operating efficiencies. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of capital have been cash flows from operations and borrowings under various revolving credit facilities and other senior indebtedness. Historically, the Company's primary uses of capital have been for acquisitions, capital expenditures and client acquisition costs. Capital Investments For 1997, 1996 and 1995, capital expenditures were $35.4 million, $23.5 million and $16.3 million, respectively, and client acquisition costs were $10.6 million, $6.5 million and $2.2 million, respectively. In 1998, the Company expects its aggregate capital expenditures will approximate $35.0 million. Over 85% of 1998 capital expenditures are anticipated to be growth related, primarily shelving for new client records. Acquisitions In order to take advantage of the operating efficiencies of the PLUS(R) computer system and the opportunities presented by the consolidation undergoing in the record management industry, the Company has actively pursued acquisitions since the beginning of 1994, which has significantly impacted liquidity and capital resources. In 1997, the Company completed 17 acquisitions for an aggregate purchase price of $109.1 million, consisting of $102.1 million in cash, 328,621 shares of Common stock with a deemed value of $4.5 million and $1.7 million in Sellers notes. Since the beginning of 1998, the Company has completed five acquisitions for an aggregate cash purchase price of approximately $41.7 million. In addition, the Company has signed a definitive agreement to purchase a regional records management company for approximately CDN $90.0 million, which it intends to finance through the issuance of additional debt securities. The acquisition is subject to due diligence and other customary conditions. The Company has historically financed its acquisitions with borrowings under its credit agreements and with cash flows from existing operating activities. During 1996, the Company also issued $200 million principal amount of 1996 Notes, a small portion of which was used to fund acquisitions. Funding for 1997 acquisitions was primarily from borrowings under its credit agreements. 17 The Company believes that future cash flows from operations, together with borrowings under the Credit Facility, will be sufficient to fund future working capital needs, capital expenditure requirements and debt service requirements of the Company for the foreseeable future. To the extent that future acquisitions are financed by additional borrowings under the Company's credit facility or other types of indebtedness, the resulting increase in debt and interest expense could have a negative effect on such measures of liquidity as debt to equity. Sources of Funds Net cash flows provided by operating activities were $21.0 million, $26.4 million and $17.5 million for 1997, 1996 and 1995, respectively. The $5.5 million decrease from 1996 to 1997 was primarily comprised of a reduction in net income of $15.7 million and a $14.1 million increase in working capital, offset by a $9.2 million increase in depreciation and amortization, an increase in deferred income taxes of $7.4 million, a $4.0 million increase in extraordinary charge and a special compensation charge of $1.8 million in 1997. Net cash flows used in investing activities were $156.5 million, $108.8 million and $51.3 million for 1997, 1996 and 1995, respectively. The uses of such cash flows were primarily for acquisitions, capital expenditures and client acquisition expenditures detailed above. Net cash flows provided by financing activities were $136.1 million, $82.9 million and $34.2 million for 1997, 1996, and 1995, respectively. In 1997, the $136.1 million in financing activities consisted primarily of $120 million of gross proceeds from the issuance of the 1997 Notes, $93.6 million in net proceeds from the Company's initial public offering of Common Stock, and $17.2 million of borrowings on the revolving line of credit, offset by the repayment of long-term debt of $82.5 million and the $7.0 million prepayment premium on the redemption of a portion of the 1996 Notes and the payment of $5.2 million of financing costs related to the issuance of the 1997 Notes and the Company's credit facility. In August 1997, the Company entered into its current Credit Facility, which provides $140 million in U.S. dollar borrowings, and CDN $35 million in Canadian dollar borrowings. The credit facility was amended in February 1998 to provide for borrowings of U.S. $150 million and CDN $40 million. In July 1996, the Company issued $200 million of the 1996 Notes and used the net proceeds to retire all of the debt outstanding under the Company's previous credit facility, to purchase certain properties from affiliates of the Company, to redeem stock from a shareholder of the Company, to fund an acquisition and for general corporate purposes. The Credit Facility contains a number of financial and other covenants restricting the Company's ability to incur additional indebtedness and make certain types of expenditures. Covenants in the indentures governing the Notes also restrict borrowings under the Credit Facility. As of December 31, 1997, CDN $31.9 million was outstanding under the Credit Facility and the Company could have borrowed an additional $64.0 million under the Credit Facility in accordance with the debt incurrence limitations. Additionally, to the extent the Company makes acquisitions, it would have additional availability under the Credit Facility based upon the pro forma EBITDA of such acquisitions. The effective interest rate on the Credit Facility, as of December 31, 1997, was approximately 6.38%. Future Capital Needs Management believes that cash flow from operations in conjunction with borrowings under the Credit Facility and possible other sources of financing will be sufficient for the foreseeable future to meet working capital requirements and to make possible future acquisitions and capital expenditures. Depending on the pace and size of future possible acquisitions, the Company may elect to seek additional debt or equity financing. There can be no assurance that the Company will be able to obtain any future financing, if required, or that the terms for any such future financing would be favorable to the Company. 18 Forward-Looking Statements This Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe-harbor created by such sections. Such forward-looking statements concern the Company's operations, economic performance and financial condition, including in particular its acquisitions and their integration into the Company's existing operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions; changes in customer preferences; competition; changes in technology; the integration of acquisitions; changes in business strategy; the indebtedness of the Company; quality of management, business abilities and judgment of the Company's personnel; the availability, terms and deployment of capital; and various other factors referenced in this Report. The forward-looking statements are made as of the date of this Report, and the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ------------------------------------------------------------------- Not Applicable 19 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - --------------------------------------------------- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Pierce Leahy Corp.: We have audited the accompanying consolidated balance sheets of Pierce Leahy Corp. (a Pennsylvania corporation) and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pierce Leahy Corp. and Subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, Pa., February 27, 1998 20 PIERCE LEAHY CORP. CONSOLIDATED BALANCE SHEETS (in thousands)
December 31 ----------------------- ASSETS 1997 1996 ------ ---------- ---------- CURRENT ASSETS: Cash $ 1,782 $ 1,254 Accounts receivable, net of allowance for doubtful accounts of $2,399 and $795 25,201 17,828 Inventories 813 611 Prepaid expenses and other 1,772 688 Deferred income taxes 2,621 -- ---------- ---------- Total current assets 32,189 20,381 ---------- ---------- PROPERTY AND EQUIPMENT 214,981 158,154 Less-Accumulated depreciation and amortization (54,500) (45,020) ---------- ---------- Net property and equipment 160,481 113,134 ---------- ---------- OTHER ASSETS: Intangible assets, net 196,750 97,544 Other 5,293 3,761 ---------- ---------- Total other assets 202,043 101,305 ---------- ---------- $ 394,713 $ 234,820 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) ---------------------------------------------- CURRENT LIABILITIES: Current portion of long-term debt $ 1,084 $ 7,310 Current portion of noncompete obligations 220 466 Accounts payable 8,838 6,757 Accrued expenses 24,754 20,563 Deferred revenues 10,199 9,218 ---------- ---------- Total current liabilities 45,095 44,314 LONG-TERM DEBT 277,767 209,330 NONCOMPETE OBLIGATIONS 126 317 DEFERRED RENT 3,993 2,841 DEFERRED INCOME TAXES 8,409 3,456 COMMITMENTS AND CONTINGENCIES (Note 10) SHAREHOLDERS' EQUITY (DEFICIT) 59,323 (25,438) ---------- ---------- $ 394,713 $ 234,820 ========== ==========
The accompanying notes are an integral part of these financial statements. 21 PIERCE LEAHY CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except share and per share data)
For the Year Ended December 31 -------------------------------------------- 1997 1996 1995 ------------ ------------ ------------ REVENUES: Storage $ 107,879 $ 75,900 $ 55,501 Service and storage material sales 75,638 53,848 39,895 ------------ ------------ ------------ Total revenues 183,517 129,748 95,396 ------------ ------------ ------------ OPERATING EXPENSES: Cost of sales, excluding depreciation and amortization 101,940 73,870 55,616 Selling, general and administrative 30,070 20,007 16,148 Depreciation and amortization 21,528 12,869 8,163 Special compensation charge 1,752 -- -- Foreign currency exchange 702 -- -- Non-recurring charges -- 3,254 -- Consulting payments to related parties -- -- 500 ------------ ------------ ------------ Total operating expenses 155,992 110,000 80,427 ------------ ------------ ------------ Operating income 27,525 19,748 14,969 INTEREST EXPENSE 29,262 17,225 9,622 ------------ ------------ ------------ Income (loss) before income taxes and extraordinary charge (1,737) 2,523 5,347 INCOME TAXES 7,424 -- -- ------------ ------------ ------------ Income (loss) before extraordinary charge (9,161) 2,523 5,347 EXTRAORDINARY CHARGE-loss on early extinguishment of debt, net of $4,014 tax benefit in 1997 and none in 1996 and 1995 6,036 2,015 3,279 ------------ ------------ ------------ NET INCOME (LOSS) (15,197) 508 2,068 ACCRETION OF REDEEMABLE WARRANTS -- 1,561 889 ------------ ------------ ------------ NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $ (15,197) $ (1,053) $ 1,179 ============ ============ ============ BASIC AND DILUTED EARNINGS PER COMMON SHARE: Income (loss) before extraordinary charge $ (0.69) $ 0.09 $ 0.41 Extraordinary charge (0.45) (0.19) (0.30) ------------ ------------ ------------ Basic and diluted income (loss) per Common share $ (1.14) $ (0.10) $ 0.11 ------------ ------------ ------------ Shares used in computing basic income (loss) per Common share 13,385,243 10,546,871 10,591,000 ============ ============ ============ Shares used in computing diluted income (loss) per Common share 13,385,243 10,630,922 10,690,186 ============ ============ ============ PRO FORMA DATA (UNAUDITED) (Note 2): Historical net loss before income taxes and extraordinary charge $ (1,737) Pro forma provision for income taxes 1,452 Extraordinary charge, net of tax 6,036 ------------ Pro forma net loss applicable to Common shareholders $ (9,225) ============ Pro forma basic and diluted net loss per Common share Loss before extraordinary charge $ (0.24) Extraordinary charge (0.45) ------------ Pro forma basic and diluted net loss per Common share $ (0.69) ============ Shares used in computing pro forma basic and diluted net loss per Common share 13,385,243 ============
The accompanying notes are an integral part of these financial statements. 22 PIERCE LEAHY CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (in thousands)
Additional Cumulative Common Paid-in Accumulated Translation Stock Capital Deficit Adjustment Total --------------------------------------------------------- BALANCE, JANUARY 1, 1995 $ -- $ 24 $(19,365) $ -- $(19,341) Accretion of redeemable warrants -- -- (889) -- (889) Net income -- -- 2,068 -- 2,068 Distributions to shareholders -- -- (39) -- (39) --------------------------------------------------------- BALANCE, DECEMBER 31, 1995 -- 24 (18,225) -- (18,201) Accretion of redeemable warrants -- -- (1,561) -- (1,561) Repurchase of Common stock -- -- (1,450) -- (1,450) Deemed distribution due to purchase of real estate and other assets from related parties -- -- (4,132) -- (4,132) Net income -- -- 508 -- 508 Distributions to shareholders -- -- (602) -- (602) --------------------------------------------------------- BALANCE, DECEMBER 31, 1996 -- 24 (25,462) -- (25,438) Net loss (through July 1, 1997) -- -- (6,772) -- (6,772) Transfer of accumulated deficit to additional paid-in capital upon conversion from S Corporation to C Corporation -- (32,234) 32,234 -- -- Stock split and recapitalization 105 (105) -- -- -- Net proceeds from initial public offering of Common stock 57 93,551 -- -- 93,608 Accelerated vesting of stock options -- 1,752 -- -- 1,752 Issuance of Common stock for acquisitions 3 4,904 -- -- 4,907 Net loss (from July 1, 1997) -- -- (8,425) -- (8,425) Change in cumulative translation adjustment -- -- -- (309) (309) --------------------------------------------------------- BALANCE, DECEMBER 31, 1997 $ 165 $ 67,892 $ (8,425) $ (309) $ 59,323 =========================================================
The accompanying notes are an integral part of these financial statements. 23 PIERCE LEAHY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
For the Year Ended December 31 ------------------------------------ 1997 1996 1995 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (15,197) $ 508 $ 2,068 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary charge 6,036 2,015 3,279 Special compensation charge 1,752 -- -- Depreciation and amortization 21,528 12,869 8,163 Gain on sale of property and equipment (44) (32) -- Deferred income tax provision 7,241 (128) -- Amortization of deferred financing costs 1,069 516 533 Change in deferred rent 1,042 302 29 Foreign currency adjustment (435) 31 -- Changes in assets and liabilities, excluding the effects from the purchase of businesses: (Increase) decrease in - Accounts receivable, net (3,870) (2,408) (360) Inventories (154) 150 (347) Prepaid expenses and other (1,137) 747 57 Other assets 746 (486) (536) Increase (decrease) in - Accounts payable 185 1,630 (978) Accrued expenses 1,872 10,732 4,693 Deferred revenue 330 (8) 921 ---------- ---------- ---------- Net cash provided by operating activities 20,964 26,438 17,522 ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments for businesses acquired, net of cash acquired (102,068) (61,176) (28,355) Capital expenditures (35,397) (23,493) (16,288) Purchase of real estate and other assets from related parties -- (11,018) -- Client acquisition costs (10,629) (6,477) (2,245) Deposits on pending acquisitions (2,398) (850) -- Increase in intangible assets (5,625) (5,618) (4,274) Payments on noncompete agreements (496) (333) (153) Proceeds from sale of property and equipment 64 123 -- ---------- ---------- ---------- Net cash used in investing activities (156,549) (108,842) (51,315) ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (payments) on revolving line of credit 17,199 5,237 (900) Proceeds from issuance of long-term debt 120,000 210,229 128,420 Payments on long-term debt and capital lease obligations (82,464) (118,570) (90,958) Prepayment penalties and cancellation of warrants (7,000) (2,625) -- Payment of debt financing costs (5,230) (9,283) (2,366) Proceeds from issuance of Common stock 93,608 -- -- Repurchase of Common stock -- (1,450) -- Distributions to shareholders -- (602) (39) ---------- ---------- ---------- Net cash provided by financing activities 136,113 82,936 34,157 ---------- ---------- ---------- NET INCREASE IN CASH 528 532 364 CASH, BEGINNING OF YEAR 1,254 722 358 ---------- ---------- ---------- CASH, END OF YEAR $ 1,782 $ 1,254 $ 722 ========== ========== ========== SUPPLEMENTAL DISCLOSURE-CASH PAID FOR INTEREST $ 26,288 $ 7,443 $ 8,356 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 24 PIERCE LEAHY CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) 1. BACKGROUND: ---------- Pierce Leahy Corp., (the "Company"), stores and services business records for clients throughout the United States and Canada. The Company also sells storage containers and provides records management consulting services and imaging services. On June 25, 1997, the Company effected a stock split, reclassified its Class A and Class B Common stock to Common stock, authorized 10,000,000 shares of undesignated Preferred stock and increased its authorized Common stock to 80,000,000 shares. All references in the accompanying financial statements to the number of Common shares and per-share amounts have been retroactively restated to reflect the stock split. In July 1997, the Company completed an initial public offering of 5,664,017 shares of Common stock, raising net proceeds of $93,608. The proceeds of the offering were used to redeem a portion of the 11.125% Senior Subordinated Notes and to repay outstanding borrowings under the Company's credit facility (see Note 6). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ------------------------------------------ Principles of Consolidation - --------------------------- The consolidated financial statements include the accounts of Pierce Leahy Corp., its 99%-owned subsidiary, Pierce Leahy Command Company, and its wholly- owned subsidiaries, Monarch Box, Inc. and Advanced Box, Inc. All intercompany accounts and transactions have been eliminated in consolidation. The minority interest in Pierce Leahy Command Company is not material to the consolidated financial statements. Use of Estimates - ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Inventories - ----------- Inventories, which consist of storage containers, are stated at the lower of cost (first-in, first-out) or market. Property and Equipment - ---------------------- Property and equipment are stated at cost. Depreciation is provided using straight-line and accelerated methods over the estimated useful lives of the assets. 25 Goodwill - -------- Goodwill reflects the cost in excess of fair value of the net assets of companies acquired in purchase transactions. Goodwill is amortized using the straight-line method from the date of acquisition over the expected period to be benefited, estimated at 30 years. The Company assesses the recoverability of goodwill, as well as other long-lived assets, based upon expectations of future undiscounted cash flows in accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." At December 31, 1997, no adjustment of the carrying values of long-lived assets was necessary. Client Acquisition Costs - ------------------------ The unreimbursed costs of moving the records of new clients into the Company's facilities and sales commissions related to new client contracts have been capitalized and are included in intangible assets in the accompanying balance sheets (see Note 4). All such costs are being amortized on a straight-line basis over six years, which represents the average initial contract term. The Company assesses whether amortization using a six year average initial contract term varies significantly from using a specific contract basis. Such difference has not been material. Deferred Rent - ------------- Certain of the Company's leases for warehouse space provide for scheduled rent increases over the lease terms. The Company recognizes rent expense on a straight-line basis over the lease terms, with the excess rent charged to expense over the amount paid recorded as deferred rent in the accompanying balance sheets. Health Insurance Reserve - ------------------------ The Company self-insures for benefit claims under a health insurance plan provided to employees. The self-insurance was limited to $100 in claims per insured individual per year for both 1997 and 1996, and a liability for claims incurred but not reported is reflected in the accompanying balance sheets. Specific stop-loss insurance coverage is maintained to cover claims in excess of the coverage per insured individual per year. Income Taxes - ------------ Prior to July 1, 1997, the Company was an S Corporation for federal and state income tax purposes and, accordingly, income and losses were passed through to the shareholders and taxed at the individual level. On July 1, 1997, in connection with the Company's initial public offering, the Company terminated its S Corporation election and currently provides for federal and state income taxes. The Company applies SFAS No. 109, "Accounting for Income Taxes," which requires the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are recognized for the future tax consequences, measured by enacted tax rates, attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forward, for years which taxes are expected to be paid or recovered. Revenue Recognition - ------------------- Storage and service revenues are recognized in the month the respective service is provided. Storage material sales are recognized when shipped to the customer. Deferred revenues represent amounts invoiced for storage services in advance of the rendering of the services. The costs of storage and service revenues 26 are not separately distinguishable, as the revenue producing activities are interdependent and costs are not directly attributable or allocable in a meaningful way to those activities. Foreign Currency - ---------------- The balance sheets of Pierce Leahy Command Company, the Company's Canadian subsidiary, are translated into U.S. dollars using the rate of exchange at period end. The statements of operations for the Canadian subsidiary are translated into U.S. dollars using the average exchange rate for the period. Net unrecognized exchange gains or losses resulting from the translation of the balance sheets are accumulated and included as a separate component of shareholders' equity (deficit). Exchange gains and losses recognized during the period are included in the Company's consolidated statements of operations. New Accounting Pronouncements - ----------------------------- In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income" ("SFAS 130"). This statement requires companies to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. SFAS 130 is effective for financial statements issued for fiscal years beginning after December 15, 1997. Management believes that SFAS 130 will not have a material effect on the Company's financial statements. In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information" ("SFAS 131"). This statement establishes additional standards for segment reporting in the financial statements and is effective for fiscal years beginning after December 15, 1997. Management is currently evaluating the need to make additional disclosures under SFAS No. 131. However, this statement will not have any impact on the Company's reported consolidated financial position or results of operations. Fair Value of Financial Instruments - ----------------------------------- For certain of the Company's financial instruments, including accounts receivable, accounts payable and accrued expenses, management believes that the carrying amounts approximate fair value due to their short maturities. The carrying amount and estimated fair value of the Company's 11.125% Senior Subordinated Notes at December 31, 1997 was $130,000 and $146,575, respectively. The carrying amount and estimated fair value of the Company's 9.125% Senior Subordinated Notes at December 31, 1997 was $120,000 and $125,700, respectively. Both series of Notes are publicly traded, and accordingly, the fair value of the Senior Subordinated Notes was estimated based on the quoted market price offered for such securities. Pro Forma Basic and Diluted Net Loss Per Share - ---------------------------------------------- Prior to July 1, 1997, the Company was an S Corporation for federal and state income tax purposes. The pro forma income tax provision for 1997 reflects taxes which would have been recorded on the historical loss before income taxes, at an effective rate of 39%, had the Company not been an S Corporation during such period. The basic and diluted pro forma net loss per share is computed by dividing pro forma net loss by the weighted average number of shares outstanding during the period. 27 3. PROPERTY AND EQUIPMENT: ----------------------
December 31 ------------------------ Life 1997 1996 ----------- --------- --------- Land - $ 10,501 $ 7,353 Buildings and improvements 10-40 years 79,119 57,296 Warehouse equipment (primarily shelving) 12-20 years 95,005 71,773 Data processing equipment and software 7 years 18,364 14,363 Furniture and fixtures 7 years 5,615 3,823 Transportation equipment 5 years 6,377 3,546 --------- --------- 214,981 158,154 Less-Accumulated depreciation and amortization (54,500) (45,020) --------- --------- Net property and equipment $ 160,481 $ 113,134 ========= =========
Depreciation expense was $9,599, $6,652, and $4,325 for the years ended December 31, 1997, 1996 and 1995, respectively. 4. INTANGIBLE ASSETS: -----------------
December 31 --------------------------------- 1997 1996 -------------- -------------- Goodwill $ 160,119 $ 69,417 Client acquisition costs 26,233 15,157 Noncompete agreements 14,263 11,287 Deferred financing costs 11,174 9,267 Other intangible assets 18,525 13,377 -------------- -------------- 230,314 118,505 Less-Accumulated amortization (33,564) (20,961) -------------- -------------- Net intangible assets $ 196,750 $ 97,544 ============== ============== December 31, 1997 --------------------------------------------------- Accumulated Net Book Life Cost Amortization Value ---- -------------- --------------- -------------- Goodwill 30 years $ 160,119 $ (8,237) $ 151,882 Client acquisition costs 6 years 26,233 (8,246) 17,987 Noncompete agreements 1-7 years 14,263 (8,675) 5,588 Deferred financing costs 10 years 11,174 (1,129) 10,045 Other intangible assets 3-15 years 18,525 (7,277) 11,248 -------------- --------------- -------------- $ 230,314 $ (33,564) $ 196,750 ============== =============== ==============
Amortization of all intangible assets, other than deferred financing costs which are charged to interest expense, was $11,929, $6,217 and $3,838 for the years ended December 31, 1997, 1996 and 1995, respectively. Amortization of deferred financing costs was $1,069, $516 and $533 for the years ended December 1997, 1996 and 1995, respectively. Capitalized client acquisition costs were $10,629, $6,477 and $2,245 for the years ended December 31, 1997, 1996 and 1995, respectively. 28 The Company continually evaluates whether events or circumstances have occurred that indicate the remaining useful lives of the intangible assets should be revised or the remaining balance of such assets may not be recoverable. As of December 31, 1997, the Company believes that no revisions to the remaining useful lives or write-downs of intangible assets are required. 5. ACCRUED EXPENSES: ----------------
December 31 ------------------------------------- 1997 1996 ----------------- ------------------ Accrued salaries and commissions $ 3,329 $ 2,613 Accrued vacation and other absences 3,981 2,866 Accrued interest 12,004 9,840 Other 5,440 5,244 ================= ================== $ 24,754 $ 20,563 ================= ==================
6. LONG-TERM DEBT: --------------
December 31 --------------------------------------- 1997 1996 ----------------- ------------------ Senior Subordinated Notes $ 250,000 $ 200,000 Canadian Revolver 22,303 5,327 Mortgage Notes 5,369 3,679 Sellers Notes 1,051 7,600 Other 128 34 ----------------- ------------------ 278,851 216,640 Less-Current portion (1,084) (7,310) ----------------- ------------------ $ 277,767 $ $ 209,330 ================= ==================
In July 1996, the Company issued $200,000 of Senior Subordinated Notes in a private offering and were later exchanged for registered notes with substantially identical terms (the "1996 Notes"). The 1996 Notes are general unsecured obligations of the Company, subordinated in right of payment to senior indebtedness of the Company and senior in right of payment to any current or future subordinated indebtedness. The 1996 Notes are guaranteed by the U.S. subsidiaries of the Company and secured by a second lien on 65% of the stock of the Canadian subsidiary. The 1996 Notes mature on July 15, 2006, and bear interest at 11.125% per year, payable semiannually in arrears on January 15 and July 15. The proceeds from the sale of the 1996 Notes were used to retire certain existing indebtedness of the Company under its previous credit facilities, to purchase certain properties from related party partnerships (see Note 12), to redeem stock from a shareholder (see Note 8), to fund an acquisition and for general corporate purposes. The Company is in compliance with all financial and operating covenants required under the indenture for the 1996 Notes. 29 The Company had the option to redeem up to an aggregate of $70,000 principal amount of the 1996 Notes at any time prior to July 15, 1999 with the net proceeds of one or more public equity offerings at a redemption price equal to 110% of the aggregate principal amount so redeemed plus accrued interest to the redemption date. Upon completion of the Company's initial public offering of its Common stock in July 1997 (see Note 1), the Company exercised this option to redeem $70,000 principal amount of the 1996 Notes. The resulting $7,000 prepayment penalty along with the write-off of a portion of the unamortized deferred financing costs of $3,050, net of an income tax benefit of $4,014, was recorded as an extraordinary charge in the accompanying consolidated statements of operations. In July 1997, the Company issued $120,000 of Senior Subordinated Notes (the "1997 Notes") in a public offering. The 1997 Notes are general unsecured obligations of the Company, subordinated in right of payment to the senior indebtedness of the Company and senior in right of payment to any current or future subordinated indebtedness. The 1997 Notes are guaranteed by the U.S. subsidiaries of the Company and secured by a third lien on 65% of the stock of the Canadian subsidiary. The 1997 Notes are equal in right of payment with the 1996 Notes. The 1997 Notes mature on July 7, 2007, and bear interest at 9.125% per year, payable semiannually in arrears on January 15 and July 15, commencing January 15, 1998. The proceeds from the sale of the 1997 Notes were used to repay outstanding borrowings under its previous credit facility and for general purposes. The Company is in compliance with all financial and operating covenants required under the indenture for the 1997 Notes. In August 1997, the Company entered into a new credit facility (the "Credit Facility") providing a revolving line of credit of U.S $140 million in borrowings and CDN $35 million in borrowings for the Company's Canadian subsidiary. The Credit Facility is senior to all subordinated indebtedness of the Company and is secured by substantially all of the assets of the Company, and a first lien on 65% of the stock of the Canadian subsidiary. Borrowings under the facility bear interest at prime plus an applicable margin, or at LIBOR plus an applicable margin, at the option of the Company. The weighted average interest rate on outstanding borrowings on the Canadian portion of the revolver at December 31, 1997 was 6.38%. In addition to interest and other customary fees, the Company is obligated to remit a fee of 0.375% per year on unused commitments, payable quarterly. The aggregate available commitment under the Credit Facility will be reduced on a quarterly basis beginning September 30, 2001. The Credit Facility matures on June 30, 2004, unless previously terminated. The Company is in compliance with all financial and operating covenants required under the Credit Facility. The Company's available borrowing capacity under the Credit Facility is contingent upon the Company meeting certain financial ratios and other criteria. In February 1998, the Company amended the Credit Facility to provide for borrowings of U.S. $150 million and CDN $40 million. All other terms and conditions remained the same. The highest amount outstanding under the current Canadian revolver during the year ended December 31, 1997, was CDN $31,900. The average amount outstanding on the current Canadian portion of the revolver during the year was CDN $17,100, while the weighted average interest rate was 6.12%. There were no borrowings under the current U.S. portion of the revolver in 1997. The highest amounts outstanding under previous U.S. and Canadian revolvers for the years ended December 31, 1997 and 1996 were $117,763 and $6,000, the average amounts outstanding were $69,338 and $3,097, and the weighted average interest rates were 7.85% and 7.91%, respectively. In connection with certain acquisitions completed in 1997 and 1996, notes for $1,652 and $7,600, respectively, were issued to the sellers. The notes bear interest at rates ranging from 5% to 7% per year. The outstanding balance on these notes as of December 31, 1997 and 1996 was $1,051 and $7,600, respectively. The outstanding balance on the notes as of December 31, 1997 matures through 1999. In connection with the purchase of real estate from related parties in 1996 (see Note 12), the Company assumed a mortgage of $1,114. The mortgage bears interest at 10.5% and requires monthly principal and interest payments of $20 through 2002. The Company also assumed mortgage notes in connection with certain acquisitions during 1997 and 1996 of $2,000 and $2,630, respectively. The notes bear interest at 30 rates of approximately 8% and require monthly principal and interest payments ranging from $15 to $22 through 2001. Future scheduled principal payments on the Company's long-term debt at December 31, 1997 are as follows: 1998 $ 1,084 1999 552 2000 323 2001 4,004 2002 5,171 2003 and thereafter 267,717 -------- $ 278,851 ========= Upon entering into prior credit facilities in 1993 and 1994, the Company issued warrants to certain lenders to purchase common stock. Warrants to purchase 229,825 shares at $.01 per share were issued in 1993 and 55,073 shares at $2.68 per share were issued in 1994. Management assigned an initial value of $338 to the 1993 warrants and $87 to the 1994 warrants for financial reporting purposes. The Company called the warrants in February 1996 at an amount which was determined by a formula defined in the credit agreement. The change in value of the redeemable warrants from the initial value has been accreted through a charge to shareholder's equity (deficit) in the accompanying financial statements. The warrants were redeemed for $2,625 in 1996. There were no warrants outstanding during 1997. Debt refinancings occurred in 1997, 1996 and 1995, resulting in the write-off of previously deferred financing costs of $3,050, $2,015 and $2,779, respectively, and prepayment and other charges of $7,000 in 1997 and $500 in 1995. Such write-offs and charges have been recorded as extraordinary charges, net of tax, in the accompanying consolidated statements of operations. 7. INCOME TAXES: - --------------- The components of income taxes for the year ended December 31, 1997 are as follows: Current- Foreign $ 150 ------- Deferred- Federal 8,895 State 1,172 Foreign 1,221 ------- $11,288 ------- $11,438 ======= The provision for income taxes for the year ended December 31, 1997 consists of a current tax provision for foreign taxes due on taxable income of the Company's Canadian subsidiary, and deferred federal, state and foreign income taxes. The total deferred income tax provision includes a one-time tax charge of $6,600 recorded upon the termination of the Company's S corporation status. The statement of operations for the year ended December 31, 1997 includes a pro forma adjustment for the income taxes which would have been recorded if the Company had been a C corporation for the entire period based on tax laws in effect during the respective period. The reconciliation of the federal statutory 31 income tax rate and the pro forma effective income tax rate is as follows for the year ended December 31, 1997: Federal statutory rate (34.0)% State income taxes 1.2 Non-deductible depreciation and amortization 7.9 Foreign 3.2 ------ (21.7)% ====== Deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred taxes are comprised of the following: Current deferred income tax asset $ 2,621 -------- Gross non-current deferred tax assets 10,269 Gross non-current deferred tax liabilities (18,678) -------- Total non-current deferred taxes 8,409 -------- Net deferred tax liability $ 5,788 ======== The tax effect of significant temporary differences representing deferred tax assets and liabilities at December 31, 1997 are as follows: Basis difference of property and equipment $(10,312) Basis difference in intangible assets (5,076) Net operating loss carry forward 5,112 Deferred rent 1,526 Expenses not currently deductible for tax purposes 2,962 -------- Net deferred tax liability $ 5,788 ======== The Company had federal and state net operating loss carry forwards available for income tax and financial reporting purposes of approximately $12,631 and $11,924, respectively, at December 31, 1997. The net operating loss carry forwards begin to expire in 2013. The Tax Reform Act of 1986 provides for a tax at the corporate level on gains realized on asset sales for a specified period following the election of Subchapter S status. Deferred taxes of $3,456 at December 31, 1996 were provided for taxes which may have been triggered if the Company disposed of certain acquired in connection with a certain purchase transaction. 8. CAPITAL STOCK: - ---- -------------- At December 31, 1997 and 1996, the Company's capital stock was comprised of the following: Preferred Common ----------- ----------- Par value $ .01 $ .01 Shares authorized 10,000,000 80,000,000 Shares issued and outstanding December 31, 1997 - 16,477,728 Shares issued and outstanding December 31, 1996 - 10,485,090 In 1996, the Company redeemed 105,910 shares of Common stock for $1,450 and canceled these shares. 32 Certain shareholders of the Company entered into a voting trust agreement on June 24, 1997. The shares held in trust represent 56.6% of the outstanding Common stock at December 31, 1997. The trustees of the voting trust include the President, Chief Executive Officer and Director of the Company and the Chairman of the Board of Directors. Each of the trustees has shared power to vote the shares held in the voting trust. The beneficial owners of interests in the voting trust have the right to dispose of the shares to which they have beneficial interests. 9. STOCK OPTIONS: ------------- In September 1994, the Company established a non-qualified stock option plan which provides for the granting of options to key employees to purchase an aggregate of 1,208,433 shares of Common stock. The shares available for grant were increased by 284,898 in December 1996. Options to purchase 153,570 shares at $5.09 per share were granted on January 1, 1997, options to purchase 360,092 shares at $5.86 per share were granted on January 1, 1996 and options to purchase 600,512 shares at $5.10 per share were granted on January 1, 1995. Option grants have an exercise price equal to the fair market value of the common stock on the date of grant. Before the Company consummated its initial public offering of Common stock in July 1997 (see Note 1), the fair market value of the options was determined based upon a formula, as defined in the option plan. The options granted vest in five equal annual installments beginning on the first anniversary of the date of grant, except as discussed below. Upon the consummation of the Company's initial public offering of Common stock in July 1997, options granted during 1997 became fully vested and exercisable as provided for under the plan. The Company recorded a non-recurring, non-cash compensation charge of approximately $1,752 relating to those options, representing the difference between the exercise price and the deemed value for accounting purposes. In April 1997, the Company adopted its 1997 Stock Option Plan (the "1997 Plan") which provides for the granting of stock options to purchase up to 1,500,000 shares of Common stock to employees, officers, directors, consultants and advisors of the Company. The 1997 Plan will be administered by the Compensation Committee of the Board of Directors (the "Committee"). Grants may consist of incentive stock options or nonqualified stock options. The option price of any incentive stock option granted will not be less than the fair value of the underlying shares of Common stock on the date of grant. The option price of a non-qualified stock option will be determined by the Committee and may be greater than, equal to or less than the fair market value of the underlying shares of Common stock on the date of grant. The term of each option will be determined by the Committee, provided that the exercise period may not exceed 10 years from the date of grant. The options granted may be subject to vesting and other conditions. In the event of a change in control (as defined in the 1997 Plan), all outstanding options will become fully exercisable. At December 31, 1997, no options were granted under the 1997 Plan. The Company accounts for its option plans under APB Opinion No. 25, "Accounting for Stock Issued to Employees," under which no compensation cost has been recognized. In 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes a fair value based method of accounting for stock-based compensation plans. This statement also applies to transactions in which an entity issues its equity instruments to acquire goods or services from non-employees. SFAS No. 123 requires that an employer's financial statements include certain disclosures about stock-based employee compensation arrangements regardless of the method used to account for the plan. At December 31, 1997, the total options outstanding are 1,114,174 with exercise prices between $5.09 and $5.86 and a weighted average exercise price of $5.34. The options outstanding at December 31, 1997 contain no expiration dates. At December 31, 1997, options to purchase 465,793 shares of Common stock are fully vested and exercisable. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for the grants in 1997, 1996 and 1995: 33 1997 1996 1995 --------------------------------------- Risk free interest rates 6.4% 5.6% 8.0% Expected lives of options 7 years 7 years 7 years Expected dividend yields N/A N/A N/A Expected volatility 20% 15% 15% The approximate fair value of each option granted in 1997, 1996 and 1995 is $2.08, $2.06 and $2.24, respectively, as determined under the provisions of SFAS No. 123. The following pro forma results would have been reported had compensation cost been recorded for the fair value of the options granted:
1997 1996 1995 --------- -------- ------ Net income (loss) applicable to Common shareholders, as reported $(15,197) $(1,053) $1,179 Net income (loss) applicable to Common shareholders, pro forma $ (9,681) $(1,311) $1,012 for compensation cost Net loss per share applicable to Common shareholders, pro forma for compensation cost and income taxes (Note 1) $ (0.72) - -
The SFAS No. 123 method of accounting is applied only to options granted on or after January 1, 1995. The resulting pro forma compensation cost may not be representative of the amount to be expected in future years due to the vesting schedule of the options. 10. COMMITMENTS AND CONTINGENCIES: - ---- ----------------------------- Operating Leases - ---------------- At December 31, 1997, the Company was obligated under non-cancelable operating leases, including the related-party leases discussed below, for warehouse space, office equipment and transportation equipment. These leases expire at various times through 2015 and require minimum rentals, subject to escalation, as follows: 1998 $ 30,963 1999 28,180 2000 25,838 2001 23,818 2002 21.346 2003 and thereafter 76,583 ------- $206,728 ------- Rent expense for all leases was approximately $21,657, $17,008, and $14,098 for the years ended December 31, 1997, 1996 and 1995, respectively. Some of the leases for warehouse space provide for purchase options on the facilities at certain dates. The Company leases office and warehouse space at prices which, in the opinion of management, approximate market rates from entities which are owned by certain shareholders, officers and employees of the Company. Rent expense on these leases was approximately $845, $9,019, and $8,201 for the years ended December 31, 1997, 1996 and 1995, respectively. A significant portion of the related party rent expense was reduced through the purchase of certain real estate and the buy-out of certain lease interests in July 1996 (see Note 12). 34 Other Matters - ------------- The Company entered into consulting agreements with several of the former owners of acquired businesses (see Note 14). These agreements require minimum payments of $74 in 1998. The Company is party to various claims arising in the ordinary course of business. Although the ultimate outcome of these matters is presently not determinable, management, after consultation with legal counsel, does not believe that the resolution of these matters will have a material adverse effect on the Company's consolidated financial position or results of operations. In June 1997 the Company entered into a tax indemnification agreement with the then current shareholders which provides for: (i) the distribution to such shareholders of cash equal to the product of the Company's taxable income for the period from January 1, 1997 until July 1, 1997 and the sum of the highest effective federal and state income tax rate applicable to any current shareholder, less any prior distributions to such shareholders to pay taxes for such period, and (ii) an indemnification of such shareholders for any losses or liabilities with respect to any additional taxes (including interest, penalties and legal fees) resulting from the Company's operations during the period in which it was a Subchapter S Corporation. 11. EARNINGS PER SHARE: ------------------ In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share," ("SFAS No. 128"). SFAS No. 128 requires dual presentation of basic and diluted earnings per share. According to SFAS No. 128, basic earnings per share, which replaces primary earnings per share, is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings per share, which replaces fully diluted earnings per share, reflects the potential dilution from the exercise or conversion of securities into Common stock, such as stock options and warrants. The Company was required to and did adopt SFAS No. 128 during the period ended December 31, 1997. In 1997 there were no dilutive effects of stock options or warrants as the Company had a loss before extraordinary item. In 1996, the weighted average of shares outstanding was 10,546,871. The dilutive effects of the weighted average number of stock options and warrants outstanding was 84,059 shares. In 1995, the weighted average number of shares outstanding was 10,591,090. The dilutive effects of the weighted average number of stock options and warrants outstanding was 299,186 shares. 12. RELATED PARTY TRANSACTIONS: -------------------------- In August 1996, the Company purchased certain real estate previously leased and other assets from two partnerships, whose partners were shareholders of the Company. The payment for the purchased real estate and other assets was $11,018 plus the assumption of a $1,114 mortgage. Since the transaction was with related parties, the real estate was recorded at its depreciated cost. As a result, the Company charged the elimination of the deferred rent liability on the leases and the difference between the purchase price and the depreciated cost, which together totaled $4,132, to shareholders' equity (deficit) as a deemed distribution. In addition, the Company bought out certain lease commitments from a related party partnership for $2,764. This lease buy-out was recorded as a non-recurring charge in the 1996 consolidated statement of operations. The Company had an agreement with a shareholder of the Company that required payments of $60 per year for five years upon the death of the shareholder. The present value of this benefit was recorded as a liability by the Company. In July 1996, the Company decided to make monthly pension payments to the shareholder and terminated the previous agreement. The pension payments are $8 per month until the death of the shareholder or his spouse. The $490 difference between the present value of this benefit and the 35 liability previously reported was recorded as a non-recurring charge in the 1996 consolidated statement of operations. The Company paid financial advisory fees to an investment banking firm of which a director of the Company was a managing director. The fees were approximately $62, $800 and $700 in 1997, 1996 and 1995, respectively. In addition, in 1997 the investment banking firm received $1,800 from the underwriters on the 1997 Notes and initial public offering. The Company paid real estate advisory fees to a firm of which a director of the Company is the owner. The fees were approximately $88 in 1997. There were no fees paid to the firm in 1996 and 1995. In December 1993, the Company borrowed $80 from a shareholder which bore interest at 7%. The note was repaid in 1996. As of December 31, 1997, an officer had borrowed $210 from the Company. Interest accrues on the loan at 8.875% a year. 13. EMPLOYEE BENEFIT PLANS: - ---- ---------------------- The Company maintains a discretionary profit sharing and a 401(k) plan for substantially all full-time employees over the age of 20 1/2 and with more than 1,000 hours of service. Participants in the 401(k) plan may elect to defer a specified percentage of their compensation on a pretax basis. The Company is required to make matching contributions equal to 25% of the employee's contribution up to a maximum of 2% of the employee's annual compensation. Participants become vested in the Company's matching contribution over three to seven years. The expense relating to these plans was $892, $1,122, and $591 for the years ended December 31, 1997, 1996 and 1995, respectively. 14. ACQUISITIONS: - ---- ------------ In 1996, the Company completed 12 acquisitions for an aggregate cash purchase price of $62,165 (of which $14,000 was for one transaction in May 1996 and $13,500 was for another transaction in October 1996; all others were individually less than $8,000). In 1997, the Company completed 17 acquisitions, of which 15 were recorded under the purchase method of accounting while the other two acquisitions were accounted for as pooling of interests, the 15 acquisitions had an aggregate purchase price of $109,098, consisting of $102,086 in net cash, 163,266 shares of Common stock with a deemed value of $4,500, and $1,652 in Seller notes. For purposes of computing the purchase price for accounting purposes, the value of the shares issued is determined using a discount of 10% from the market value at the day of issuance due to certain restrictions on the sale and transferability of shares issued. The most significant of these acquisitions was for one transaction of $9,084 in January 1997 and another for $62,000 in April 1997; all others were individually less than $8,000. In addition to these cash payments, acquisitions in 1997 and 1996 provided for noncompete obligations of $60 and $400, respectively, payable over one year. The noncompete liability at December 31, 1997 and 1996 was $347 and $783, respectively. The results of operations for each of these acquisitions have been included in the consolidated results of the Company from the respective acquisition dates. The excess of the fair value of the assets and liabilities acquired has been allocated to goodwill ($91,047 and $43,062 in 1997 and 1996, respectively) and is being amortized over the estimated benefit period of 30 years. In connection with certain of the acquisitions, the Company entered into consulting agreements with several of the former owners of the acquired businesses which require aggregate commitments of $74 at December 31, 1997 (see Note 10). During 1997, the Company also completed two mergers with records management businesses by exchanging 165,355 shares of Common stock for the Common stock of these entities. These mergers constituted tax free reorganizations and have been accounted for as pooling of interests under Accounting Principles Board Opinion No. 16. Prior periods have not been restated for the acquisitions due to the immateriality of the transactions, and the book value of net assets acquired of $407 has been recorded as additional paid-in 36 capital. The results of operations for each acquisition have been included in the consolidated results of the Company from their respective acquisition dates. Subsequent to December 31, 1997, the Company completed five acquisitions of record management businesses for an aggregate cash purchase price of approximately $41,700. Certain purchase agreements contain purchase price adjustments and earn-out provisions contingent upon future performance and other criteria that could affect the net cash paid for the entity. The acquisitions were accounted for under the purchase method of accounting. The $36,700 excess purchase price over the underlying fair value of the assets and liabilities acquired has been allocated to goodwill. A summary of the net cash paid for the purchase price of the completed acquisitions is as follows: 1997 1996 ----------------- ----------------- Fair value of assets acquired $ 164,960 $ 72,210 Liabilities assumed (12,649) (1,432) Seller notes issued (1,652) (7,600) Fair value of Common stock issued (4,907) - Cash acquired (1,974) (1,013) ----------------- ----------------- Net cash paid $ 143,778 $ 62,165 ================= ================= The following unaudited pro forma information shows the results of the Company's operations for the years ended December 31, 1997 and 1996 as though each of the completed acquisitions had occurred as of January 1, 1996: 1997 1996 ----------------- ----------------- Total revenues $ 212,191 $ 195,480 Net loss $ (14,171) $ (14,293) Basic and diluted net loss per common share $ (1.06) $ (1.32) The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the acquisitions taken place as of January 1, 1996, or the results that may occur in the future. Furthermore, the pro forma results do not give effect to all cost savings or incremental costs which may occur as a result of the integration and consolidation of the acquired companies. In February 1998, the Company signed a definitive agreement to purchase a regional records management company for CDN $90.0 million, which it intends to finance either through borrowings under the Credit Facility or through the issuance of additional notes. The acquisition is subject to due diligence and other customary conditions. 37 15. SUBSIDIARY INFORMATION (UNAUDITED): - ---- ---------------------------------- The Company stores and services business records for clients throughout the United States and Canada. The following information is a summary of the operating results and financial position for the Company's Canadian subsidiary: For the Year Ended December 31 ------------------------------ 1997 1996 1995 ---- ---- ---- Revenues $17,180 $15,699 $ 2,316 Gross margin (excluding depreciation and amortization 8,056 7,417 988 Operating income 2,287 2,762 336 Net income (loss) 246 1,076 (15) At December 31 ------------------------------ 1997 1996 1995 ---- ---- ---- Current assets $ 3,587 $ 3,226 $ 3,433 Total assets 33,056 30,879 25,498 Current liabilities 2,018 1,707 2,711 Long-term liabilities 25,652 8,354 21,132 The summarized financial information of the Canadian subsidiary has been prepared from the books and records maintained by this subsidiary. The summarized financial information may not necessarily be indicative of the results of operations or financial position had the Canadian subsidiary operated as an independent entity. Certain intercompany sales and charges are included in the subsidiary records and are eliminated in consolidation. The Company has borrowed on its Credit Facility and loaned certain amount to the Canadian subsidiary, which have been recorded as intercompany loans. The Company's domestic, wholly-owned subsidiaries are Monarch Box, Inc. and Advanced Box, Inc. These subsidiaries were established in 1997 to hold investments and certain intangible assets of the Company. They do not have any other operations. There are no restrictions on the ability of any of the subsidiaries to transfer funds to the Company in the form of loans, advances or dividends, except as provided by applicable law. 38 16. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED): - ---- ------------------------------------------------- Summarized quarterly financial data for 1997 and 1996 is as follows:
1997 Quarter ------------------------------------------- First Second Third Fourth -------- -------- -------- -------- (in thousands, except per share amounts) Total revenues $ 40,232 $ 46,208 $ 47,249 $ 49,828 Cost of sales, excluding depreciation and amortization $ 22,298 $ 25,611 $ 25,943 $ 28,088 Operating income $ 6,776 $ 8,040 $ 6,780 $ 5,929 Income (loss) before extraordinary charge $ 64 $ (103) $ (7,870) $ (1,252) Net income (loss) $ 64 $ (103) $(13,906) $ (1,252) Basic and diluted income (loss) per Common share: Income (loss) before extraordinary charge $ 0.01 $ (0.01) $ (0.49) $ (0.08) Extraordinary charge -- -- (0.37) -- -------- -------- -------- -------- Net income (loss) $ 0.01 $ (0.01) $ (0.86) $ (0.08) ======== ======== ======== ======== 1996 Quarter ------------------------------------------- First Second Third Fourth -------- -------- -------- -------- (in thousands, except per share amounts) Total revenues $ 29,699 $ 31,623 $ 32,508 $ 35,918 Cost of sales, excluding depreciation and amortization $ 17,406 $ 17,783 $ 17,706 $ 20,975 Operating income $ 4,740 $ 5,870 $ 3,288 $ 5,850 Income (loss) before extraordinary charge $ 1,894 $ 2,763 $ (2,078) $ (56) Net income (loss) $ 1,894 $ 2,763 $ (4,093) $ (56) Basic and diluted income (loss) per Common share: Loss before extraordinary charge $ 0.18 $ 0.11 $ (0.20) $ (0.01)
In the third quarter of 1997, the Company incurred a non-recurring non-cash compensation charge of $1,752 relating to the accelerated vesting of options as a result of its initial public offering of Common stock (see Note 9). In the third quarter of 1996, the Company incurred non-recurring charges of $3,254 relating to the buy-out of certain lease commitments from a related party partnership and the issuance of a pension to a shareholder (see Note 12). 39 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------ --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- Not Applicable. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- -------------------------------------------------- ITEM 11. EXECUTIVE COMPENSATION - -------- ---------------------- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------- -------------------------------------------------------------- ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ---------------------------------------------- The information called for by the above items, except the information set forth in Item 4A herein, is incorporated by reference to the Company's definitive proxy statement for its 1998 Annual Meeting of Shareholders, which definitive proxy statement is to be filed with the Securities and Exchange Commission no later than 120 days after the end of the Company's fiscal year. 40 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - -------- (a) The following documents are filed as part of this Report. 1. Financial Statements Page Report of Independent Public Accountants.................. 20 Consolidated Balance Sheets............................... 21 Consolidated Statement of Operations...................... 22 Consolidated Statement of Shareholders' Equity (Deficit).. 23 Consolidated Statements of Cash Flows..................... 24 Notes to Consolidated Financial Statements................ 25 2. Financial Statement Schedule: ----------------------------- Report of Independent Public Accountants Schedule II Valuation and Qualifying Accounts 3. Exhibits: --------- Exhibit Number Description of Exhibits. - ------ ----------------------- 3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1, File No. 333-23121) 3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1, File No. 333-23121) 9** Amended and Restated Voting Trust Agreement by and among certain shareholders of the Company 9** Amended and Restated Voting Trust Agreement by and amoung certain shareholders of the Company 10.1* Pierce Leahy Corp. Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-4, File No. 333-9963) 10.2* Pierce Leahy Corp. 1997 Stock Option Plan (incorporated by reference to Exhibit to the Company's Registration Statement on Form S-1, File No. 333-23121) 10.3** Credit Agreement dated as of August 12, 1997, as amended, among the Company, Pierce Leahy Command Company, the several lenders from time to time parties thereto, Canadian Imperial Bank of Commerce, as Canadian Administrative Agent, and Canadian Imperial Bank of Commerce, New York Agency, as U.S. administrative agent, together with certain collateral documents attached thereto, 41 Exhibit Number Description of Exhibits. - ------ ----------------------- including the form of US$ Note, the form of Canadian$ Note, and the form of the U.S. Global Guarantee and Security Agreement made by the Company, certain of its affiliates and subsidiaries and its shareholders in favor of the U.S. Administrative Agent 10.4 Indenture, dated as of July 15, 1996, among the Company as issuer, and United States Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.4 to the Company's Registration Statement on Form S-4, File No. 333-9963) 10.5** Indenture, dated as of July 7, 1997, among the Company, as issuer, and The Bank of New York, as trustee 10.6 Stock Purchase Agreement dated April 17, 1996 among the Company and Security Archives, Inc. and Patrick G. Clayton, Carol A. Clayton and Byron Wood Clayton (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-4, File No. 333-9963) 10.7 Stock Purchase Agreement dated as of February 27, 1997 between the Company, Records Management Services, Inc. and certain shareholders of Records Management Services, Inc. (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996) 10.8 Tax Indemnification Agreement among the Company and certain of its shareholders (incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-1, File No. 333-23121) 12** Computation of Ratio of Earnings to Fixed Charges 21** Subsidiaries of the Registrant 23** Consent of Arthur Andersen LLP 27** Financial Data Schedule. ____________________ * Compensatory plan required to be filed pursuant to Item 601(b)(10)(iii) of Regulation S-K. ** Filed herewith. (b) Reports on Form 8-K. None 42 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto, duly authorized. PIERCE LEAHY CORP. Dated: March 23, 1998 By /s/ J. Peter Pierce ------------------- J. Peter Pierce President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ J. Peter Pierce President, Chief Executive Officer March 23, 1998 - ------------------- Director (Principal Executive Officer) J. Peter Pierce /s/ Douglas B. Huntley Vice President, Chief Financial March 23, 1998 - ---------------------- Officer, Director (Principal Financial Douglas B. Huntley and Accounting Officer) /s/ Leo W. Pierce, Sr. Chairman of the Board, Director March 23, 1998 - ---------------------- Leo W. Pierce, Sr. /s/ Alan B. Campell Director March 23, 1998 - ------------------- Alan B. Campell /s/ Delbert S. Conner Director March 23, 1998 - --------------------- Delbert S. Conner /s/ Thomas A. Decker Director March 23, 1998 - -------------------- Thomas A. Decker /s/ J. Anthony Hayden Director March 23, 1998 - --------------------- J. Anthony Hayden 43 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Pierce Leahy Corp.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements for Pierce Leahy Corp. and have issued our report thereon dated February 27, 1998. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule of valuation and qualifying accounts is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Philadelphia, Pa. February 27, 1998 44 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (in thousands)
Charges to Balance, Charges Other Accounts - Balance, Beginning of to Purchase Deductions End of Period Expenses Accounting From Reserve Period ------ -------- ---------- ------------ ------ December 31, 1997 Reserve for doubtful accounts...... $ 795 $ 947 $ 953 $ 296 $ 2,399 December 31, 1996 Reserve for doubtful accounts...... $ 487 $ 467 $ -- $ 159 $ 795 December 31, 1995 Reserve for doubtful accounts...... $ 554 $ 418 $ -- $ 485 $ 487
45 INDEX TO EXHIBITS Exhibit Number Description of Exhibits. ------ ----------------------- 3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1, File No. 333-23121) 3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1, File No. 333-23121) 9** Amended and Restated Voting Trust Agreement by and amoung certain shareholders of the Company 10.1* Pierce Leahy Corp. Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-4, File No. 333-9963) 10.2* Pierce Leahy Corp. 1997 Stock Option Plan (incorporated by reference to Exhibit to the Company's Registration Statement on Form S-1, File No. 333-23121) 10.3** Credit Agreement dated as of August 12, 1997, as amended, among the Company, Pierce Leahy Command Company, the several lenders from time to time parties thereto, Canadian Imperial Bank of Commerce, as Canadian Administrative Agent, and Canadian Imperial Bank of Commerce, New York Agency, as U.S. administrative agent, together with certain collateral documents attached thereto, including the form of US$ Note, the form of Canadian$ Note, and the form of the U.S. Global Guarantee and Security Agreement made by the Company, certain of its affiliates and subsidiaries and its shareholders in favor of the U.S. Administrative Agent 10.4 Indenture, dated as of July 15, 1996, among the Company as issuer, and United States Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.4 to the Company's Registration Statement on Form S-4, File No. 333-9963) 10.5** Indenture, dated as of July 7, 1997, among the Company, as issuer, and The Bank of New York, as trustee 10.6 Stock Purchase Agreement dated April 17, 1996 among the Company and Security Archives, Inc. and Patrick G. Clayton, Carol A. Clayton and Byron Wood Clayton (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-4, File No. 333-9963) 10.7 Stock Purchase Agreement dated as of February 27, 1997 between the Company, Records Management Services, Inc. and certain shareholders of Records Management Services, Inc. (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996) 10.8 Tax Indemnification Agreement among the Company and certain of its 46 Exhibit Number Description of Exhibits - ------- ------------------------- shareholders (incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-1, File No. 333-23121) 12** Computation of Ratio of Earnings to Fixed Charges 21** Subsidiaries of the Registrant . 23** Consent of Arthur Andersen LLP 27** Financial Data Schedule. ____________________ * Compensatory plan required to be filed pursuant to Item 601(b)(10)(iii) of Regulation S-K. ** Filed herewith. 47 EX-9 2 VOTING TRUST AGREEMENT Exhibit 9 VOTING TRUST AGREEMENT ---------------------- AMENDED AND RESTATED VOTING TRUST AGREEMENT made this 28th day of February, 1998, among PIERCE LEAHY CORP., a Pennsylvania corporation (hereinafter called the "Company"), and the shareholders of the Company set forth on the signature pages hereto and any other present or future shareholders of the Company who hereafter become parties hereto (collectively, the "Shareholders"), and LEO W. PIERCE, SR. and J. PETER PIERCE, in such persons' capacities as voting trustee hereunder (the "Trustees"). W I T N E S S E T H: - - - - - - - - - - A. The parties hereto entered into a Voting Trust Agreement dated June 24, 1997[, as amended and restated] (the "Original Agreement") pursuant to which they established the voting trust hereafter described. B. The Shareholders, the Trustees and the Company believe it is desirable to amend and restate the Original Agreement as hereinafter set forth; and C. The Trustees have consented to act under this Agreement for the purposes herein provided. NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants and agreements contained in this Agreement, the parties hereto, intending to be legally bound, agree as follows: 1. Voting Trust Agreement. Copies of this Agreement, and of every ---------------------- amendment or supplement to this Agreement shall be filed in the principal office of the Company and shall be open to the inspection of any Shareholder during business hours. All voting trust certificates or proxies issued as hereinafter provided shall be issued, received, and held subject to all the terms of this Agreement. Every person, firm, corporation or other entity entitled to receive voting trust certificates representing shares (the "shares") of the Company's Common Stock, $.01 par value (the "Common Stock"), and their transferees and assigns who are also parties to this Agreement, upon accepting the voting trust certificates issued hereunder, shall be bound by the provisions of this Agreement. 2. Transfer of Shares to Trustees. ------------------------------ (a) Each Shareholder, pursuant to the Original Agreement, has previously assigned and transferred to the Trustees such shares as is set forth after such Shareholder's name on Exhibit A attached hereto for the purpose of vesting in the Trustees, as Trustees of an active trust, the right to vote and act and to exercise other rights pertaining to such shares, as and to the extent, and upon the terms and conditions and for the period set forth in this Agreement. The Trustees shall hold the same subject to the terms of this Agreement, and shall issue and deliver to the Shareholders voting trust certificates for the shares as hereinafter provided. (b) All certificates for shares delivered to the Trustees pursuant to this Agreement shall be issued to and held by the Trustees in the name of "Leo W. Pierce, Sr. and J. Peter Pierce as Voting Trustees." 3. Voting Trust Certificates. ------------------------- (a) The Trustees shall maintain a voting trust certificate register in which each holder of a voting trust certificate issued under this Agreement, and the number of shares represented by each voting trust certificate will be identified. The voting trust certificates shall be in substantially the following form: "No. VT_________________ _________________ Shares PIERCE LEAHY CORP. A Pennsylvania Corporation Voting Trust Certificate for Common Stock This certifies that __________________ or registered assigns is entitled to all the benefits arising from the transfer to the Trustees under the Voting Trust Agreement hereinafter mentioned, of ____ shares of common stock of Pierce Leahy Corp., a Pennsylvania corporation (hereinafter called the "Company"), as provided in such Voting Trust Agreement and subject to the terms thereof. The registered holder hereof, or assigns, is entitled to receive payment, in the manner set forth in the Voting Trust Agreement, equal to the amount of dividends, if any, received by the Trustees upon the number of shares of capital stock of the Company in respect of which this certificate is issued; provided, however, that any dividends received by the Trustees in common or - -------- ------- other stock of the Company having general voting powers shall be held by the Trustees under the Voting Trust Agreement and shall be represented by voting trust certificates issued in form similar hereto. Until the Trustees shall have delivered the shares of stock held under such Voting Trust Agreement to the holders of the trust certificates, or to the Company, as specified in such Voting Trust Agreement, the Trustees shall possess and shall be entitled to exercise all rights and powers of an absolute owner of such shares of stock, including the right to vote thereon for every purpose, and to execute consents in respect thereof for every purpose, it being expressly stipulated that no voting right passes to the owner hereof, or such owner's assigns, under this certificate or any agreement, expressed or implied. This certificate is issued, received, and held under, and the rights of the owner hereof are subject to, the terms of a Voting Trust Agreement, as amended and restated as of ________ __, 1998, among the Company and Leo W. Pierce, Sr. and J. Peter Pierce in trust (such agreement, as it may be amended from time to time, the "Voting Trust Agreement"), and certain shareholders of the Company (copies of which Voting Trust Agreement, and of every agreement amending or supplementing the same, are on file in the principal office of the Company, and shall be open to the inspection of any shareholder of the Company, during business hours); to all the provisions of which Voting Trust Agreement the holder of this certificate, and such holder's heirs, personal representatives, successors and assigns, by acceptance hereof, assents and is bound as if such Voting Trust Agreement had been signed by such person. -2- Subject to Sections 8, 9 and 12 of the Voting Trust Agreement, in the event of the dissolution or total or partial liquidation of the Company, the moneys, securities or property received by the Trustees in respect of the shares of stock deposited under such Voting Trust Agreement shall be distributed among the registered holders of trust certificates in proportion to their interests as shown on the books of the Trustees. Except as otherwise provided in Sections 9 and 12 of the Voting Trust Agreement, in the event that any dividend or distribution other than in cash or shares of common or other stock of the Company having general voting powers is received by the Trustees, the Trustees shall distribute the same to the registered holders of voting trust certificates, on the date of such distribution, or to the registered certificate holders at the close of business on the date fixed by the Trustees for taking a record to determine the certificate holders entitled to such distribution, pursuant to the provisions of Paragraph 6 of the Voting Trust Agreement. Such distribution shall be made to the certificate holders ratably in accordance with the number of shares represented by their respective voting trust certificates. Cash dividends shall be treated as set forth in Section 6 of the Voting Trust Agreement. Share certificates for the number of shares of common stock then represented by this certificate, or the net proceeds in cash or property representing such shares, shall be due and deliverable hereunder upon the termination of such Voting Trust Agreement as provided therein. The Voting Trust Agreement shall continue in full force and effect until June 23, 2007 (subject to extension as hereinafter set forth), unless terminated prior thereto, as provided in the Voting Trust Agreement. The Voting Trust Agreement may be extended as the parties may agree, as provided in the Voting Trust Agreement. This certificate is transferable on the books of the Trustees at the office of the Trustees (or elsewhere as designated by the Trustees) by the holder hereof, either in person or by attorney duly authorized, in accordance with the rules established for that purpose by the Trustees and on surrender of this certificate properly endorsed, subject to compliance with all applicable state and federal securities laws. Title to this certificate when duly endorsed shall, to the extent permitted by law, be transferable with the same effect as in the case of a negotiable instrument. Each holder hereof agrees that delivery of this certificate, duly endorsed by any holder hereof, shall vest title hereto and all rights hereunder in the transferee; provided, however, that the Trustees -------- ------- may treat the registered holder hereof, or when presented duly endorsed in blank the bearer hereof, as the absolute owner hereof, and of all rights and interests represented hereby, for all purposes whatsoever, and the Trustees shall not be bound or affected by any notice to the contrary, or by any notice of any trust, whether express or implied, or constructive, or of any charge or equity respecting the title or ownership of this certificate, or the shares of stock represented hereby; provided, however, that no delivery of stock certificates hereunder, or the proceeds thereof, shall be made without surrender hereof properly endorsed. This certificate shall not be valid for any purpose until duly signed by the Trustees. The word "Trustees" as used in this certificate means the Trustees or, if only one Trustee is remaining, as provided in the Voting Trust Agreement, such Trustee, acting under the Voting Trust Agreement. -3- IN WITNESS WHEREOF, the Trustees have signed this certificate on ______________________, ____. ________________________________ Trustee ________________________________ Trustee (Form of Assignment): For value received ____________________________ hereby assigns the within certificate, and all rights and interests represented thereby, to and appoints _____________________________ attorney to transfer this certificate on the books of the Trustees mentioned therein, with full power of substitution. Dated:____________________________ ______________________________(Seal) In presence of: ____________________________________ ____________________________________ NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION, ENLARGEMENT, OR ANY CHANGE WHATEVER. ALL ENDORSEMENTS, IN THE DISCRETION OF THE TRUSTEES, SHALL BE GUARANTEED BY A BANK OR TRUST COMPANY SATISFACTORY TO THE TRUSTEES." (b) Any voting trust certificates issued under the Original Agreement shall be deemed issued pursuant hereto without the need to be returned to the Trustees for reissuance, and any references therein to the Original Agreement shall be deemed to be references to this Agreement. 4. Transfer of Certificates. ------------------------ (a) The voting trust certificates, if and to the extent transferable under applicable securities law or under any agreement restricting transferability, shall be transferable at the principal office of the Trustees (and at such other office as the Trustees may designate by an instrument in writing signed by the Trustees and sent by mail to the registered holders of voting trust certificates), on the books of the Trustees, by the registered owner thereof, either in person or by attorney thereto duly authorized, upon surrender thereof, according to the rules established for that purpose by the Trustees, subject to the provisions set forth in this Section. If a transfer of voting trust certificates is so permitted, the holder shall notify the Trustees of the details of such transfer, including the name, address and social security number of the transferee and number of shares as to which the beneficial interest is being transferred, and shall surrender to the Trustees the voting trust certificate or certificate representing such shares, properly endorsed for transfer, and the Trustees shall, upon receipt of such notice and voting trust -4- certificate(s), transfer the voting trust certificates on the voting trust certificate registry and issue a new voting trust certificate to the transferee. Until so transferred, the Trustees may treat the record holders of voting trust certificates as the owners of said voting trust certificates for all purposes whatsoever. As a condition to making any transfer or delivery of voting trust certificates, the Trustees may require compliance by the transferee with any applicable federal or state statute and the payment of a sum sufficient to pay for any stamp tax or other governmental charge in connection therewith. No transfer of voting trust certificates shall in any way remove the shares represented by such certificate or certificates from being held by the Trustees under this Agreement and any transferee, by accepting such transfer, does hereby consent to be bound by the terms of this Agreement, and upon becoming a holder of voting trust certificates shall be deemed to be a party hereto as though an original signatory hereto. (b) If a voting trust certificate is lost, stolen, mutilated, or destroyed, the holder thereof shall promptly notify the Trustees and the Trustees, in the Trustees' discretion, may issue to such holder a duplicate of such certificate upon receipt of: (i) evidence of such fact satisfactory to the Trustees; (ii) indemnity satisfactory to the Trustees (whether by bond or otherwise in such form or amount and with such surety as the Trustees may require to indemnify the Trustees against loss or liability that might arise due to the issuance of such new voting trust certificate); (iii) the existing certificate, if mutilated; and (iv) the reasonable fees and expenses of the Trustees in connection with the issuance of a new trust certificate. The Trustees shall not be required to recognize any transfer of a voting trust certificate not made in accordance with the provisions hereof, unless the person claiming such ownership shall have produced indicia of title satisfactory to the Trustees, and shall in addition deposit with the Trustees indemnity satisfactory to the Trustees. 5. Termination Procedure. ---------------------- (a) Any Shareholder may from time to time give the Trustees written notice that such Shareholder desires to withdraw all or part of such Shareholder's shares from the voting trust created hereby in order to donate such shares to a non-profit corporation, foundation or similar entity having a charitable purpose or to sell such shares to someone other than another Shareholder within fifteen (15) days of the delivery of the notice. Voting trust certificates representing shares to be withdrawn shall accompany the notice. Within five (5) days after receipt of such notice and certificates, Trustees shall deliver to the Company stock certificates and instructions to deliver the requisite number of shares to the Shareholder who delivered the notice of withdrawal to the Trustees. In the event the Shareholder does not donate or sell all of the shares withdrawn from the voting trust, (i) the Shareholder shall deliver the stock certificate representing the shares not donated or sold to the Trustees who shall deliver it to the Company for reissue to the Trustees, (ii) the reissued stock certificate shall be held by the Trustees pursuant to this Agreement and (iii) the Trustees shall issue to the Shareholder a voting trust certificate representing such shares. (b) Any Shareholder may from time to time give the Trustees written notice in the form attached as Exhibit B hereto that such Shareholder desires to withdraw all or a part of such Shareholder's shares from the voting trust created hereby in order to pledge such shares to a broker as collateral for a margin account with such broker (any such shares so withdrawn, together with any shares of common or other stock of the Company having general -5- voting power paid as a dividend or issued upon exercise of any subscription rights with respect to such shares, until any of the foregoing are sold as permitted hereunder or reissued to the Trustees, "Margin Shares"). The Shareholder shall send to the Trustees, along with such notice, the voting trust certificates representing the Margin Shares to be withdrawn and a duly executed proxy in the form attached hereto as Exhibit C. Within five (5) days after receipt of such notice, proxy and certificates, the Trustees shall deliver to the Company stock certificates and instructions to deliver the requisite number of shares to the Shareholder who delivered the notice of withdrawal to the Trustees for purposes of placing the Margin Shares in a margin account. If applicable, the stock certificate issued to the Shareholder with respect to such Margin Shares shall contain a standard restrictive legend under the Securities Act of 1933. If the Shareholder otherwise would be entitled to have such legend removed prior to the sale of such Margin Shares and so requests the Company and the Trustees to remove such legend solely for the purpose of registering the Margin Shares in "street name" or the name of the broker in whose margin account the Margin Shares are held, the Company shall honor such request if the Shareholder arranges for the registered holder or broker, as applicable, to provide a duly executed proxy to the Trustees substantially similar in form to Exhibit C attached hereto to vote such Margin Shares while held in the margin account (or makes other arrangements satisfactory to the Trustees with respect to voting such shares at the direction of the Trustees while subject to the margin account). Upon receipt of written notice from the Trustees that such a satisfactory arrangement has been made, the Company will authorize the issuance of a certificate for such Margin Shares in "street name" or in the name of the broker without a restrictive legend. Any Margin Shares sold by or on behalf of the broker shall be sold free and clear of the proxy, which by its terms shall terminate upon such sale. Any Shareholder who has Margin Shares shall give, or cause to be given, to the Trustees a notice when all or a portion of such Margin Shares are sold, as soon as practicable after such sale. In the event the Shareholder ceases using all or part of such Margin Shares as collateral for a margin account, (i) the Shareholder shall deliver or cause to be delivered the stock certificate representing the Margin Shares no longer subject to the margin account to the Trustees who shall deliver such certificate to the Company for reissue to the Trustees, (ii) the reissued stock certificate shall be held by the Trustees pursuant to this Agreement and (iii) the Trustees shall issue to the Shareholder a voting trust certificate representing such shares. (c) Any Shareholder may, once in any twelve-month period, give the Trustees written notice in the form attached as Exhibit D hereto that such Shareholder has a bona fide intent (subject to market and other conditions) to sell up to such number of shares as specified in the notice within twelve months from the date of such notice and therefore desires to withdraw such shares from the voting trust created hereby in order to facilitate such possible sale (any such shares so withdrawn, together with any shares of common or other stock of the Company having general voting power paid as a dividend or issued upon exercise of any subscription rights with respect to such shares, until any of the foregoing are sold as permitted hereunder or reissued to the Trustees, "Designated Shares" and together with Margin Shares, "Proxy Shares"). The Shareholder shall send to the Trustees, along with such notice, the voting trust certificates representing the Designated Shares to be withdrawn and a duly executed proxy in the form attached hereto as Exhibit C. Within five (5) days after receipt of such notice, proxy and certificates, the Trustees shall deliver to the Company stock certificates and instructions to deliver the requisite number of shares to the Shareholder who delivered the notice of withdrawal to the Trustees as set forth above. If applicable, the stock certificate issued to the -6- Shareholder with respect to such Designated Shares shall contain a standard restrictive legend under the Securities Act of 1933. If the Shareholder otherwise would be entitled to have such legend removed prior to the sale of such Designated Shares and so requests the Company and the Trustees to remove such legend solely for the purpose of registering the Designated Shares in "street name," the Company shall honor such request if the Shareholder arranges for the registered holder to provide a duly executed proxy to the Trustees substantially similar in form to Exhibit C attached hereto to vote such Designated Shares while held by the broker (or makes other arrangements satisfactory to the Trustees with respect to voting such shares at the direction of the Trustees while held by the broker). Upon receipt of written notice from the Trustees that such a satisfactory arrangement has been made, the Company will authorize the issuance of a certificate for such Designated Shares in "street name" without a restrictive legend. Any Designated Shares sold by the Shareholder shall be sold free and clear of the proxy, which by its terms shall terminate upon such sale. Any Shareholder who has Designated Shares shall give, or cause to be given, to the Trustees a notice when all or a portion of such Designated Shares are sold, as soon as practicable after such sale. In the event the Shareholder determines not to sell all or part of such Designated Shares, (i) the Shareholder shall deliver or cause to be delivered the stock certificate representing the Designated Shares not to be sold to the Trustees who shall deliver such certificate to the Company for reissue to the Trustees, (ii) the reissued stock certificate shall be held by the Trustees pursuant to this Agreement and (iii) the Trustees shall issue to the Shareholder a voting trust certificate representing such shares. (d) Subject to the provisions of Section 12, upon the termination of this Agreement at any time, as hereinafter provided, the Trustees, at such time as the Trustees may choose during the period commencing 20 days before and ending 20 days after such termination, shall mail written notice of such termination to the registered owners of the voting trust certificates and any Shareholder who beneficially owns any Proxy Shares (each, a "Proxy Shareholder"), at the addresses appearing on the transfer books of the Trustees. After the date specified in any such notice (which date shall be fixed by the Trustees), (i) the voting trust certificates shall cease to have any effect, and the holders of such voting trust certificates shall have no further rights under this Agreement other than to receive certificates for shares of the Company or other property distributable under the terms hereof and upon the surrender of such voting trust certificates, and (ii) any proxy given to the Trustees relating to any Proxy Shares shall be deemed terminated. (e) Within 30 days after the termination of this Agreement, the Trustees shall deliver, to the registered holders of all voting trust certificates, certificates for the number of shares of the capital stock of the Company represented thereby, upon the surrender of such voting trust certificates properly endorsed, such delivery to be made in each case at the office of the Trustees. (f) At any time subsequent to 30 days after the termination of this Agreement, the Trustees may deposit with the Company share certificates representing the number of shares of capital stock represented by the voting trust certificates then outstanding, with authority in writing to the Company to deliver such share certificates in exchange for voting trust certificates representing a like number of shares of the capital stock of the Company and for the Company to call upon and require all holders of voting trust certificates to so surrender them; and upon such deposit all further liability of the Trustees for the delivery of such share -7- certificates and the delivery or payment of dividends upon surrender of the voting trust certificates shall cease, and the Trustees shall not be required to take any further action hereunder. 6. Dividends. --------- (a) Until the termination of this Agreement pursuant to the terms of Section 12, the holder of each voting trust certificate shall be entitled to receive from the Trustees payments equal to the cash dividends, if any, received by the Trustees upon a like number and class of shares of capital stock of the Company as is called for by each such voting trust certificate standing in the name of such holder in the voting trust certificate register. If any dividend in respect of the stock deposited with the Trustees are paid, in whole or in part, in shares of common or other stock of the Company having general voting powers, the Trustees shall likewise hold, subject to the terms of this Agreement, the certificates for shares of stock which are received by the Trustees on account of such dividend, and the holder of each voting trust certificate representing shares of stock on which such stock dividend has been paid shall be entitled to receive a voting trust certificate issued under this Agreement for the number of shares and class of stock received as such dividend with respect to the shares represented by such voting trust certificate. Holders entitled to receive the dividends described above shall be those registered as such on the transfer books of the Trustees at the close of business on the day fixed by the Company for the taking of a record to determine those holders of its shares of stock entitled to receive such dividends, or if the Trustees have fixed a date, as hereinafter in this Section provided, for the purpose of determining the holders of voting trust certificates entitled to receive such payment or distribution, those holders registered as such at the close of business on the date so fixed by the Trustees. (b) Except as otherwise provided in Section 12, if any dividend in respect of the stock deposited with the Trustees are paid other than in cash or in capital stock having general voting powers, then the Trustees shall distribute the same among the holders of voting trust certificates registered as such at the close of business on the day fixed by the Trustees for taking a record to determine the holders of voting trust certificates entitled to receive such distribution. Such distribution shall be made to such holders of voting trust certificates ratably, in accordance with the number of shares represented by their respective voting trust certificates. (c) The transfer books of the Trustees may be closed temporarily by the Trustees for a period not exceeding 20 days preceding the date fixed for the payment or distribution of dividends or the distribution of assets or rights, or at any other time in the discretion of the Trustees. In lieu of providing for the closing of the books against the transfer of voting trust certificates, the Trustees may fix a date not exceeding 20 days preceding any date fixed by the Company for the payment or distribution of dividends, or for the distribution of assets or rights, as a record date for the determination of the holders of voting trust certificates entitled to receive such payment or distribution or to receive such assets or exercise such rights, or for the purpose of determining the holders of voting trust certificates entitled to vote at any meeting of the holders or to determine any other thing, act or rights to be exercised, done or performed by the holders, and the holders of voting trust certificates of record at the close of business on such date shall exclusively be entitled to participate in such payments or distribution -8- or exercise of rights. (d) In lieu of receiving cash dividends upon the capital stock of the Company and paying the same to the holders of voting trust certificates pursuant to the provisions of this Agreement, the Trustees may instruct the Company in writing to pay such dividends to the holders of the voting trust certificates. Upon receipt of such written instructions, the Company shall pay such dividends directly to the holders of the voting trust certificates. Upon such instructions being given by the Trustees to the Company, and until revoked by the Trustees, all liability of the Trustees with respect to such dividends shall cease. The Trustees may at any time revoke such instructions and by written notice to the Company direct it to make dividend payments to the Trustees. 7. Subscription Rights. In case any stock or other securities of ------------------- the Company are offered for subscription to the holders of capital stock of the Company deposited hereunder, the Trustees, promptly upon receipt of notice of such offer, shall mail a copy thereof to each of the holders of the voting trust certificates. Upon receipt by the Trustees, at least five days prior to the last day fixed by the Company for subscription and payment, of a request from any such registered holder of voting trust certificates to subscribe in such holder's behalf, accompanied with the sum of money required to pay for such stock or securities (not in excess of the amount subject to subscription in respect to the shares represented by the voting trust certificate held by such certificate holder), the Trustees shall make such subscription and payment, and upon receiving from the Company the certificates for shares or securities so subscribed for, shall issue to such holder a voting trust certificate in respect thereof if the same be stock having general voting powers, but if the same be securities other than stock having general voting powers, the Trustees shall mail or deliver such securities to the certificate holder in whose behalf the subscription was made, or may instruct the Company to make delivery directly to the certificate holder entitled thereto. In case any reduction of the shares of the Company shall have been duly authorized, the Trustees are hereby authorized to make such surrender of shares of the Company held by the Trustees hereunder, pro-rata on behalf of all holders of voting trust certificates, as may be required under the terms pursuant to which such reduction is to be effected, and to receive and hold any and all shares of the Company issued in exchange for such surrendered shares. Following any such action, the voting trust certificates issued and outstanding pursuant hereto shall be deemed to represent a proportionately reduced number of shares. 8. Dissolution of Company. Except as otherwise provided in Section ---------------------- 12, in the event of the dissolution or total or partial liquidation of the Company, whether voluntary or involuntary, the Trustees shall receive the moneys, securities, rights, or property to which the holders of the capital stock of the Company deposited hereunder are entitled, and shall timely distribute the same among the registered holders of voting trust certificates in proportion to their interests, as shown by the books of the Trustees, or the Trustees may in the Trustees' discretion deposit such moneys, securities, rights, or property with any bank as the Trustees may select, with authority and instructions to distribute the same as above provided, and upon such deposit, this Agreement shall terminate and all further obligations or liabilities of the Trustees in respect of such moneys, securities, rights, or property so deposited shall cease and terminate. 9. Reorganization of Company. Except as otherwise provided in ------------------------- Section 12, -9- in the event the Company is merged into or consolidated with another corporation, or all or substantially all of the assets of the Company are transferred to another corporation pursuant to a plan requiring the Company's assets to be distributed in liquidation, or all the shares of the Company are to be exchanged in connection with a reorganization of the Company, then in connection with such transaction or series of transactions the term "Company" for all purposes of this Agreement shall be taken to include such successor corporation, and the Trustees shall receive and hold under this Agreement any stock of such successor corporation received on account of the ownership, as Trustees hereunder, of the shares of stock held hereunder prior to such merger, consolidation or transfer. Voting trust certificates issued and outstanding under this Agreement at the time of such merger, consolidation, or transfer may remain outstanding, or the Trustees may, in their discretion, substitute for such voting trust certificates new voting trust certificates in appropriate form, and the terms "stock," "shares" and "capital stock" as used herein shall be taken to include any stock which may be received by the Trustees in lieu of all or any part of the capital stock of the Company. 10. Rights of Trustees. ------------------ (a) Until the actual delivery to the holders of voting trust certificates issued hereunder of stock certificates in exchange therefor, and until the surrender of the voting trust certificates for cancellation, the Trustees shall possess and have the exclusive right, except as otherwise expressly limited in this Agreement, to exercise, in person or by nominees or proxies of the Trustees, all shareholders' voting rights and powers in respect to all shares deposited hereunder, for any and every purpose, and to take part in or consent to any corporate or stockholders' action of any kind whatsoever, as absolute owner of such shares. The Shareholders have hereby assigned to Trustees all voting rights that they otherwise might have had arising out of any ownership of the shares, whether by operation of law or agreement. The right to vote shall include the right to vote for or against or to abstain with respect to the election of directors, and in favor of or against or to abstain with respect to any resolution or proposed action of any character whatsoever, which may be presented at any meeting or require the consent of shareholders of the Company. Without limiting such general right, it is understood that such action or proceeding may include, upon terms satisfactory to the Trustees or to their nominees or proxies thereto appointed by the Trustees, mortgaging, creating a security interest in, and pledging of all or any part of the property of the Company, the lease or sale of all or any part of the property of the Company, for cash, securities, or other property, and the dissolution of the Company, or the consolidation, merger, reorganization, or recapitalization of the Company. It is further understood that action by the Trustees in voting or not voting stock deposited hereunder in instances where there are shareholders' statutory rights of appraisal may effectively waive or terminate any such rights as to the shares represented thereby. (b) In voting the shares held by the Trustees hereunder either in person or by nominees or proxies, the Trustees shall exercise their best judgment in voting with respect to suitable directors and officers of the Company (which may include the Trustees), or on such other matters as may be voted on or consented to by the shareholders, including without limitation the adequacy of any consideration to be received by the Company and its shareholders, and shall otherwise, insofar as the Trustees may be shareholders of the Company, take such part or action in respect to the management of the Company's affairs as the Trustees may deem -10- necessary; and in voting upon any matters that may come before the Trustees at any shareholders' meeting or otherwise, the Trustees shall exercise like judgment, but the Trustees shall not be personally responsible with respect to any action taken pursuant to the vote of the Trustees so cast in any matter or act committed or omitted to be done under this Agreement, provided such commission or omission does not amount to willful misconduct on the part of the Trustees, and provided further that the Trustees at all times exercise good faith in such matters. In addition, the Shareholders, jointly and severally, agree to indemnify and hold the Trustees harmless from any and all liabilities resulting from actions taken pursuant to this Agreement, except only for acts which constitute gross negligence or willful misconduct on the part of the Trustees. In the exercise of any and all of the rights of the Trustees under this Agreement, the Trustees may choose at any time to waive any such exercise, without the consent of any other party. (c) Meetings of the Trustees shall be held whenever either Trustee desires. Notice stating the place and time of any meeting of the Trustees shall be sufficient if given at least one day in advance of the time fixed for the meeting, and notice may be given to the recipient either personally, by telephone or by sending a copy thereof by first class or express mail, postage prepaid, or by telex or TWX (with answerback received), or next day courier service, charges prepaid, or by telecopier (with answerback received), to such recipient's address (or to such recipient's telex, TWX, telecopier or telephone number) appearing on the books of the Company or supplied by such recipient to the Company for the purpose of notice. Any Trustee may participate in any meeting of the Trustees, be counted for the purpose of determining a quorum thereof and exercise all rights and privileges to which such Trustee might be entitled were he personally in attendance, including the right to vote, or any other rights attendant to presence in person at such meeting, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. So long as there are two Trustees, both Trustees shall be necessary to constitute a quorum for the transaction of business, and, subject to the next sentence, the acts of both Trustees shall be the acts of the Trustees under this Agreement. If the Trustees disagree as to how the shares held by them hereunder or any Proxy Shares subject to a proxy hereunder should be voted, each Trustee shall vote one-half of the shares subject to this Agreement or such Proxy Shares, as applicable, as he shall determine. 11. Trustees. -------- (a) Any Trustee may at any time resign by mailing to the registered holders of voting trust certificates and to any Proxy Shareholders a written resignation, to take effect ten days thereafter or upon the prior acceptance thereof. Upon the death of any Trustee or upon any Trustee's adjudication of incompetence giving rise to the appointment of a custodian or other representative, or upon a resignation of a Trustee, the remaining Trustee shall act as sole Trustee during the remainder of the term of this Agreement, and any act, decision, or vote by such Trustee shall be deemed the act, decision, or vote of such Trustee. Upon the death, incompetence or resignation of both Trustees, this Agreement shall terminate. (b) Upon one of the Trustees ceasing to serve as a Trustee as set forth in subsection 11(a) above, the rights, powers, and privileges of the Trustees named hereunder shall be possessed by the remaining Trustee, with the same effect as though such remaining -11- Trustee had originally been the sole Trustee under this Agreement. The word "Trustees," as used in this Agreement, means the Trustees or at any time when there is only one remaining Trustee, such Trustee acting hereunder, and shall include both the single and the plural number. 12. Term. ---- (a) Except as otherwise provided in subsection 10(a), this Agreement shall continue in effect until June 23, 2007, (subject to extension as hereinafter set forth) but shall terminate at any time upon the happening of either of the following events: (1) the execution and acknowledgment by the Trustees hereunder of a deed of termination, duly filed in the office of the Company; or (2) such time as both Trustees have ceased serving as Trustees pursuant to subsection 11(a). (b) At any time within one year prior to the expiration of this Agreement as theretofore extended, the holders of all of the voting trust certificates hereunder and any Proxy Shareholders at such time may, by agreement in writing and with the written consent of the Trustees, extend the duration of this Agreement for an additional period. In the event of such extension, the Trustees shall, prior to the time of expiration as hereinabove provided, as originally fixed, or as theretofore extended, as the case may be, file in the principal office of the Company, a copy of such extension agreement, and of the consent thereto, and thereupon the duration of this Agreement shall be extended for the period fixed by such extension agreement; provided, however, that no such extension agreement shall extend the term of this Agreement beyond the maximum period then permitted by applicable law or affect the rights, or obligations of persons not parties thereto. 13. Compensation and Reimbursement of Trustees. The Trustees shall ------------------------------------------ serve without compensation, unless such compensation is authorized by a majority vote of the persons then holding voting trust certificates hereunder and Proxy Shareholders representing at least seventy-five percent (75%) of the shares represented by such voting trust certificates and Proxy Shares, but it is expressly agreed that the Trustees shall have the right to incur and pay such reasonable expenses and charges, to employ and pay such agents, attorneys, and counsel as the Trustees may deem necessary and proper with respect to the Trustees carrying out any of the Trustees' duties under this Agreement or interpreting or exercising any of the Trustees' powers under this Agreement. Any such expenses or charges incurred by and due to the Trustees paid by the Company, where the Company deems it appropriate to its interests, may be deducted pro rata from the dividends or other moneys or property received by the Trustees on the stock deposited hereunder. Nothing herein contained shall disqualify the Trustees, or incapacitate either of them from serving the Company or any of its subsidiaries as officer or director, or in any other capacity, and in any such capacity receiving compensation. 14. Meetings of Holders. The Trustees shall have no duty to hold ------------------- meetings of holders of voting trust certificates, but the Trustees shall be entitled to do so. Two days written notice of every meeting of holders shall be given and such notice shall state the place, day, hour and purposes of such meeting, but any holder may waive such notice in writing, either before, during or after the meeting. No notice of any adjourned meeting need be given. Every such meeting shall be held within or without the Commonwealth of Pennsylvania at a place designated by the Trustees. The failure to hold meetings shall not in any manner or degree -12- impair or reduce the authority of the Trustees hereunder. 15. Miscellaneous. ------------- (a) Indulgences, Etc. Neither the failure nor any delay on the ---------------- part of any party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. (b) Controlling Law. This Agreement and all questions relating to --------------- its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, notwithstanding any conflict-of-laws doctrines of such state or other jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. (c) Notice. ------ (i) Unless otherwise in this Agreement specifically provided, any notice to or communication with the holders of the voting trust certificates hereunder shall be deemed to be sufficiently given or made if addressed to such holders at their respective addresses appearing on the transfer books of the Trustees, postage prepaid and deposited in any post office or post office box, personally delivered with evidence of receipt or submitted to an overnight delivery service such as Federal Express or similarly recognized service and so addressed. The addresses of the holders of voting trust certificates, as shown on the transfer books of the Trustees, shall in all cases be deemed to be the addresses of voting trust certificate holders for all purposes under this Agreement, without regard to what other or different addresses the Trustees may have for any voting trust certificate holder on any other books or records of the Trustees. Every notice so given shall be effective, whether or not received; and the date of mailing shall be the date such notice is deemed given for all purposes. (ii) Any notice of the Company hereunder shall be sufficient if mailed with the U.S. Postal Service, postage prepaid, personally delivered with evidence of receipt, or submitted to Federal Express or similarly recognized overnight delivery service, to the Company addressed as follows: Pierce Leahy Corp. 631 Park Avenue King of Prussia, PA 19406 Attention: President -13- (iii) Any notice to the Trustees hereunder shall be sufficient if mailed with the U.S. Postal Service, postage prepaid, personally delivered with evidence of receipt, or submitted to Federal Express or similarly recognized overnight delivery service, to the Trustees, addressed to them at such addresses as may from time to time be furnished in writing to the Company by the Trustees, and if no such address has been so furnished by the Trustees, then to the Trustees in care of the Company. (iv) All distributions of cash, securities, or other property hereunder by the Trustees to the holders of voting trust certificates may be made, in the discretion of the Trustees, by mail, in the same manner as hereinabove provided for the giving of notices to the holders of voting trust certificates. (d) Binding Nature of Agreement; No Assignment. This Agreement ------------------------------------------ shall be binding upon and inure to the benefit of the parties hereto, including future holders of voting trust certificates, and their respective heirs, personal representatives, successors and assigns. No party may sell, assign, transfer or encumber such party's rights or obligations under this Agreement, the voting trust certificates or the shares represented thereby, without the prior written consent of the other parties hereto, except to the extent expressly permitted in this Agreement; provided, however, upon the prior written approval of the Trustees, a Shareholder or Proxy Shareholder may dispose of any shares in a manner approved in writing by the Trustees. Neither the death, disability nor incapacity of a holder of voting trust certificates shall in any way remove the shares from being held by the Trustees under this Agreement. (e) Rights of Proxy Shareholders. Notwithstanding anything in ---------------------------- this Agreement to the contrary, Proxy Shareholders beneficially owning Proxy Shares shall have the same rights as Shareholders holding voting trust certificates with respect to consenting to or voting upon matters as provided in this Agreement. (f) Provisions Separable. The provisions of this Agreement are -------------------- independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. (g) Entire Agreement. This Agreement contains the entire ---------------- understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing. (h) Paragraph Headings. The paragraph headings in this Agreement ------------------ are for convenience only; they form no part of this Agreement and shall not affect its interpretation. (i) Execution in Counterparts. This Agreement may be executed in ------------------------- any number of counterparts, and shall become binding when one or more counterparts hereof, individually taken together, shall bear the signatures of all of the parties reflected hereon as the -14- signatories. (j) Gender, Etc. Words used herein, regardless of the number and ----------- gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate. (k) Number of Days. In computing the number of days for purposes -------------- of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period (including the effective date of a notice or other communication given hereunder) falls on a Saturday, Sunday or holiday on which federal banks are or may elect to be closed, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or such holiday. -15- IN WITNESS WHEREOF the Company, the Trustees and the Shareholders have signed this Agreement as of the date written above. PIERCE LEAHY CORP. /s/ J. Peter Pierce -------------------------------------------------- Name: J. Peter Pierce Title: President /s/ Leo W. Pierce, Sr. -------------------------------------------------- Leo W. Pierce, Sr., Trustee /s/ J. Peter Pierce -------------------------------------------------- J. Peter Pierce, Trustee /s/ Leo W. Pierce, Jr. /s/ Eve Bullitt Pierce - ------------------------------------- ------------------------------------- Leo W. Pierce, Jr., individually Eve Bullitt Pierce, individually and for the benefit of Kate Pierce, and for the benefit of Kate Pierce, Alexandra Pierce and Julia Pierce Alexandra Pierce and Julia Pierce /s/ J. Peter Pierce /s/ John P. Pierce, Jr. - ---------------------------------------- ------------------------------------ J. Peter Pierce, individually John P. Pierce, Jr. and for the benefit of Matthew Pierce /s/ Michael J. Pierce /s/ Mary E. Pierce - -------------------------------------- ----------------------------------- Michael J. Pierce, individually Mary E. Pierce and for the benefit of Michael M. Pierce SIGNATURES CONTINUED ON NEXT PAGE -16- SIGNATURES CONTINUED FROM PREVIOUS PAGE /s/ Barbara Quinn /s/ Constance P. Buckley - ----------------------------------- -------------------------------------- Barbara Quinn, individually and Constance P. Buckley, individually and for the benefit of Sarah Quinn, for the benefit of Hilary Buckley and Daniel J. Quinn, Jr., Conor Quinn, Hannah Buckley Dylan Quinn and Terrance Quinn /s/ Kathryn Cox /s/ Constance Cox - ----------------------------------- -------------------------------------- Kathryn Cox, individually and Constance Cox for the benefit of Christopher Cox, Gregory Cox, Adrian Cox, Brendan Cox, Deirdre Cox, Timothy Cox, Conor Cox and Bronwyn Cox /s/ Monica Cox Durfee /s/ Suzanne Cox - ----------------------------------- -------------------------------------- Monica Cox Durfee Suzanne Cox /s/ Andrea Cox Fidurko /s/ Gregory Cox - ----------------------------------- -------------------------------------- Andrea Cox Fidurko Gregory Cox /s/ Maurice Cox, III /s/ Daniel J. Quinn - ----------------------------------- -------------------------------------- Maurice Cox, III Daniel J. Quinn, for the benefit of Sarah Quinn, Conor F. Quinn, Daniel J. Quinn, Jr., Dylan P. Quinn and Terrance P. Quinn /s/ Leo w. Pierce, Sr. /s/ Constance P. Buckley - ----------------------------------- -------------------------------------- Leo W. Pierce, Sr., Trustee under Constance P. Buckley, Trustee under Karen Pierce 1996 Irrevocable Trust Irrevocable Agreement of Trust dated September 19, 1996 F/B/O Julia Stockton Pierce /s/ J. Peter Pierce - ----------------------------------- J. Peter Pierce, Trustee under Leo W. Pierce Trust for the Family of J. Peter Pierce SIGNATURES CONTINUED ON NEXT PAGE -17- SIGNATURES CONTINUED FROM PREVIOUS PAGE /s/ Constance P. Buckley /s/ Constance P. Buckley - ----------------------------------- -------------------------------------- Constance P. Buckley, Trustee under Constance P. Buckley, Trustee under Irrevocable Agreement of Trust dated Irrevocable Agreement of Trust dated September 19, 1996 F/B/O Kate September 19, 1996 F/B/O Alexandra Bullitt Pierce Roberts Pierce /s/ Constance P. Buckley /s/ Constance P. Buckley - ----------------------------------- -------------------------------------- Constance P. Buckley, Trustee under Constance P. Buckley, Trustee under Irrevocable Agreement of Trust dated Irrevocable Agreement of Trust dated December 23, 1996, Leo W. October 23, 1996 F/B/O Michael M. Pierce, Settlor Pierce /s/ Barbara P. Quinn - ----------------------------------- Barbara P. Quinn, Trustee under Irrevocable Agreement of Trust dated 12/30/96 F/B/O Michael M. Pierce -18- EXHIBIT B NOTICE TO VOTING TRUSTEES To the Trustees under that certain Amended and Restated Voting Trust Agreement dated ________ __, 1998 (as such agreement may be amended, restated or extended from time to time (the "Voting Trust Agreement)) among Pierce Leahy Corp., the shareholders of the Company set forth on the signature pages thereof and Leo W. Pierce, Sr. and J. Peter Pierce, in such persons' capacity as Voting Trustee thereunder (the "Trustees"). Gentlemen: Notice is hereby given pursuant to Section 5(b) of the Voting Trust Agreement that the undersigned shareholder requests to withdraw __________ shares (the "Margin Shares") from the Voting Trust in order to pledge such shares to ______________________ as collateral for a margin account with such broker. Accompanying this Notice are voting trust certificates representing the Margin Shares to be withdrawn, a letter from the broker indicating that such shares are required for the margin account and a duly executed proxy in the form attached as Exhibit C to the Voting Trust Agreement. Please send to the undersigned a certificate representing the Margin Shares, which the undersigned understands will contain a restrictive legend under the Securities Act of 1933, and a replacement voting trust certificate for any shares in the certificate tendered herewith in excess of the number of Margin Shares. The undersigned acknowledges the requirement of Section 5(b) of the Voting Trust Agreement to promptly redeliver any Margin Shares owned by the undersigned that are no longer subject to the margin account. Very truly yours, ______________________________________ -19- EXHIBIT C PROXY This Irrevocable Proxy is granted this ____ day of _____________, ____ by the undersigned (the "Shareholder") pursuant to that certain Amended and Restated Voting Trust Agreement dated _______ __, 1998 (as such agreement may be amended or restated from time to time (the "Voting Trust Agreement)) among Pierce Leahy Corp., the shareholders of the Company set forth on the signature pages thereof and Leo W. Pierce, Sr. and J. Peter Pierce, in such persons' capacity as Voting Trustee thereunder, to the Trustees (such term referring to the Trustee or Trustees from time to time under the Voting Trust Agreement). The Shareholder irrevocably appoints the Trustees as his true and lawful proxy with full power of substitution and resubstitution, to vote __________ shares of the Common Stock of Pierce Leahy Corp., a Pennsylvania corporation (the "Company"), for and in the name, place and stead of the Shareholder, at any annual, special or other meeting of the holders of the shares of the Company and at any adjournment or postponement thereof, or to express consent or dissent to corporate action in writing without a meeting. The Shareholder understands and agrees that the appointment and proxy granted to the Trustees by this Proxy is being issued pursuant to the Voting Trust Agreement and shall be irrevocable and coupled with an interest and, except as otherwise provided herein, is not terminable by the Shareholder without the Trustees' consent. The Proxy will remain in effect and terminate only upon the termination of the Voting Trust Agreement or the sale of the stock covered by this Proxy. The Shareholder hereby waives any defect which might cause this Proxy to be invalid and unenforceable. The undersigned hereby agrees to execute such other instruments as Trustee shall reasonably request to confirm the validity and enforceability of this Proxy. IN WITNESS WHEREOF, the undersigned has executed and delivered this Proxy on the day and year above written. Witness: ____________________________(SEAL) - --------------------------------------- -20- EXHIBIT D NOTICE TO VOTING TRUSTEES To the Trustees under that certain Amended and Restated Voting Trust Agreement dated ________ __, 1998 (as such agreement may be amended, restated or extended from time to time (the "Voting Trust Agreement)) among Pierce Leahy Corp., the shareholders of the Company set forth on the signature pages thereof and Leo W. Pierce, Sr. and J. Peter Pierce, in such persons' capacity as Voting Trustee thereunder (the "Trustees"). Gentlemen: Notice is hereby given pursuant to Section 5(c) of the Voting Trust Agreement that the undersigned shareholder requests to withdraw __________ shares (the "Designated Shares") from the Voting Trust because the undersigned has a bona fide intent to sell such Designated Shares within the twelve months following the date of this Notice. Accompanying this Notice are voting trust certificates representing the Designated Shares to be withdrawn and a duly executed proxy in the form attached as Exhibit C to the Voting Trust Agreement. Please send to the undersigned a certificate representing the Designated Shares, which the undersigned understands will contain a restrictive legend under the Securities Act of 1933, and a replacement voting trust certificate for any shares in the certificate tendered herewith in excess of the number of Designated Shares. The undersigned acknowledges the requirement of Section 5(c) of the Voting Trust Agreement to promptly redeliver any Designated Shares owned by the undersigned that the undersigned no longer has a bona fide intention to sell. Very truly yours, ______________________________________ -21- EX-10.3 3 CREDIT AGREEMENT DATED AUGUST 12, 1997 CONFORMED COPY ================================================================================ US$ 140,000,000 C$35,000,000 AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 12, 1997 PIERCE LEAHY CORP. and PIERCE LEAHY COMMAND COMPANY, as Borrowers The Several Lenders from Time to Time Parties Hereto CANADIAN IMPERIAL BANK OF COMMERCE as Canadian Administrative Agent and CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY as US Administrative Agent _______________ FLEET NATIONAL BANK as Documentation Agent ================================================================================ TABLE OF CONTENTS -----------------
Page SECTION 1. DEFINITIONS................................................. 1 1.1 Defined Terms................................................. 1 1.2 Other Definitional Provisions................................. 28 SECTION 2. THE US COMMITMENTS.......................................... 28 2.1 The US Commitments............................................ 28 2.2 Procedure for US$ Loan Borrowing.............................. 28 2.3 Conversion and Continuation Options........................... 29 2.4 Minimum Amounts and Maximum Number of Eurodollar Tranches..... 30 SECTION 3. THE CANADIAN COMMITMENTS.................................... 30 3.1 The Canadian Commitments...................................... 30 3.2 Procedure for C$ Loan Borrowing............................... 30 3.3 Bankers' Acceptances.......................................... 31 3.4 Conversion Option............................................. 34 3.5 Circumstances Making Bankers' Acceptances Unavailable......... 35 SECTION 4. GENERAL PROVISIONS.......................................... 35 4.1 Repayment of Loans; Evidence of Debt.......................... 35 4.2 Commitment Fee................................................ 36 4.3 Termination or Reduction of Commitments....................... 37 4.4 Optional and Mandatory Prepayments............................ 38 4.5 Interest Rates and Payment Dates.............................. 41 4.6 Computation of Interest and Fees.............................. 43 4.7 Inability to Determine Eurodollar Rate........................ 44 4.8 Pro Rata Treatment and Payments............................... 44 4.9 Illegality.................................................... 45 4.10 Requirements of Law.......................................... 45 4.11 Taxes........................................................ 47 4.12 Indemnity.................................................... 49 4.13 Change of Lending Office..................................... 49 SECTION 5. REPRESENTATIONS AND WARRANTIES.............................. 49 5.1 Financial Condition........................................... 49 5.2 No Change..................................................... 50 5.3 Corporate Existence; Compliance with Law...................... 50 5.4 Corporate Power; Authorization; Enforceable Obligations....... 50 5.5 No Legal Bar.................................................. 51 5.6 No Material Litigation........................................ 51 5.7 No Default.................................................... 51 5.8 Ownership of Property; Liens.................................. 51 5.9 Intellectual Property......................................... 52
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Page ---- 5.10 No Burdensome Restrictions.................................... 52 5.11 Taxes......................................................... 52 5.12 Margin Regulations............................................ 52 5.13 ERISA; Canadian Pension Plans................................. 52 5.14 Investment Company Act; Other Regulations..................... 53 5.15 Environmental Matters......................................... 54 5.16 Regulation H.................................................. 54 5.17 Capitalization................................................ 55 5.18 Subsidiaries.................................................. 55 5.19 Restrictions on or Relating to Subsidiaries................... 55 5.20 Subchapter S Status........................................... 55 5.21 Leases........................................................ 55 5.22 Related Agreements.......................................... 56 5.23 Proceeds of Equity Offerings................................ 56 SECTION 6. CONDITIONS PRECEDENT......................................... 56 6.1 Conditions to Effectiveness.................................... 56 6.2 Conditions to Initial Loans.................................... 57 6.3 Additional Conditions for Acquisition Loans.................... 59 6.4 Conditions to Each Loan........................................ 60 SECTION 7. AFFIRMATIVE COVENANTS........................................ 61 7.1 Financial Statements, Etc...................................... 61 7.2 Certificates; Other Information................................ 62 7.3 Books, Records and Inspections................................. 63 7.4 Maintenance of Property, Insurance............................. 63 7.5 Corporate Franchises........................................... 64 7.6 Compliance with Statutes, Etc.................................. 64 7.7 Compliance with Environmental Laws............................. 64 7.8 ERISA; Canadian Pension Plans.................................. 65 7.9 End of Fiscal Years; Fiscal Quarters........................... 66 7.10 Performance of Obligations.................................... 66 7.11 Payment of Taxes.............................................. 66 7.12 Use of Proceeds............................................... 66 7.13 Notices....................................................... 67 7.14 Additional Mortgages.......................................... 68 7.15 Additional Stock Pledges...................................... 69 7.16 Additional Guarantee and Security Agreements.................. 70 SECTION 8. NEGATIVE COVENANTS........................................... 70 8.1 Liens.......................................................... 70 8.2 Consolidation, Merger, Purchase or Sale of Assets, Etc......... 72 8.3 Limitation on Restricted Payments.............................. 73 8.4 Indebtedness................................................... 73 8.5 Advances, Investments and Loans................................ 74
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Page ---- 8.6 Transactions with Affiliates................................... 74 8.7 Capital Expenditures........................................... 75 8.8 Fixed Charge Coverage Ratio.................................... 76 8.9 Interest Coverage Ratio........................................ 76 8.10 Leverage Ratio................................................ 76 8.11 Limitation on Voluntary Payments and Modifications of Indebtedness and Certain Other Agreements, Etc........... 77 8.12 Limitation on Issuance of Capital Stock....................... 78 8.13 Business...................................................... 78 8.14 Designation of "Designated Senior Indebtedness"............... 78 SECTION 9. EVENTS OF DEFAULT............................................ 79 SECTION 10. THE ADMINISTRATIVE AGENTS................................... 82 10.1 Appointment................................................... 82 10.2 Delegation of Duties.......................................... 82 10.3 Exculpatory Provisions........................................ 82 10.4 Reliance by Administrative Agent.............................. 83 10.5 Notice of Default............................................. 83 10.6 Non-Reliance on Administrative Agents and Other Lenders....... 83 10.7 Indemnification............................................... 84 10.8 Administrative Agents in Their Individual Capacity............ 84 10.9 Successor Administrative Agent................................ 84 SECTION 11. MISCELLANEOUS............................................... 85 11.1 Amendments and Waivers........................................ 85 11.2 Notices....................................................... 86 11.3 No Waiver; Cumulative Remedies................................ 87 11.4 Survival of Representations and Warranties.................... 88 11.5 Payment of Expenses and Taxes................................. 88 11.6 Successors and Assigns; Participations and Assignments........ 88 11.7 Adjustments; Set-off.......................................... 91 11.8 Counterparts.................................................. 91 11.9 Severability.................................................. 92 11.10 Integration.................................................. 92 11.11 GOVERNING LAW................................................ 92 11.12 Submission To Jurisdiction; Waivers.......................... 92 11.13 Foreign Currency Judgments................................... 93 11.14 Acknowledgements............................................. 93 11.15 WAIVERS OF JURY TRIAL........................................ 93 11.16 Confidentiality.............................................. 94 11.17 Conflicts.................................................... 94 11.18 Reference to and Effect on the Existing Credit Agreement..... 94
-iii- AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 13, 1996, among PIERCE LEAHY CORP., a New York corporation (the " Company "), PIERCE LEAHY COMMAND COMPANY, a company organized and existing under the laws of the Province of Nova Scotia (the " Canadian Borrower " and, together with the Company, the " Borrowers "), the several banks and other financial institutions from time to time parties to this Agreement (the " Lenders "), Canadian Imperial Bank of Commerce, New York Agency, as US Administrative Agent (as hereinafteCredit Agreement AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 12, 1997, among PIERCE LEAHY CORP., a Pennsylvania corporation (the "Company"), PIERCE ------- LEAHY COMMAND COMPANY , a company organized and existing under the laws of the Province of Nova Scotia (the "Canadian Borrower" and, together with the Company, ----------------- the "Borrowers"), the several banks and other financial institutions from time --------- to time parties to this Agreement (the "Lenders"), Canadian Imperial Bank of ------- Commerce, New York Agency, as US Administrative Agent (as hereinafter defined) for the US$ Lenders hereunder and Canadian Imperial Bank of Commerce, as Canadian Administrative Agent (as hereinafter defined) for the C$ Lenders hereunder. W I T N E S S E T H: ------------------- WHEREAS, Pierce Leahy Corp., a New York corporation ("PLC"), the --- Canadian Borrower, the Lenders, the US Administrative Agent and the Canadian Administrative Agent are parties to the Credit Agreement, dated as of August 13, 1996 (as heretofore amended, supplemented or otherwise modified prior to the date hereof, the "Existing Credit Agreement"); ------------------------- WHEREAS, the Company is the successor to PLC by reason of PLC having been merged with and into the Company immediately preceding the Equity Offerings (as hereinafter defined); WHEREAS, the Borrowers have requested that the Existing Credit Agreement be amended and restated to (a) increase the aggregate principal amount of the US Commitments (as hereinafter defined) to US$ 140,000,000, (b) reflect changes in the Company's corporate structure and governance related to its status as a public company following the Equity Offerings and (c) otherwise amend the Existing Credit Agreement and restate it in its entirety as more fully set forth herein; and the Lenders, the US Administrative Agent and the Canadian Administrative Agent are willing, upon and subject to the terms and conditions hereof, so to amend and restate the Existing Credit Agreement; NOW, THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereto hereby agree that on the Closing Date (as hereinafter defined) the Existing Credit Agreement shall be amended and restated to read in its entirety as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms ------------- shall have the following meanings: "Acceptance Fee": the fee payable in C$ to each C$ Lender in respect -------------- of Bankers' Acceptances computed in accordance with subsection 3.3(e). 2 "Acquisition Documents": in connection with any Permitted Acquisition, --------------------- any asset purchase agreement, stock purchase agreement, merger agreement or similar agreement and all other documents entered into or delivered in connection therewith. "Acquisition Loan": any Loan the proceeds of which are used to ---------------- finance all or any portion of the purchase price of (and to pay fees and expenses, and refinance existing Indebtedness in connection with) a Permitted Acquisition. "Additional Mortgaged Property": as defined in subsection 7.14(a). ----------------------------- "Adjusted EBITDA": for any period, with respect to the Company and --------------- its Subsidiaries on a consolidated basis, EBITDA of the Company and its Subsidiaries for such period determined on a pro forma basis after giving effect to the following adjustments: (a) any business acquired during such period pursuant to a Permitted Acquisition shall be deemed to have been acquired on the first day of such period (and EBITDA attributable to such business shall be calculated on the basis of the available financial statements of such business); (b) any business disposed of during such period pursuant to a Disposition shall be deemed to have been disposed of on the first day of such period; and (c) if, in connection with any Permitted Acquisition, the Company shall in good faith adopt a program which can reasonably be expected to result in quantifiable improvements in the operating results of the acquired business, the Company (so long as (i) it shall have delivered to the Lenders a description of such program, setting forth in reasonable detail the terms and conditions thereof and (ii) the aggregate amount of such quantifiable improvements in operating results from such Permitted Acquisition shall not exceed 15% of the Company's EBITDA for the then most recently ended period of twelve consecutive months for which financial statements shall have been delivered to the Lenders pursuant to subsections 7.1(a) or (b)) shall be entitled to assume that the improved operating results projected to result from such program shall have occurred from the first day of such period to the date of such Permitted Acquisition. "Adjustment Date": the second Business Day following receipt by the --------------- US Administrative Agent of both (a) the financial statements required to be delivered pursuant to subsection 7.1(a) or 7.1(b), as the case may be, for the most recently completed fiscal period and (b) the related Compliance Certificate required to be delivered pursuant to subsection 7.2(b) with respect to such fiscal period. "Administrative Agents": the collective reference to the US --------------------- Administrative Agent and the Canadian Administrative Agent. 3 "Administrative Office": the Canadian Administrative Office or the US --------------------- Administrative Office, as applicable. "Affected Property": as defined in subsection 4.4(d). ----------------- "Affiliate": with respect to any Person, any other Person directly or --------- indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with, such Person; provided, however, that for purposes of -------- ------- subsection 8.6, an Affiliate of the Company shall include any Person that directly or indirectly owns more than 5% of the total voting power of the Company's Capital Stock. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. "Affiliate Contracts": collectively, all contracts or agreements ------------------- entered into between the Company or any of its Subsidiaries, on the one hand, and any of its Affiliates, on the other hand. "Agreement": this Credit Agreement, as amended, supplemented, --------- restated or otherwise modified from time to time. "Applicable BA Discount Rate": with respect to any C$ Lender, as --------------------------- applicable to a Bankers' Acceptance being purchased by such C$ Lender on any day, the CDOR Rate in effect on such day with respect to such Bankers' Acceptance. "Applicable Margin": the rate for the respective Type of Loan set ----------------- forth opposite the range in which the Leverage Ratio in effect on the Closing Date (as determined from the certificate delivered on such Date pursuant to subsection 6.2(a)) shall fall, provided that if on any -------- Adjustment Date occurring after the Closing Date the Leverage Ratio determined from the financial statements relating to such Adjustment Date (and based upon the Total Net Debt on the date of the balance sheet included in such financial statements) shall fall within any of the ranges set forth below then the Applicable Margin for all Loans will be adjusted on such Adjustment Date (each such adjustment to be effective until the next succeeding Adjustment Date) to the rate for the respective Type of Loan set forth opposite the range in which such Leverage Ratio falls: 4 Applicable Margin (% per annum) ------------------------------------- Range of Leverage Ratio Base Rate Loans/ Eurodollar Loans/ - --------------------------------- C$ Prime Bankers' Loans Acceptances ---------------- ----------------- greater than or equal to 5.50 to 1.00 1.00% 2.25% greater than or equal to 5.00 to 1.00 but less than 5.50 to 1.00 0.75% 2.00% greater than or equal to 4.50 to 1.00 but less than 5.00 to 1.00 0.50% 1.75% greater than or equal to 4.00 to 1.00 but less than 4.50 to 1.00 0.25% 1.50% greater than or equal to 3.50 to 1.00 but less than 4.00 to 1.00 0.00% 1.25% less than 3.50 to 1.00 0.00% 1.00%
provided, however, that, the Applicable Margin for any Loan shall not be -------- ------- reduced pursuant to the immediately preceding proviso for any period during which a Default or Event of Default shall have occurred and be continuing; and provided, further that: -------- ------- (a) if on or prior to the thirtieth day following the occurrence of a Default or Event of Default which arises under subsection 9(b), (c) or (d), such Default or Event of Default has been cured or waived, then the Applicable Margin during the thirty-day period during which such Default or Event of Default existed shall be deemed to have been the Applicable Margin with the applicable reduction determined in accordance with the table set forth above absent such Default or Event of Default, and any excess payments of interest made by the applicable Borrower as a result of the unavailability of the reduction in the Applicable Margin pursuant to the immediately preceding proviso, so long as there exists no other Default or Event of Default, shall be credited by the applicable Lenders to the next interest payment due from such Borrower in the amount of such excess; and (b) if any Default or Event of Default referred to in paragraph (a) above shall not have been cured or waived prior to the thirtieth day following 5 its occurrence, then, for the period from the date upon which such Default or Event of Default shall have occurred until two Business Days following the date upon which such Default or Event of Default is cured or waived, the Applicable Margin in respect of Loans shall be 1.00% per annum, in the case of Base Rate Loans and C$ Prime Loans, and 2.25% per annum, in the case of Eurodollar Loans and Bankers' Acceptances. "Assignee": as defined in subsection 11.6(c). -------- "Assignment and Acceptance": as defined in subsection 11.6(c). ------------------------- "Available Canadian Commitment": as to any C$ Lender, at a particular ----------------------------- time, an amount equal to the excess, if any, of (a) the amount of such Lender's Canadian Commitment at such time over (b) the aggregate principal ---- amount of all C$ Loans made by such Lender then outstanding. "Available US Commitment": as to any US$ Lender, at a particular ----------------------- time, an amount equal to the excess, if any, of (a) the amount of such Lender's US Commitment at such time over (b) the aggregate principal amount ---- of all US$ Loans made by such Lender then outstanding. "BA Discount Proceeds": in respect of any Bankers' Acceptance to be -------------------- purchased by a C$ Lender on any day under subsection 3.3, an amount (rounded to the nearest whole Canadian cent, and with one-half of one Canadian cent being rounded up) calculated on such day by dividing: (a) the face amount of such Bankers' Acceptance; by (b) the sum of one plus the product of: (i) the Applicable BA Discount Rate (expressed as a decimal) applicable to such Bankers' Acceptance; and (ii) a fraction, the numerator of which is the number of days remaining in the term of such Bankers' Acceptance and the denominator of which is 365; with such product being rounded up or down to the fifth decimal place and .000005 being rounded up. "Bankers' Acceptance": a bill of exchange denominated in C$ drawn by ------------------- the Canadian Borrower and accepted by a C$ Lender pursuant to subsection 3.3. "Base Rate": on any particular date, a rate of interest per annum --------- equal to the higher of: (a) the rate of interest most recently announced by CIBC as its prime rate (which rate is not necessarily intended to be the lowest rate of interest charged by 6 CIBC in connection with extensions of credit) for loans denominated in US Dollars; and (b) the Federal Funds Rate for such date plus .50%. "Base Rate Loans": US$ Loans the rate of interest applicable to which --------------- is based upon the Base Rate. "Benefitted Lender": as defined in subsection 11.7(a). ----------------- "Borrowing Date": any Business Day specified in a notice pursuant to -------------- subsection 2.2, 3.2 or 3.3(b)(1) as a date on which a Borrower requests the relevant Lenders to make Loans hereunder. "Business Day": a day other than a Saturday, Sunday or other day on ------------ which commercial banks in New York City are authorized or required by law to close, except that (a) when used in connection with a Eurodollar Loan, "Business Day" shall mean any Business Day on which dealings in foreign currencies and exchange between banks may be carried on in London, England and New York, New York and (b) when used in connection with a C$ Loan, "Business Day" shall mean a day on which banks are open for business in Toronto, Ontario, Canada but excludes Saturday, Sunday and any other day which is a legal holiday in Toronto, Ontario, Canada. "Canadian Administrative Agent": Canadian Imperial Bank of Commerce, ----------------------------- together with its affiliates, as the agent for the C$ Lenders under this Agreement and the other Loan Documents. "Canadian Administrative Office": the Canadian Administrative Agent's ------------------------------ office located at Commerce Court West 7, Toronto, Ontario, Canada or such other office in Canada as may be designated as such by the Canadian Administrative Agent by written notice to the Canadian Borrower and the Lenders. "Canadian Commitment": as to any C$ Lender, its obligation to make C$ ------------------- Loans to and purchase Bankers' Acceptances from the Canadian Borrower hereunder in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1.1 as such Lender's "Canadian Commitment", as such amount may be changed from time to time as provided herein. The original aggregate principal amount of the Canadian Commitments is C$35,000,000. "Canadian Debenture Pledge Agreements": the Debenture Pledge ------------------------------------ Agreements executed and delivered by the Canadian Borrower on the Original Closing Date, substantially in the form of Exhibit E-3 to the Existing Credit Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Canadian Demand Debentures": the Demand Debentures executed and -------------------------- delivered by the Canadian Borrower on the Original Closing Date, substantially 7 in the form of Exhibit E-2 to the Existing Credit Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Canadian Dollars" or "C$": dollars in lawful currency of Canada. ---------------- -- "Canadian Exchange Rate": on a particular date, the rate at which C$ ---------------------- may be exchanged into US$, determined by reference to the Bank of Canada noon rate as published on the Reuters Screen page BOFC. In the event that such rate does not appear on such Reuters page, the "Canadian Exchange ----------------- Rate" shall be determined by reference to any other means (as selected by the Canadian Administrative Agent) by which such rate is quoted or published from time to time by the Bank of Canada (in each case as in effect at or about 12:00 Noon, Toronto time, on the Business Day immediately preceding the relevant date of determination); provided, that -------- if at the time of any such determination, for any reason, no such exchange rate is being quoted or published, the Canadian Administrative Agent may use any reasonable method as it deems applicable to determine such rate, and such determination shall be prima facie evidence of the accuracy thereof. "Canadian Hypothec": the moveable hypothec executed and delivered by ----------------- the Canadian Borrower on the Original Closing Date, substantially in the form of Exhibit E-4 to the Existing Credit Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Canadian Lending Office": as to each C$ Lender, the office in Canada ----------------------- specified as the "Canadian Lending Office" of such Lender on Schedule 1.1 or in an Assignment and Acceptance, as the case may be, or such other office in Canada as may be designated by such Lender by written notice to the Company and the Canadian Administrative Agent. "Canadian Mortgage": a mortgage provided by the Canadian Borrower or ----------------- a Subsidiary thereof with respect to a Canadian Mortgaged Property pursuant to the provisions set forth in the relevant Canadian Demand Debenture and Canadian Debenture Pledge Agreement. "Canadian Mortgaged Properties": all real property listed and ----------------------------- identified as such in Part B of Schedule 5.8 and designated as such. "Canadian Pension Plan": any plan, program, arrangement or --------------------- understanding that is a pension plan for the purposes of any applicable pension benefits or tax laws of Canada (whether or not registered under any such laws) which is maintained or contributed to by (or to which there is or may be an obligation to contribute of), any Borrower or any Subsidiary of the Company in respect of any person's employment in Canada or a province or territory thereof with the Company or any Subsidiary of the Company and all related agreements, arrangements and understandings in respect of, or related to, any benefits to be provided thereunder or the effect thereof on any other compensation or remuneration of any employee. 8 "Canadian Security Agreement": the Canadian Security Agreement executed --------------------------- and delivered by the Canadian Borrower on the Original Closing Date, substantially in the form of Exhibit E-1 to the Existing Credit Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Canadian Security Documents": the collective reference to the --------------------------- Canadian Demand Debentures, Canadian Debenture Pledge Agreements, the Canadian Hypothec, and the Canadian Security Agreement and all other security documents hereafter delivered to the Canadian Administrative Agent granting a Lien on any asset or assets of the Canadian Borrower or any Canadian Subsidiary to secure the obligations and liabilities of the Canadian Borrower hereunder and under any of the other Loan Documents or to secure any guarantee by any Canadian Subsidiary of any such obligations and liabilities. "Canadian Subsidiary": any Subsidiary that is incorporated or ------------------- organized under the laws of Canada or any province thereof. "Capital Expenditures": as defined in subsection 8.7. -------------------- "Capital Stock": any and all shares, interests, participations or ------------- other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Capitalized Lease Obligations": Indebtedness represented by ----------------------------- obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP; the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP. "Cash Equivalents": (i) securities issued or directly and fully ---------------- guaranteed or insured by the United States or any agency or instrumentality thereof or Canada or any province thereof (provided that the full faith and -------- credit of the United States or Canada or any province thereof is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (ii) time deposits and certificates of deposit of any Lender or any commercial bank incorporated in the United States or Canada of recognized standing having capital and surplus in excess of US$200,000,000 and having, or which is the principal banking subsidiary of a bank holding company having, a long-term unsecured debt rating of at least "A" or the equivalent thereof from S&P or "A-2" or the equivalent thereof from Moody's, or at least A or the equivalent thereof by Canadian Bond Rating Service Limited or at least A Middle or the equivalent thereof by Dominion Bond Rating Service Limited with maturities of not more than six months from the date of acquisition by such Person, (iii) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (ii) above, (iv) commercial paper issued 9 by any Lender or any Person incorporated in the United States or Canada rated at least A-1+ or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's or at least A-1+ or the equivalent thereof by Canadian Bond Rating Service Limited or at least R-I (Middle or High) or the equivalent thereof by Dominion Bond Rating Service Limited and in each case maturing not more than six months after the date of acquisition by such Person and (v) investments in money market funds substantially all of the assets of which are comprised of securities of the types described in clauses (i) through (iv) above. "Casualty Event": with respect to any property or assets of any -------------- Person, any loss of or damage to, or any condemnation or other taking of, such property (other than in the ordinary course of business) for which such Person or any of its Subsidiaries receives insurance proceeds, or proceeds of a condemnation award or other compensation. "Casualty Reinvestable Proceeds": as defined in subsection 4.4(d). ------------------------------ "C$ Commitment Percentage": as to any C$ Lender at any time, the ------------------------ percentage of the aggregate Canadian Commitments then constituted by such Lender's Canadian Commitment. "C$ Equivalent": on any date of determination, with respect to any ------------- amount in US$, the equivalent in C$ of such amount determined by the Canadian Administrative Agent using the US$ Exchange Rate then in effect. "C$ Lender": each Lender designated as a "C$ Lender" on Schedule 1.1, --------- as such Schedule may be modified from time to time as provided herein. "C$ Loans": the collective reference to C$ Prime Loans and Bankers' -------- Acceptances; for the purposes of this Agreement, the principal amount of any C$ Loan constituting a Bankers' Acceptance shall be deemed to be the undiscounted face amount of such Bankers' Acceptance. "C$ Note": as defined in subsection 4.1(g). ------- "C$ Prime Loans": C$ Loans at such time as they bear interest at a -------------- rate based upon the C$ Prime Rate. "C$ Prime Rate": with respect to a C$ Prime Loan, on any day, the ------------- greater of (a) the annual rate of interest announced from time to time by CIBC as its reference rate then in effect for determining interest rates on C$ denominated commercial loans in Canada and (b) the annual rate of interest equal to the sum of (i) the CDOR Rate and (ii) 0.50% per annum. "CDOR Rate": on any date, the per annum rate of interest which is the --------- rate based on the rate applicable to C$ bankers' acceptances for a term of 30 days (in the 10 case of the definition of "C$ Prime Rate") or for a term equivalent to the term of, and for amounts comparable to the amount of, the relevant Bankers' Acceptances (in the case of the definition of "Applicable BA Discount Rate") appearing on the "Reuters Screen CDOR Page" (as defined in the International Swap Dealer Association, Inc. definitions, as modified and amended from time to time) for acceptances of Schedule I banks under the Bank Act (Canada) as of 10:00 A.M., Toronto time, on such date, or if such date is not a Business Day, then on the immediately preceding Business Day; provided, however, that if no such rate appears on the Reuters Screen CDOR -------- ------- Page as contemplated, then the CDOR Rate on any date shall be calculated as the arithmetic mean of the rates for the term and amount referred to above applicable to C$ bankers' acceptances quoted by CIBC as of 10:00 A.M., Toronto time, on such date or, if such date is not a Business Day, then on the immediately preceding Business Day. "CERCLA": the Comprehensive Environmental Response Compensation and ------ Liability Act of 1980, as the same may be amended from time to time, 42 U.S.C. (S)9601 et seq. -- --- "Change of Control": with respect to the Company shall be deemed to ----------------- have occurred at such time as: (a) any Person (including a Person's Affiliates and associates), other than a Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of more than 50% of the total voting power of the Company's Common Stock; (b) any Person (including a Person's Affiliates and associates), other than a Permitted Holder, becomes the beneficial owner of more than 33-1/3% of the total voting power of the Company's Common Stock, and the Permitted Holders beneficially own, in the aggregate, a lesser percentage of the total voting power of the Common Stock of the Company than such other Person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company; (c) there shall be consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which the Common Stock of the Company would be converted into cash, securities or other property, other than a merger or consolidation of the Company in which the holders of the Common Stock of the Company outstanding immediately prior to the consolidation or merger hold, directly or indirectly, at least a majority of the Common Stock of the surviving corporation immediately after such consolidation or merger; or (d) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or 11 whose nomination for election by the shareholders of the Company has been approved by a majority of the directors then still in office who either were directors at the beginning of such period or whose election or recommendation for election was previously so approved) cease to constitute a majority of the Board of Directors of the Company. "CIBC": Canadian Imperial Bank of Commerce, a Canadian chartered ---- bank, or one or more of its agencies, branches or affiliates in its or their respective capacity or capacities, as the case may be, as a Lender or Lenders hereunder. "Claims": as defined in the definition of "Environmental Claims." ------ "Client Acquisition Costs": the capitalized unreimbursed costs of ------------------------ acquiring and moving records of new clients into the facilities of either Borrower or any Subsidiary thereof. "Closing Date": the date on which the conditions precedent set forth ------------ in subsection 6.1 shall be satisfied. "Code": the Internal Revenue Code of 1986, as amended from time to ---- time. "Collateral": all assets of the Loan Parties, now owned or ---------- hereinafter acquired, upon which a Lien is purported to be created by any Security Document. "Commitment": with respect to any Lender, such Lender's US Commitment ---------- or Canadian Commitment, as the case may be. "Commitment Percentage": as to any Lender at any time, the percentage --------------------- which such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Loans then outstanding constitutes of the aggregate principal amount of the Loans then outstanding); all amounts denominated in C$ shall be included in any computations pursuant to this definition at the US$ Equivalent thereof. "Commitment Period": as to the Commitment of any Lender, the period ----------------- from and including the Closing Date to but not including the Termination Date or such earlier date as the Commitments shall terminate as provided herein. "Common Stock": all Capital Stock of such Person that is generally ------------ entitled to (i) vote in the election of directors of such Person or (ii) if such Person is not a corporation, vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management and policies of such Person. 12 "Commonly Controlled Entity": an entity, whether or not incorporated, -------------------------- which is under common control with the Company within the meaning of Section 4001 of ERISA or is part of a group which includes the Company and which is treated as a single employer under Section 414 of the Code. "Compliance Certificate": as defined in subsection 7.2(b). ---------------------- "Contractual Obligation": as to any Person, any provision of any ---------------------- security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Current Casualty Event": as defined in subsection 4.4(d). ---------------------- "Current Disposition": as defined in subsection 4.4(b). ------------------- "Default": any of the events specified in Section 9, whether or not ------- any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Disposition": any transaction, or series of related transactions, ----------- pursuant to which either Borrower and/or any of its Subsidiaries sells, assigns, transfers or otherwise disposes (other than sales of equipment or inventory in the ordinary course of business) of any property (whether now owned or hereafter acquired) to any other Person, in each case whether or not the consideration therefor to be received by such Borrower or a Subsidiary consists of cash, securities or the swap or exchange of assets owned by the acquiring Person, except any such transaction between or among the Borrowers and their Subsidiaries or between or among any such Subsidiaries of the Borrowers. "Domestic Subsidiary": with respect to any Person, any Subsidiary of ------------------- such Person that is incorporated or organized under the laws of the United States or any state thereof. "Draft": a blank bill of exchange, within the meaning of the Bills of ----- Exchange Act (Canada), in substantially the form set forth in Exhibit B, drawn by the Canadian Borrower on a C$ Lender, denominated in C$ and bearing such distinguishing letters and numbers as such Lender may determine, but which at such time, except as otherwise provided herein, has not been completed or accepted by such Lender. "Drawing": the creation and purchase of Bankers' Acceptances and/or ------- the purchase of completed Drafts, by the C$ Lenders pursuant to subsection 3.2. "EBITDA": for any period for any Person, the consolidated Net Income ------ of such Person and its Subsidiaries, plus, to the extent deducted in determining such Net Income for such period, (a) Interest Expense, (b) amortization of intangibles and deferred financing fees, (c) depreciation, (d) provisions for taxes, and in the case of 13 the Company, all Tax Distributions, (e) any extraordinary, unusual or non- recurring gains or losses or charges, and (f) any other non-cash items reducing such Net Income, all as determined on a consolidated basis in accordance with GAAP; provided that, for any period during which the -------- Company or any Subsidiary shall purchase or otherwise acquire any real property which the Company or such Subsidiary shall have been leasing as lessee during such period, the Company or such Subsidiary, as the case may be, shall be deemed to have acquired such real property on the first day of such period and any rental expense of the Company or such Subsidiary during such period in respect of such real property shall be disregarded. "Environmental Claims": any and all administrative, regulatory or -------------------- judicial actions, suits, written directives, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (hereafter, "Claims"), including, without ------ limitation, (a) any and all Claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Laws and (b) Claims by any third party pursuant to Environmental Laws seeking damages, contributions, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Costs": any and all costs, fines, penalties, expenses, ------------------- damages and liabilities, including, without limitation, the fees of attorneys and environmental consultants, arising directly under Environmental Laws. "Environmental Law": any federal, state, provincial, foreign or local ----------------- statute, law, rule, regulation, ordinance or rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Hazardous Materials Transportation Act, as amended, 49 U.S.C. (S) 1801 et seq.; the Federal Water Pollution Control Act, as amended, 33 -- --- U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. (S) -- --- 2601 et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the Safe -- --- -- --- Drinking Water Act, 42 U.S.C. (S) 3808 et seq.; the Oil Pollution Act of -- --- 1990, 33 U.S.C. (S) 2701 et seq.; the Emergency Planning and Community -- --- Right-To-Know-Act of 1986, 42 U.S.C. (S) 11001 et seq.; any applicable -- --- state and local or foreign counterparts or equivalents; and any Canadian federal, provincial, municipal or local counterparts or equivalents thereof, including the Canadian Environmental Protection Act, as amended, the Environmental Protection Act (Ontario), as amended, and the Ontario Water Resources Act and any foreign counterparts or equivalents thereof; and the terms and conditions of any environmental permit issued pursuant to any Environmental Law to either Borrower or its Subsidiaries or any facility owned or operated by such Borrower or its Subsidiaries. 14 "ERISA": the Employee Retirement Income Security Act of 1974, as ----- amended from time to time. "Equity Offerings": the collective reference to the concurrent public ---------------- offerings by the Company consummated in July, 1997 of shares of the Company's Common Stock (i) in the United States of America and Canada and (ii) internationally. "Eurocurrency Reserve Requirements": for any day as applied to a --------------------------------- Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such System. "Eurodollar Base Rate": with respect to each day during each Interest -------------------- Period pertaining to a Eurodollar Loan, the rate per annum determined by the US Administrative Agent to be the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered rates for deposits in US Dollars with a term comparable to such Interest Period that appears on the Telerate British Bankers Assoc. Interest Settlement Rates Page (as defined below) at approximately 11:00 A.M., London time, on the second full Business Day preceding the first day of such Interest Period; provided, however, that if -------- ------- there shall at any time no longer exist a Telerate British Bankers Assoc. Interest Settlement Rates Page, "Eurodollar Base Rate" shall mean, with -------------------- respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate at which CIBC is offered US Dollar deposits at or about 10:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Loan to be outstanding during such Interest Period. "Telerate -------- British Bankers Assoc. Interest Settlement Rates Page" shall mean the ----------------------------------------------------- display designated as Page 3750 on the Telerate System Incorporated Service (or such other page as may replace such page on such service for the purpose of displaying the rates at which US Dollar deposits are offered by leading banks in the London interbank deposit market). "Eurodollar Loans": US$ Loans the rate of interest applicable to ---------------- which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest --------------- Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in 15 accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate ----------------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Eurodollar Tranche": the collective reference to Eurodollar Loans ------------------ the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "Event of Default": any of the events specified in Section 9, ---------------- provided that any requirement for the giving of notice, the lapse of time, -------- or both, or any other condition, has been satisfied. "Exchange Act": the Securities Exchange Act of 1934, as amended, and ------------ the rules and regulations promulgated thereunder. "Existing Credit Agreement": as defined in the recitals to this ------------------------- Agreement. "Federal Funds Rate": for any particular date, an interest rate per ------------------ annum equal to the interest rate (rounded upward to the nearest 1/16th of 1%) offered in the interbank market to CIBC as the overnight Federal Funds Rate at or about 10:00 A.M., New York City time, on such day (or, if such day is not a Business Day, for the next preceding Business Day). "Fixed Charge Coverage Ratio": for any period, the ratio of (a) --------------------------- EBITDA of the Company for such period to (b) Fixed Charges for such period. "Fixed Charges": for any period, the sum of the following for such ------------- period: (a) Interest Expense, (b) the excess, if any, of the aggregate principal amount of Loans outstanding on the first day of such period over the maximum aggregate amount of the Commitments on the last day of such period, giving effect to the scheduled reductions required under subsection 4.3(a) and 4.3(b), (c) income taxes paid by the Company and its Subsidiaries, (d) Tax Distributions and (e) the amount of Capital Expenditures relating to the Company's normal maintenance program. "Foreign Subsidiary": any Subsidiary organized under the laws of any ------------------ jurisdiction outside the United States of America. "GAAP": generally accepted accounting principles in the United States ---- of America in effect from time to time. "Governmental Authority": any nation or government, any state or ---------------------- other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 16 "Guarantee Obligation": as to any Person (the "guaranteeing person"), -------------------- ------------------- without duplication, any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person ------------------- (the "primary obligor") in any manner, whether directly or indirectly, --------------- including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) 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, (iii) to purchase property, 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 (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, -------- however, that the term Guarantee Obligation shall not include endorsements ------- of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Company in good faith. "Hazardous Materials": (a) any petroleum or petroleum products, ------------------- radioactive materials, asbestos in any form that is friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas in excess of four picocuries per liter; (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous waste," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," "toxic substances," "toxic pollutants," "contaminants," or "pollutants," or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority. "Indebtedness": of any Person at any date, without duplication, (a) ------------ all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than accounts payable or trade payables and other accrued liabilities incurred in the ordinary course of business and payable in accordance with customary practices), provided that amounts deferred and owing with respect to non-competition or -------- consulting agreements with respect to Permitted Acquisitions or 17 existing on the Closing Date up to an aggregate amount of $5,000,000 at any one time outstanding shall not constitute Indebtedness, (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person in respect of acceptances issued or created for the account of such Person, (d) all Capitalized Lease Obligations of such Person, (e) for purposes of subsection 8.4 and Section 9(e), all obligations of such Person in respect of any Interest Rate Protection Agreements, and (f) all liabilities secured by any Lien on any property owned by such Person in circumstances where such Person has not assumed or otherwise become liable for the payment thereof, which Indebtedness shall be limited to the lesser of the value of the property or the amount of the liability. "Indemnified Liabilities": as defined in subsection 11.5. ----------------------- "Insolvency": with respect to any Multiemployer Plan, the condition ---------- that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. --------- "Intellectual Property": as defined in subsection 5.9. --------------------- "Interest Expense": for any period for any Person, the total ---------------- consolidated interest expense of such Person and its Subsidiaries for such period (calculated on an accrual basis without regard to any limitations on the payment thereof and excluding amortization of deferred financing costs) in respect of all Indebtedness of such Person for such period plus, without duplication, that portion of Capitalized Lease Obligations of such Person and its Subsidiaries representing the interest factor for such period. "Interest Payment Date": (a) as to any Base Rate Loan or C$ Prime --------------------- Loan, the last day of each March, June, September and December, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period and (c) as to any Eurodollar Loan having an Interest Period longer than three months, the day which is three months after the first day of such Interest Period and the last day of such Interest Period. "Interest Period": with respect to any Eurodollar Loan: --------------- (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Company in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Company by irrevocable 18 notice to the US Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods -------- are subject to the following: (i) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period that would otherwise extend beyond the Termination Date shall end on the Termination Date; (iii) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and (iv) the Company shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan. "Interest Rate Protection Agreement": any interest rate protection ---------------------------------- agreement, interest rate future, interest rate option, interest rate cap or collar or other interest rate hedge arrangement, to or under which the Company or any of its Subsidiaries is a party or a beneficiary. "Knott Transaction": the acquisition of the 60% partnership interest ----------------- in Knott Pierce Limited Partnership not currently owned by the Company. "Leverage Ratio": at any date of determination thereof, the ratio of -------------- (a) Total Net Debt at such date to (b) Adjusted EBITDA for the then most recently ended period of four consecutive fiscal quarters, for which financial statements shall have been delivered to the Lenders pursuant to subsection 5.1, 7.1(a) or 7.1(b), as the case may be. "Lien": any mortgage or deed of trust, pledge, hypothecation, ---- assignment, deposit arrangement, security interest, lien, charge, easement, encumbrance, preference, priority, or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including without limitation, any Capitalized Lease Obligation, conditional sale, or other title retention agreement having substantially the same economic effect as any of the foregoing). 19 "Limited Partnership": collectively, PLC Command I, L.P. and PLC ------------------- Command II, L.P., each a limited partnership organized and existing under the laws of the Commonwealth of Pennsylvania. "Loan Documents": this Agreement, each Draft, each Bankers' -------------- Acceptance, any Notes, the Security Documents and any document, agreement or certificate executed or delivered in connection herewith. "Loan Parties": each Borrower and each Subsidiary of the Company and ------------ any other Person (other than the Lenders and the Administrative Agents) which is a party to a Loan Document. "Loans": the collective reference to the US$ Loans and the C$ Loans. ----- "Local Time": (a) in the case of matters relating to US$ Loans, New ---------- York City time, and (b) in the case of matters relating to C$ Loans, Toronto time. "Management Services Agreement": collectively, the Management and ----------------------------- Administrative Services Agreement and the Software and Technology Services Agreement, each dated as of October 27, 1995, between the Company and the Canadian Borrower pursuant to which certain services are obligated to be provided by the Company to the Canadian Borrower for which services the Canadian Borrower is obligated to pay to the Company certain fees as provided in such Agreements, as such Agreements may be amended, supplemented or otherwise modified in accordance with subsection 8.11. "Material Adverse Effect": a material adverse effect on (a) the ----------------------- business, operations, property, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole or (b) the validity or enforceability of this or any of the other Loan Documents or the rights or remedies of the Administrative Agents or the Lenders hereunder or thereunder. "Moody's": Moody's Investors Service, Inc. ------- "Mortgages": the collective reference to all US Mortgages and all --------- Canadian Mortgages. "Multiemployer Plan": a Plan which is a multiemployer plan as defined ------------------ in Section 4001(a)(3) of ERISA. "Net Income": with respect to any Person for any period, the ---------- consolidated net income of such Person and its Subsidiaries for such period determined in accordance with GAAP, excluding any foreign currency translation gains or losses added or deducted, as applicable, in the computation of Net Income. 20 "Net Proceeds": ------------ (a) in the case of any Disposition, the aggregate amount of all cash payments received by the relevant Borrower and its Subsidiaries directly or indirectly in connection with such Disposition; provided -------- that (i) Net Proceeds shall be net of (x) the amount of any legal, title and recording tax expenses, commissions and other fees and expenses paid by such Borrower and its Subsidiaries in connection with such Disposition and (y) any federal, state, provincial and local income or other taxes estimated to be payable by such Borrower and its Subsidiaries (or, in the case of the Company, by the Company and/or the Subchapter S Shareholders resulting from the Company's status as an S corporation as defined in Section 1361 of the Code prior to the Equity Offerings) as a result of such Disposition (but only to the extent that such estimated taxes are in fact paid to the relevant federal, state, provincial or local Governmental Authority) and (ii) Net Proceeds shall be net of any repayments by such Borrower or any of its Subsidiaries of Indebtedness to the extent that (x) such Indebtedness is secured by a Lien on the property that is subject to such Disposition (which Indebtedness shall be valued at the lesser of the value of the property or the amount of the Indebtedness) and (y) the transferee of (or holder of a Lien on) such property requires that such Indebtedness be repaid as a condition to the purchase of such property; and (b) in the case of any Casualty Event, the aggregate amount of proceeds of insurance (other than business interruption insurance), condemnation awards and other compensation received by the relevant Borrower and its Subsidiaries in respect of such Casualty Event net of (i) reasonable expenses incurred by such Borrower and its Subsidiaries in connection therewith, (ii) contractually required repayments on Indebtedness (other than Indebtedness hereunder) to the extent secured by a Lien on such property, (iii) any income and transfer taxes payable by such Borrower or any of its Subsidiaries (or, in the case of the Company, by the Company and/or the Subchapter S Shareholders resulting from the Company's status as an S corporation as defined in Section 1361 of the Code prior to the Equity Offerings) in respect of such Casualty Event and (iv) costs resulting from the use of alternate facilities or warehouses by such Borrower and/or any Subsidiaries as a result of such Casualty Event. "1996 Senior Subordinated Notes": the 11-/1//\\8\\% Senior ------------------------------ Subordinated Notes due 2006 of the Company in an aggregate original principal amount of US$200,000,000 issued pursuant to the 1996 Senior Subordinated Notes Indenture, as the same may be amended, supplemented or otherwise modified from time to time in accordance with subsection 8.11. "1997 Senior Subordinated Notes": the 9-/1//\\8\\% Senior ------------------------------ Subordinated Notes due 2007 of the Company in an aggregate original principal amount of US$120,000,000 issued pursuant to the 1997 Senior Subordinated Notes Indenture, as the same may be 21 amended, supplemented or otherwise modified from time to time in accordance with subsection 8.11. "1996 Senior Subordinated Notes Indenture": the Senior Subordinated ---------------------------------------- Notes Indenture, dated as of July 15, 1996, between the Company and United States Trust Company of New York, as trustee, as amended, supplemented or otherwise modified from time to time in accordance with subsection 8.11. "1997 Senior Subordinated Notes Indenture": the Senior Subordinated ---------------------------------------- Notes Indenture, dated as of July 7, 1997 between the Company and The Bank of New York, as trustee, as amended, supplemented or otherwise modified from time to time in accordance with subsection 8.11. "Non-Excluded Taxes": as defined in subsection 4.11. ------------------ "Notes": the collective reference to the US$ Notes and C$ Notes. ----- "Original Closing Date": the Closing Date, as defined in the Existing --------------------- Credit Agreement. "Participant": as defined in subsection 11.6(b). ----------- "Partnership Agreement": the PLC Command I, L.P. Limited Partnership --------------------- Agreement dated as of October 23, 1995 between PLC Command I, Inc. as general partner and the Company as limited partner, as amended, supplemented or modified thereto, and the PLC Command II, L.P. Limited Partnership Agreement dated as of October 23, 1995 between PLC Command II, Inc. as general partner and the Company as limited partner, as amended, supplemented or modified thereto. "PBGC": the Pension Benefit Guaranty Corporation established pursuant ---- to Subtitle A of Title IV of ERISA. "Permitted Acquisition": any acquisition by the Company or any Wholly --------------------- Owned Subsidiary, on or after the Closing Date, whether through a purchase of Capital Stock or assets or through a merger, consolidation or amalgamation, of another Person or the assets constituting an entire business or operating business unit of another Person, provided that: -------- (a) the assets so acquired or, as the case may be, the assets of the Person so acquired shall be in or related to the archives records management business; (b) no Default or Event of Default shall have occurred and be continuing at the time thereof or would result therefrom; 22 (c) the Company shall have delivered to the US Administrative Agent, as soon as available but in no event later than the earlier of (i) 10 days after the execution thereof and (ii) 3 Business Days prior the closing of such acquisition, a copy of the executed purchase agreement with respect thereto (without exhibits, except to the extent available and requested by the US Administrative Agent) or the most recent draft thereof; (d) if the Purchase Price of such Permitted Acquisition would exceed US$30,000,000 (or the equivalent thereof in other currencies), the Required Lenders shall have consented in writing to such Permitted Acquisition; (e) if, after giving effect to such acquisition, the aggregate amount of the proceeds of Acquisition Loans made (x) during the period from the Closing Date to and including December 31, 1997 or (y) in any fiscal year of the Company thereafter that are used to fund Permitted Acquisitions shall exceed US$85,000,000, (i) the Required Lenders shall have consented in writing to such Permitted Acquisition and (ii) the Company shall, not less than five Business Days prior to the closing of such Permitted Acquisition, have provided updated financial projections for the then remaining life of this Agreement and delivered a compliance certificate of a Responsible Officer demonstrating pro forma compliance with subsections 8.8, 8.9 and 8.10 for the then remaining life of this Agreement; and (f) such acquisition shall be effected in such manner so that the acquired Capital Stock or assets are owned either by the Company or a Wholly Owned Subsidiary and, if effected by merger, consolidation or amalgamation, the Company or a Wholly Owned Subsidiary shall be the continuing, surviving or resulting entity. Notwithstanding the foregoing, the Knott Transaction shall be a Permitted Acquisition. "Permitted Holders": collectively, Leo W. Pierce, Sr., his children ----------------- or other lineal descendants (whether adoptive or biological), the spouses of any of the foregoing and any probate estate of any such individual and any trust, so long as one or more of the foregoing individuals is the principal beneficiary of such trust, and any partnership, corporation or other entity all of the partners, shareholders, members or owners of which are any one or more of the foregoing. "Permitted Intercompany Indebtedness": (a) loans and advances from ----------------------------------- the Company to any Subsidiary of the Company, (b) loans and advances from any Subsidiary of the Company to the Company or any other Subsidiary of the Company, and (c) accrued but unpaid fees owing by the Canadian Borrower to the Company pursuant to the Management Services Agreement. 23 "Permitted Mortgage Debt": Indebtedness of the Company permitted by ----------------------- subsection 8.4(c). "Person": an individual, partnership, corporation, business trust, ------ joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan which is ---- covered by ERISA and in respect of which the Company or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "PLC": as defined in the recitals to this Agreement. --- "PPSA": the Personal Property Security Act (Ontario). ---- "Preferred Stock": as defined in subsection 5.17. --------------- "Purchase Price": with respect to any Permitted Acquisition, an -------------- amount equal to the sum of (i) the aggregate consideration, whether cash, property (at the fair market value thereof determined in good faith by the Board of Directors) or securities (including, without limitation, any Indebtedness incurred pursuant to subsection 8.4(f) and the fair market value of any Capital Stock of the Company issued to the seller in such Permitted Acquisition), paid or delivered by the Company and its Subsidiaries in connection with such Permitted Acquisition plus (ii) the aggregate amount of liabilities of the acquired business (net of current assets of the acquired business) that would be reflected on a balance sheet (if such were to be prepared) of the Company and its Subsidiaries after giving effect to such Permitted Acquisition. "Qualified Assets": as defined in subsection 4.4(b). ---------------- "RCRA": shall mean the Resource Conservation and Recovery Act, as the ---- same may be amended from time to time, 42 U.S.C. (S) 6901 et seq. -- --- "Refunding Bankers' Acceptance": as defined in subsection 3.3(d). ----------------------------- "Registers": as defined in subsection 11.6(d). --------- "Regulation D, G, T, U or X": Regulation D, G, T, U or X of the Board -------------------------- of Governors of the Federal Reserve System as in effect from time to time. "Reinvestable Proceeds": as defined in subsection 4.4(b). --------------------- "Release": disposing, discharging, injecting, spilling, pumping, ------- leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing, pouring and the like, into or upon any land or water or air, or otherwise entering into the environment. "Relevant Permitted Acquisition": as defined in subsection 6.3(a). ------------------------------ 24 "Reorganization": with respect to any Multiemployer Plan, the condition -------------- that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(b) of ---------------- ERISA, other than those events as to which the thirty day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S) 2615. "Required C$ Lenders": at any date, C$ Lenders the C$ Commitment ------------------- Percentages of which aggregate at least 51% at such date. "Required Lenders": at any date, Lenders the Commitment Percentages ---------------- of which aggregate at least 51% at such date. "Required US$ Lenders": at any date, US$ Lenders the US Commitment -------------------- Percentages of which aggregate at least 51% at such date. "Requirement of Law": as to any Person, the Certificate of ------------------ Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": with respect to either Borrower, the chief ------------------- executive officer, the president, the chief financial officer or the treasurer of such Borrower. "Security Documents": the collective reference to the US Security ------------------ Documents and the Canadian Security Documents. "Single Employer Plan": any Plan which is covered by Title IV of -------------------- ERISA, but which is not a Multiemployer Plan. "S&P": Standard & Poor's Ratings Services. --- "Stock Recapitalization": the collective reference to the stock split ---------------------- and recapitalization effected by PLC immediately prior to PLC's redomestication into Pennsylvania pursuant to PLC's merger with and into the Company, in which each outstanding share of Class A and Class B Common Stock of PLC was converted into shares of voting Common Stock of the Company. "Subsidiary": as to any Person, a corporation, partnership or other ---------- entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all 25 references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. "Subchapter S Shareholders": the collective reference to the ------------------------- shareholders of the Company during the period in which the Company was taxed as an S corporation as defined in Section 1361 of the Code, to whom the Company may make Tax Distributions. "Tax Distributions": with respect to any period in which the Company ----------------- was taxed as an S corporation as defined in Section 1361 of the Code or other pass-through entity for federal income tax purposes, distributions to the Subchapter S Shareholders based on estimates of the highest amount of federal, state and local income tax per share of Capital Stock of the Company outstanding prior to the Stock Recapitalization that any Subchapter S Shareholder would be required to pay as a result of the Company's being treated as a pass-through entity for income tax purposes or pursuant to a Tax Indemnity Agreement. "Tax Indemnity Agreement": collectively, (a) the Tax Indemnification ----------------------- Agreement, dated June 24, 1997, entered into by the Company and certain Subchapter S Shareholders with respect to the indemnity by the Company for taxes owing by such Shareholders as a result of the Company's operations during the period in which the Company was taxed as an S corporation and (b) the agreement with one of the Subchapter S Shareholders relating to such matters that is described in the letter from the Company to the US Administrative Agent dated August 12, 1997. "Tax Refund": with respect to either Borrower, any cash payment ---------- received by such Borrower as a rebate or refund of any federal, state, provincial or local income taxes paid by such Borrower or of any taxes with respect to the assets or properties of such Borrower. "Tax Sharing Agreements": collectively, all tax sharing, tax ---------------------- allocation and other similar agreements entered into by the Company or any of its Subsidiaries. "Termination Date": June 30, 2004. ---------------- "Texas Avenue Property": that certain real property leased by the --------------------- Company pursuant to a Ground Lease, dated as of August 1, 1922, between the Company and S. Bernard Naman, as Trustee, located at 1120 Texas Avenue, Houston, Texas. "Total Net Debt": at any date of determination, without duplication, -------------- the excess, if any, of all Indebtedness of the Company and its Subsidiaries (excluding (a) all Indebtedness of the type described in clause (e) of the definition thereof, except to the extent amounts are owing with respect thereto upon the termination of the respective agreement constituting such Indebtedness) and all Guarantee Obligations of the Company and its Subsidiaries in respect of Indebtedness of third Persons over (b) any cash balances in excess of US$500,000 then standing to the credit of the Company 26 and its Subsidiaries in their respective operating accounts and the aggregate amount of Cash Equivalents then owned by the Company and its Subsidiaries. "Transferee": as defined in subsection 11.6(f). ---------- "Travelers Corporation Building Archives": the real property located --------------------------------------- at 1100 Kennedy Boulevard, Windsor, Connecticut. "Type": (a) as to any US$ Loan, its nature as a Base Rate Loan or a ---- Eurodollar Loan and (b) as to any C$ Loan, its nature as a C$ Prime Loan or a Bankers' Acceptance. "US Administrative Agent": Canadian Imperial Bank of Commerce, New ----------------------- York Agency, together with its affiliates, as the agent for the US$ Lenders under this Agreement and the other Loan Documents. "US Administrative Office": the US Administrative Agent's office ------------------------ located at 425 Lexington Avenue, New York, New York 10017, or such other office in the United States as may be designated by the US Administrative Agent by written notice to the Company and the Lenders. "US Commitment": as to any US$ Lender, its obligation to make US$ ------------- Loans to the Company hereunder in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1.1 as such Lender's "US Commitment", as such amount may be changed from time to time as provided herein. The original aggregate principal amount of the US Commitments is US$ 140,000,000. "US Commitment Percentage": as to any US$ Lender at any time, the ------------------------ percentage of the aggregate US Commitments then constituted by such Lender's US Commitment. "US$ Equivalent": on any date of determination, with respect to any -------------- amount in C$, the equivalent in US Dollars of such amount, determined by the US Administrative Agent using the Canadian Exchange Rate then in effect. "US$ Exchange Rate": on a particular date, the rate at which US$ may ----------------- be exchanged into C$, determined by reference to the Bank of Canada noon rate as published on the Reuters Screen page BOFC on the immediately preceding Business Day. In the event that such rate does not appear on such Reuters page, the "US$ Exchange Rate" shall be determined by reference ----------------- to any other means (as selected by the relevant Administrative Agent) by which such rate is quoted or published from time to time by the Bank of Canada (in each case as in effect at or about 12:00 Noon, Toronto time, on the Business Day immediately preceding the relevant date of determination); provided, that if at the time of any such determination, for any reason, no -------- such exchange rate is being quoted or published, the relevant Administrative Agent 27 may use any reasonable method as it deems applicable to determine such rate, and such determination shall be conclusive absent manifest error. "US$ Lender": each Lender designated as a "US$ Lender" on Schedule ---------- 1.1, as such Schedule may be modified from time to time as provided herein. "US$ Loans": as defined in subsection 2.1(a). --------- "US Dollars" and "US$": dollars in lawful currency of the United ---------- --- States of America. "US Global Guarantee and Security Agreement": the Amended and ------------------------------------------ Restated US Global Guarantee and Security Agreement to be executed and delivered by the parties thereto substantially in the form of Exhibit D, as the same may be amended, supplemented or otherwise modified from time to time. "US Lending Office": as to each US$ Lender, the office in the United ----------------- States specified as the "US Lending Office" of such Lender on Schedule 1.1 or in an Assignment and Acceptance, as the case may be, or such other office in the United States as may be designated by such Lender by written notice to Company and the US Administrative Agent. "US Mortgage": a mortgage executed and delivered pursuant to the ----------- Existing Credit Agreement or to be executed and delivered pursuant hereto by a domestic Loan Party, with respect to a US Mortgaged Property, substantially in the form of Exhibit E, as the same may be amended, supplemented or otherwise modified from time to time. "US Mortgaged Properties": all real property listed and identified as ----------------------- such in Part B of Schedule 5.8 and designated as such. "US$ Notes": as defined in subsection 4.1(f). --------- "US Security Documents": the collective reference to the US Global --------------------- Guarantee and Security Agreement, the US Mortgages, and all other security documents hereafter delivered to the US Administrative Agent granting a Lien on any asset or assets of the Company or any Domestic Subsidiary to secure the obligations and liabilities of the Company hereunder and under any of the other Loan Documents or to secure any guarantee by any Subsidiary of any such obligations and liabilities. "Wholly Owned Subsidiary": any Subsidiary, 99% or more of the ----------------------- outstanding Capital Stock (other than directors' qualifying shares or shares held pursuant to similar requirements of law in respect of Foreign Subsidiaries) of which are owned, directly or indirectly, by the Company. 28 1.2 Other Definitional Provisions. (a) Unless otherwise specified ----------------------------- therein, all terms defined in this Agreement shall have the defined meanings when used in any Notes or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Notes, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Company and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. THE US COMMITMENTS 2.1 The US Commitments. (a) Subject to the terms and conditions ------------------ hereof, each US$ Lender severally agrees to make revolving credit loans ("US$ --- Loans") to the Company from time to time during the Commitment Period in an - ----- aggregate principal amount at any one time outstanding not to exceed the amount of such Lender's US Commitment. During the Commitment Period the Company may use the US Commitments by borrowing, prepaying or repaying the US$ Loans of such Lender in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (b) The US$ Loans may from time to time be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Company and notified to the US Administrative Agent in accordance with subsections 2.2 and 2.3, provided that no US$ Loan shall be made as a Eurodollar Loan after the day -------- that is one month prior to the Termination Date. 2.2 Procedure for US$ Loan Borrowing. The Company may borrow under -------------------------------- the US Commitments during the Commitment Period on any Business Day, provided -------- that the Company shall give the US Administrative Agent irrevocable written or telephonic notice (in the case of telephonic notice, to be promptly confirmed in writing) (which notice must be received by the US Administrative Agent prior to 10:00 A.M., New York City time, (a) three Business Days prior to the requested Borrowing Date, if all or any part of the requested US$ Loans are to be initially Eurodollar Loans, or (b) one Business Day prior to the requested Borrowing Date, in the case of Base Rate Loans), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, Base Rate Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the amount of such Type of Loan and the length of the initial Interest Period or Interest Periods therefor. Each borrowing under the US Commitments shall be in 29 an amount equal to (x) in the case of Base Rate Loans, US$300,000 or a whole multiple of US$100,000 in excess thereof (or, if the then Available Commitments are less than US$300,000, such lesser amount) and (y) in the case of Eurodollar Loans, US$1,000,000 or a whole multiple of US$100,000 in excess thereof (or, if the then Available Commitments are less than US$1,000,000, such lesser amount). Upon receipt of any such notice from the Company, the US Administrative Agent shall promptly notify each US$ Lender thereof. Each US$ Lender will make the amount of its pro rata share of each borrowing available to the US Administrative Agent for the account of the Company at the US Administrative Office prior to 11:00 A.M., New York City time, on the Borrowing Date requested by the Company in funds immediately available to the US Administrative Agent. Such borrowing will then be made available to the Company by the US Administrative Agent crediting the account of the Company on the books of such office with the aggregate of the amounts made available to the US Administrative Agent by the US$ Lenders and in like funds as received by the US Administrative Agent. 2.3 Conversion and Continuation Options. (a) The Company may elect ----------------------------------- from time to time to convert Eurodollar Loans to Base Rate Loans by giving the US Administrative Agent at least one Business Day's prior irrevocable written or telephonic notice (in the case of telephonic notice, to be promptly confirmed in writing) of such election, provided that if any such conversion of Eurodollar -------- Loans occurs on a day other than the last day of an Interest Period with respect thereto the Company shall pay any breakage costs in connection with such conversion. The Company may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the US Administrative Agent at least three Business Days' prior irrevocable written or telephonic notice (in the case of telephonic notice, to be promptly confirmed in writing) of such election. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the US Administrative Agent shall promptly notify each US$ Lender thereof. All or any part of outstanding Eurodollar Loans and Base Rate Loans may be converted as provided herein, provided that (i) no Base Rate Loan may be -------- converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and the US Administrative Agent has or the Required US$ Lenders have determined that such a conversion is not appropriate and (ii) no Base Rate Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Termination Date. (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Company giving, at least three Business Days' prior, irrevocable written or telephonic notice (in the case of telephonic notice, to be promptly confirmed in writing) to the US Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurodollar Loan -------- may be continued as such (i) when any Event of Default has occurred and is continuing and the US Administrative Agent has or the Required US$ Lenders have determined that such a continuation is not appropriate or (ii) after the date that is one month prior to the Termination Date in accordance with the terms described above and provided, further, that if the Company shall fail to give -------- ------- such notice or if such continuation is not permitted such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring 30 Interest Period. Upon receipt of any notice given by the Company pursuant to this subsection 2.3(b), the US Administrative Agent shall promptly notify each US$ Lender thereof. 2.4 Minimum Amounts and Maximum Number of Eurodollar Tranches. --------------------------------------------------------- Notwithstanding anything to the contrary in this Agreement, all borrowings, payments, prepayments, conversions and continuations of US$ Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be equal to US$1,000,000 or a whole multiple of US$100,000 in excess thereof. More than one borrowing may occur on the same date, but in no event shall there be more than five Eurodollar Tranches outstanding at any time. SECTION 3. THE CANADIAN COMMITMENTS 3.1 The Canadian Commitments. Subject to the terms and conditions ------------------------ hereof, each C$ Lender severally agrees to make revolving credit loans (which shall be C$ Prime Loans) to, and to accept and, at the option of the Canadian Borrower, purchase Bankers' Acceptances from, the Canadian Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding not to exceed such Lender's Canadian Commitment. During the Commitment Period, the Canadian Borrower may use the Canadian Commitments by borrowing, prepaying or repaying the C$ Prime Loans or Bankers' Acceptances, in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. 3.2 Procedure for C$ Loan Borrowing. The Canadian Borrower may ------------------------------- borrow C$ Prime Loans during the Commitment Period on any Business Day, provided -------- that the Canadian Borrower shall give the Canadian Administrative Agent irrevocable written or telephonic notice (in the case of telephonic notice, to be promptly confirmed in writing) (which notice must be received by the Canadian Administrative Agent prior to 10:00 A.M., Toronto time, one Business Day prior to the requested Borrowing Date), specifying (a) the amount to be borrowed and (b) the requested Borrowing Date. Each borrowing of C$ Prime Loans shall be in an amount equal to C$300,000 or a whole multiple of C$100,000 in excess thereof. Upon receipt of any such irrevocable notice from the Canadian Borrower, the Canadian Administrative Agent shall promptly notify each C$ Lender thereof. Each C$ Lender will make the amount of its pro rata share of each such borrowing available to the Canadian Administrative Agent for the account of the Canadian Borrower at the Canadian Administrative Office prior to 11:00 A.M., Toronto time, on the Borrowing Date requested by the Canadian Borrower in funds immediately available to the Canadian Administrative Agent. Such borrowing will then be made available on such Borrowing Date to the Canadian Borrower by the Canadian Administrative Agent crediting the account of the Canadian Borrower on the books of the Canadian Administrative Office with the aggregate of the amounts made available to the Canadian Administrative Agent by the C$ Lenders and in like funds as received by the Canadian Administrative Agent. 31 3.3 Bankers' Acceptances. (a) The Canadian Borrower may issue -------------------- Bankers' Acceptances denominated in C$, for acceptance and, at the Canadian Borrower's option, purchase by the C$ Lenders, each in accordance with the provisions of this subsection 3.3. (b) Procedures. ---------- (1) Notice. The Canadian Borrower shall notify the Canadian ------ Administrative Agent by irrevocable written or telephonic notice (in the case of telephonic notice, to be promptly confirmed in writing) by 10:00 A.M., Toronto time, one Business Day prior to the Borrowing Date in respect of any borrowing by way of Bankers' Acceptances. (2) Minimum Borrowing Amount. Each borrowing by way of Bankers' ------------------------ Acceptances shall be in a minimum aggregate face amount of C$1,000,000 or a whole multiple of C$100,000 in excess thereof. (3) Face Amounts. The face amount of each Bankers' Acceptance shall ------------ be C$100,000 or any whole multiple thereof. (4) Term. Bankers' Acceptances shall be issued and shall mature on a ---- Business Day. Each Bankers' Acceptance shall have a term of 30, 60, 90 or 180 days (or such shorter or longer term as shall be agreed to by all of the C$ Lenders), shall mature on or before the Termination Date and shall be in form and substance reasonably satisfactory to each C$ Lender. (5) Bankers' Acceptances in Blank. To facilitate the acceptance of ----------------------------- Bankers' Acceptances under this Agreement, the Canadian Borrower shall, from time to time as required, provide to the Canadian Administrative Agent Drafts duly executed and endorsed in blank by the Canadian Borrower in quantities sufficient for each C$ Lender to fulfill its obligations hereunder. Each C$ Lender is hereby authorized to accept such Drafts endorsed in blank in such face amounts as may be determined by such C$ Lender in accordance with the terms of this Agreement, provided that the -------- aggregate amount thereof is less than or equal to the aggregate amount of Bankers' Acceptances required to be accepted by such C$ Lender. No C$ Lender shall be responsible or liable for its failure to accept a Bankers' Acceptance if the cause of such failure is, in whole or in part, due to the failure of the Canadian Borrower to provide duly executed and endorsed Drafts to the Canadian Administrative Agent on a timely basis, nor shall any C$ Lender be liable for any damage, loss or other claim arising by reason of any loss or improper use of any such instrument except loss or improper use arising by reason of the gross negligence or willful misconduct of such C$ Lender, its officers, employees, agents or representatives. The Canadian Administrative Agent and each C$ Lender shall exercise such care in the custody and safekeeping of Drafts as it would exercise in the custody and safekeeping of similar property owned by it. Each C$ Lender will, upon the request of the Canadian Borrower, promptly advise the Canadian Borrower of the number and designation, if any, of Drafts then held by it for the Canadian Borrower. Each C$ Lender shall 32 maintain a record with respect to Drafts and Bankers' Acceptances (i) received by it from the Canadian Administrative Agent in blank hereunder, (ii) voided by it for any reason, (iii) accepted by it hereunder, (iv) purchased by it hereunder and (v) cancelled at their respective maturities. Each C$ Lender further agrees to retain such records in the manner and for the statutory periods provided in the various Canadian provincial or federal statutes and regulations which apply to such C$ Lender. (6) Execution of Bankers' Acceptances. Drafts of the Canadian --------------------------------- Borrower to be accepted as Bankers' Acceptances hereunder shall be duly executed on behalf of the Canadian Borrower. Notwithstanding that any person whose signature appears on any Bankers' Acceptance as a signatory for the Canadian Borrower may no longer be an authorized signatory for the Canadian Borrower at the date of issuance of a Bankers' Acceptance, such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such issuance, and any such Bankers' Acceptance so signed shall be binding on the Canadian Borrower. (7) Issuance of Bankers' Acceptances. Promptly following receipt of -------------------------------- a notice of borrowing by way of Bankers' Acceptances, the Canadian Administrative Agent shall so advise the C$ Lenders and shall advise each C$ Lender of the face amount of each Draft to be accepted by it and the term thereof. The aggregate face amount of Drafts to be accepted by a C$ Lender shall be determined by the Canadian Administrative Agent on a pro rata basis by reference to the respective Canadian Commitments of the C$ Lenders, except that, if the face amount of a Draft which would otherwise be accepted by a C$ Lender would not be C$100,000 or a whole multiple thereof, such face amount shall be increased or reduced by the Canadian Administrative Agent in its sole and unfettered discretion to the nearest whole multiple of C$100,000. (8) Acceptance of Bankers' Acceptances. Each Draft to be accepted by ---------------------------------- a C$ Lender shall be accepted at such C$ Lender's Canadian Lending Office. (9) Purchase of Bankers' Acceptances. Each C$ Lender shall be -------------------------------- required to purchase (subject to the commercial availability of a resale market in the case of Bankers' Acceptances with a term of approximately 30, 60, 90 or 180 days, as the case may be) from the Canadian Borrower on such Borrowing Date, at the Applicable BA Discount Rate, the Bankers' Acceptances accepted by it on such Borrowing Date and to provide to the Canadian Administrative Agent the BA Discount Proceeds thereof not later than 12:00 Noon, Toronto time, on such Borrowing Date for the account of the Canadian Borrower. The Acceptance Fee payable by the Canadian Borrower to such C$ Lender under subsection 3.3(e) in respect of each Bankers' Acceptance accepted and purchased by such C$ Lender from the Canadian Borrower shall be set off against the BA Discount Proceeds payable by such C$ Lender under this subsection 3.3(b)(9). Not later than 2:00 P.M., Toronto time, on such Borrowing Date, the Canadian Administrative Agent shall make such BA Discount Proceeds available to the Canadian Borrower by crediting the account of the Canadian Borrower on the books of the Canadian Administrative Office with the aggregate of the amounts 33 made available to the Canadian Administrative Agent by the C$ Lenders and in like funds as received by the Canadian Administrative Agent. (10) Sale of Bankers' Acceptances. Each C$ Lender may at any time ---------------------------- and from time to time hold, sell, rediscount or otherwise dispose of any or all Bankers' Acceptances accepted and purchased by it. (11) Waiver of Presentment and Other Conditions. To the extent ------------------------------------------ permitted by applicable law, the Canadian Borrower waives presentment for payment and any other defense to payment of any amounts due to a C$ Lender in respect of a Bankers' Acceptance accepted by it pursuant to this Agreement which might exist solely by reason of such Bankers' Acceptance being held, at the maturity thereof, by such C$ Lender in its own right, and the Canadian Borrower agrees not to claim any days of grace if such C$ Lender as holder sues the Canadian Borrower on the Bankers' Acceptances for payment of the amount payable by the Canadian Borrower thereunder. (c) The Canadian Borrower shall reimburse a C$ Lender for, and there shall become due and payable at 10:00 A.M., Toronto time, on the contract maturity date for each Bankers' Acceptance, an amount in Canadian Dollars in same day funds equal to the face amount of such Bankers' Acceptance. The Canadian Borrower shall make each such reimbursement payment (i) by causing any proceeds of a Refunding Bankers' Acceptance issued in accordance with subsection 3.3(d) or conversion of such Bankers' Acceptance in accordance with subsection 3.4 to be applied in reduction of such reimbursement payment; and (ii) by depositing the amount of such reimbursement payment (or any portion thereof remaining unpaid after application of any proceeds referred to in clause (i)) with the Canadian Administrative Office in accordance with subsection 4.8. The Canadian Borrower's payment in accordance with this Section shall satisfy its obligations under any Bankers' Acceptance to which it relates, and the C$ Lender which has accepted such Bankers' Acceptance shall thereafter be solely responsible for the payment of such Bankers' Acceptance. (d) The Canadian Borrower shall give irrevocable written or telephonic notice (in the case of telephonic notice, to be promptly confirmed in writing) (or such other method of notification as may be agreed upon between the Canadian Administrative Agent and the Canadian Borrower) to the Canadian Administrative Agent at or before 10:00 A.M., Toronto time, one Business Day prior to the maturity date of each Bankers' Acceptance of the Canadian Borrower's intention to issue a Bankers' Acceptance on such maturity date (a "Refunding Bankers' Acceptance") to provide for the payment of such maturing - ------------------------------ Bankers' Acceptance (it being understood that payments by the Canadian Borrower and fundings by the C$ Lenders in respect of each maturing Bankers' Acceptance and the related Refunding Bankers' Acceptance shall be made on a net basis reflecting the difference between the face amount of such maturing Bankers' Acceptance and the BA Discount Proceeds (net of the applicable Acceptance Fee) of such Refunding Bankers' Acceptance). If the Canadian Borrower fails to give such notice or does not have sufficient funds on deposit in the amount of reimbursement payment in accordance with subsection 3.3(c)(ii), the Canadian Borrower shall be deemed to have requested that such maturing Bankers' Acceptances be repaid with 34 the proceeds of C$ Prime Loans (without any requirement to give notice with respect thereto), commencing on the maturity date of such maturing Bankers' Acceptances. (e) An Acceptance Fee shall be payable by the Canadian Borrower to each C$ Lender in advance (in the manner specified in subsection 3.3(b)(9)) upon the issuance of a Bankers' Acceptance to be accepted by such C$ Lender calculated at the rate per annum equal to the Applicable Margin, such Acceptance Fee to be calculated on the face amount of such Bankers' Acceptance and to be computed on the basis of the number of days in the term of such Bankers' Acceptance. (f) Upon the occurrence of any Event of Default which is continuing, and in addition to any other rights or remedies of any C$ Lender and the Canadian Administrative Agent hereunder, any C$ Lender or the Canadian Administrative Agent (or such alternate arrangement as may be agreed upon by the Canadian Borrower and such C$ Lender or the Canadian Administrative Agent, as applicable) shall be entitled to deposit and retain in an account to be maintained by the Canadian Administrative Agent (bearing interest at the Canadian Administrative Agent's rates as may be applicable in respect of other deposits of similar amounts for similar terms), for the ratable benefit of the C$ Lenders, amounts which are received by such C$ Lender or the Canadian Administrative Agent from the Canadian Borrower hereunder or as proceeds of the exercise of any rights or remedies of any C$ Lender or the Canadian Administrative Agent hereunder against the Canadian Borrower, to the extent such amounts may be required to satisfy any contingent or unmatured obligations or liabilities of the Canadian Borrower to the C$ Lenders or the Canadian Administrative Agent, or any of them hereunder. 3.4 Conversion Option. Subject to the provisions of this Agreement, ----------------- the Canadian Borrower may, prior to the Termination Date, effective on any Business Day, convert, in whole or in part, C$ Prime Loans into Bankers' Acceptances or vice versa upon giving to the Canadian Administrative Agent prior irrevocable written or telephonic notice (in the case of telephonic notice, to be promptly confirmed in writing) within the notice period and in the form which would be required to be given to the Canadian Administrative Agent in respect of the category of C$ Loan into which the outstanding C$ Loan is to be converted in accordance with the provisions of subsection 3.2 or 3.3, as applicable, provided -------- that: (a) no C$ Prime Loan may be converted into a Bankers' Acceptance when any Event of Default has occurred and is continuing; (b) each conversion to Bankers' Acceptances shall be for an aggregate amount of C$1,000,000 (and whole multiples of C$100,000 in excess thereof), and each conversion to C$ Prime Loans shall be in a minimum aggregate amount of C$100,000; and (c) Bankers' Acceptances may be converted only on the maturity date of such Bankers' Acceptances and, provided that, if less than all -------- Bankers' Acceptances are converted, then after such conversion not less than C$1,000,000 (and whole 35 multiples of C$100,000 in excess thereof) shall remain as Bankers' Acceptances. 3.5 Circumstances Making Bankers' Acceptances Unavailable. (a) If ----------------------------------------------------- the Canadian Administrative Agent determines in good faith, which determination shall be final, conclusive and binding upon the Canadian Borrower, and notifies the Canadian Borrower that, by reason of circumstances affecting the money market, there is no market for Bankers' Acceptances, then: (i) the right of the Canadian Borrower to request a borrowing by way of Bankers' Acceptance shall be suspended until the Canadian Administrative Agent determines that the circumstances causing such suspension no longer exist and the Canadian Administrative Agent so notifies the Canadian Borrower; and (ii) any notice relating to a borrowing by way of Bankers' Acceptance which is outstanding at such time shall be deemed to be a notice requesting a borrowing by way of C$ Prime Loans (all as if it were a notice given pursuant to subsection 3.2). (b) The Canadian Administrative Agent shall promptly notify the Canadian Borrower and the C$ Lenders of the suspension of the Canadian Borrower's right to request a borrowing by way of Bankers' Acceptance and of the termination of such suspension. SECTION 4. GENERAL PROVISIONS 4.1 Repayment of Loans; Evidence of Debt. (a) The Company hereby ------------------------------------ unconditionally promises to pay to the US Administrative Agent for the account of each US$ Lender the then unpaid principal amount of each US$ Loan of such US$ Lender on the Termination Date (or such earlier date on which the US$ Loans become due and payable pursuant to Section 9). The Company hereby further agrees to pay interest on the unpaid principal amount of the US$ Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 4.5. (b) The Canadian Borrower hereby unconditionally promises to pay to the Canadian Administrative Agent for the account of each C$ Lender the then unpaid principal amount of each C$ Loan of such C$ Lender on the Termination Date (or such earlier date on which the C$ Loans become due and payable pursuant to Section 9). The Canadian Borrower hereby further agrees to pay interest on the unpaid principal amount of the C$ Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 4.5. (c) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the relevant Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. 36 (d) Each Administrative Agent shall maintain the Register pursuant to subsection 11.6(d), and a subaccount therein for each relevant Lender, in which shall be recorded (i) the amount of each relevant Loan made hereunder, whether such Loan is, as applicable, a US$ Loan, a C$ Prime Loan or a Bankers' Acceptance, the Type of each US$ Loan made and each Interest Period applicable to any Eurodollar Loan, (ii) the amount of any principal or interest due and payable or to become due and payable from the relevant Borrower to each relevant Lender hereunder and (iii) both the amount of any sum received by such Administrative Agent hereunder from the relevant Borrower and each relevant Lender's share thereof. (e) The entries made in the Registers and the accounts of each Lender maintained pursuant to subsection 4.1(c) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the relevant Borrower therein recorded; provided, however, that -------- ------- the failure of any Lender or either Administrative Agent to maintain such Register or any such account, or any error therein, shall not in any manner affect the obligation of each Borrower to repay (with applicable interest and all other amounts owing with respect thereto) the Loans made to such Borrower by such Lender in accordance with the terms of this Agreement. (f) The Company agrees that, upon the request to the US Administrative Agent by any US$ Lender, the Company will execute and deliver to such Lender a promissory note of the Company evidencing the US$ Loans of such Lender, substantially in the form of Exhibit A-1 with appropriate insertions as to date and principal amount (a "US$ Note"), as the same may be amended, -------- supplemented or otherwise modified from time to time. (g) The Canadian Borrower agrees that, upon the request to the Canadian Administrative Agent by any C$ Lender, the Canadian Borrower will execute and deliver to such Lender a promissory note of the Canadian Borrower evidencing the C$ Prime Loans of such Lender, substantially in the form of Exhibit A-2 with appropriate insertions as to date and principal amount (a "C$ -- Note"), as the same may be amended, supplemented or otherwise modified from time - ---- to time. 4.2 Commitment Fee. (a) The Company agrees to pay to the US -------------- Administrative Agent for the account of each US$ Lender a commitment fee for the period from and including the first day of the Commitment Period to the Termination Date, computed at the rate of 3/8ths of 1% per annum on the average daily amount of the Available US Commitment of such US$ Lender during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Termination Date or such earlier date as the US Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof. (b) The Canadian Borrower agrees to pay to the Canadian Administrative Agent for the account of each C$ Lender a commitment fee for the period from and including the first day of the Commitment Period to the Termination Date, computed at the rate of 3/8ths of 1% per annum on the average daily amount of the Available Canadian Commitment of such C$ Lender during the period for which payment is made, payable quarterly in arrears 37 on the last day of each March, June, September and December and on the Termination Date or such earlier date as the Canadian Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof. (c) The Company agrees to pay to the US Administrative Agent and the Canadian Borrower agrees to pay to the Canadian Administrative Agent, for their own accounts, the fees in the amounts and on the dates previously agreed to in the Fee Letter dated March 28, 1997, among the Borrowers, the US Administrative Agent and the Canadian Administrative Agent. 4.3 Termination or Reduction of Commitments. (a) The aggregate --------------------------------------- amount of the US Commitments shall be automatically reduced to zero on the Termination Date. The aggregate amount of the US Commitments shall also reduce on the last day of March, June, September and December of each year, commencing March 31, 2001, each of which reductions on any such date shall be in an amount equal to the amount set forth below opposite such date:
Date Amount ---- ------ March 31, 2001 $ 5,625,000 June 30, 2001 5,625,000 September 30, 2001 5,625,000 December 31, 2001 5,625,000 March 31, 2002 7,500,000 June 30, 2002 7,500,000 September 30, 2002 7,500,000 December 31, 2002 7,500,000 March 31, 2003 11,250,000 June 30, 2003 11,250,000 September 30, 2003 11,250,000 December 31, 2003 11,250,000 March 31, 2004 26,250,000 June 30, 2004 26,250,000
(b) The aggregate amount of the Canadian Commitments shall be automatically reduced to zero on the Termination Date. The aggregate amount of the Canadian Commitments shall also reduce on the last day of March, June, September and December of each year, commencing March 31, 2001, each of which reductions on any such date shall be in an amount equal to the amount set forth below opposite such date:
Date Amount ---- ------ March 31, 2001 C$1,312,500 June 30, 2001 1,312,500
38
Date Amount ---- ------ September 30, 2001 1,312,500 December 31, 2001 1,312,500 March 31, 2002 1,750,000 June 30, 2002 1,750,000 September 30, 2002 1,750,000 December 31, 2002 1,750,000 March 31, 2003 2,625,000 June 30, 2003 2,625,000 September 30, 2003 2,625,000 December 31, 2003 2,625,000 March 31, 2004 6,112,500 June 30, 2004 6,112,500
(c) The Company shall have the right, upon not less than two Business Days' notice to the applicable Administrative Agent, without premium or penalty, to terminate the Commitments or, from time to time, to reduce the amount of the US Commitments (so long as, after giving effect thereto and to any contemporaneous prepayment of the Loans, the then outstanding US$ Loans of each US$ Lender shall be no greater than such Lender's US Commitment) or reduce the amount of the Canadian Commitments (so long as, after giving effect thereto and to any contemporaneous prepayment of the C$ Loans, the then outstanding C$ Loans of each C$ Lender shall be no greater than such Lender's Canadian Commitment). Upon receipt of such notice the applicable Administrative Agent shall promptly notify each relevant Lender thereof. Any such reduction shall be in an amount of at least US$500,000 and, if greater, in integral multiples of US$100,000 (in the case of the US Commitments) or C$500,000 and, if greater, in integral multiples of C$100,000 (in the case of the Canadian Commitments) and shall reduce permanently the amount of the affected Commitments then in effect. Any termination of the Commitments shall be accompanied by prepayment in full of the Loans, together with accrued interest thereon to the date of such prepayment. 4.4 Optional and Mandatory Prepayments. (a) Each Borrower may at ---------------------------------- any time and from time to time prepay the relevant Loans, in whole or in part, without premium or penalty, upon at least three Business Days' irrevocable notice to the relevant Administrative Agent (in the case of Eurodollar Loans), or one Business Day's irrevocable notice to the relevant Administrative Agent (otherwise), specifying the date and amount of prepayment, and the Type of Loan to be prepaid, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice the relevant Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with, in the case of Eurodollar Loans, any interest accrued thereon, and in the case of all Loans, any amounts payable pursuant to subsection 4.12. Partial prepayments shall be in an aggregate principal amount of US$1,000,000 or C$1,000,000, as the case may be, or a whole multiple of US$100,000 or C$100,000, as the case may be, in excess thereof. 39 Notwithstanding anything to the contrary above, C$ Loans consisting of Bankers' Acceptances may not be prepaid pursuant to this subsection. (b) Without limiting the obligation of the Company to obtain the consent of the Required Lenders pursuant to subsection 8.2 to any Disposition not otherwise permitted hereunder, in the event that the Net Proceeds of any Disposition by either Borrower or any of its Subsidiaries (the "Current ------- Disposition"), and of all prior Dispositions of the Borrowers and their - ----------- Subsidiaries as to which a prepayment has not yet been made under this subsection 4.4(b), but excluding any Reinvestable Proceeds (as defined below), shall exceed US$2,500,000 then, no later than five Business Days after the occurrence of the Current Disposition, the relevant Borrower will deliver to the US Administrative Agent a statement, certified by a Responsible Officer of such Borrower, in form and detail reasonably satisfactory to the US Administrative Agent, of the amount of the Net Proceeds of the Current Disposition and of all such prior Dispositions and shall prepay its Loans, and its Commitments shall be subject to automatic reduction (and, if required, such Borrower shall provide cash collateral in connection with such reduction, which cash collateral shall be invested in Cash Equivalents), in an aggregate amount equal to the excess of 100% of the Net Proceeds of the Current Disposition and such prior Dispositions (but excluding the amount of any Reinvestable Proceeds) over US$2,500,000 (or the C$ Equivalent thereof, as the case may be), such prepayment and reduction to be effected in each case in the manner and order specified in subsection 4.4(g); provided that, at the option of such Borrower and so long as no Default or Event - -------- of Default shall have occurred and be continuing or would be caused thereby and subject to the consent of the Required Lenders in connection with any Disposition not otherwise permitted hereunder, such Net Proceeds shall not be required to be applied on such date so long as such Borrower delivers a certificate of a Responsible Officer to the US Administrative Agent prior to such date stating that such Borrower intends to use all or a portion of the Net Proceeds of any Disposition (the "Reinvestable Proceeds" of such Disposition) to --------------------- purchase assets to be used by such Borrower or such Subsidiary in its business (the "Qualified Assets") within 270 days after receipt of such proceeds and ---------------- setting forth an estimate of the Reinvestable Proceeds to be so expended. After such election to use the Reinvestable Proceeds, on the date which is 270 days after the relevant Disposition, such Borrower shall (I) deliver a certificate of a Responsible Officer to the US Administrative Agent certifying as to the amount and use of such Reinvestable Proceeds actually used to purchase Qualified Assets and (II) deliver to the US Administrative Agent, for application in accordance with this subsection 4.4(b), an amount equal to the remaining unused Reinvestable Proceeds. (c) On the date of the receipt thereof by either Borrower or any of its Subsidiaries, such Borrower shall prepay its Loans (but the Commitments shall not be subject to any reduction) in an aggregate amount equal to (i) 100% of the proceeds (net of underwriting discounts and commissions and other costs associated therewith) from any sale or issuance of equity of such Borrower or any of its Subsidiaries (other than any portion of such proceeds applied to redeem 1997 Senior Subordinated Notes as permitted by subsection 8.11(a)) other than to either Borrower or any of its Subsidiaries and (ii) 100% of the proceeds (net of underwriting discounts and commissions and other costs associated therewith) from any incurrence of any Indebtedness for borrowed money by such Borrower or any of its 40 Subsidiaries (other than Indebtedness permitted by subsection 8.4), such prepayment to be effected in each case in the manner and order specified in subsection 4.4(g). The provisions of this paragraph shall not limit the obligation of the Company to obtain the consent of the Required Lenders to any action referred to in this paragraph that is not otherwise permitted hereunder. (d) In the event that the Net Proceeds of any Casualty Event of either Borrower or any of its Subsidiaries (the "Current Casualty Event"), and ---------------------- of all prior Casualty Events of the Borrowers and their Subsidiaries as to which a prepayment has not yet been made under this subsection 4.4(d), but excluding any Casualty Reinvestable Proceeds (as defined below), shall exceed US$2,500,000, then, no later than five Business Days after the occurrence of the Current Casualty Event, the relevant Borrower will deliver to the US Administrative Agent a statement, certified by a Responsible Officer of such Borrower, in form and detail reasonably satisfactory to the relevant Administrative Agent, of the amount of the Net Proceeds of the Current Casualty Event and of all such prior Casualty Events and shall prepay its Loans, and its Commitments shall be subject to automatic reduction (and, if required, such Borrower shall provide cash collateral in connection with such reduction, which cash collateral shall be invested in Cash Equivalents), in an aggregate amount equal to the excess of 100% of the Net Proceeds of the Current Casualty Event and such prior Casualty Events (but excluding the amount of any Casualty Reinvestable Proceeds) over US$2,500,000 (or the C$ Equivalent thereof, as the case may be), such prepayment and reduction to be effected in each case in the manner and order specified in subsection 4.4(g); provided, that such Net -------- Proceeds shall not be required to be applied on such date (other than if such Net Proceeds are required to be applied pursuant to the terms of any Mortgage or lease) so long as (i) such Borrower delivers a certificate of a Responsible Officer to the US Administrative Agent prior to such date stating that such Borrower intends to use or cause the appropriate Subsidiary to use such Net Proceeds (the "Casualty Reinvestable Proceeds" of such Casualty Event) to repair ------------------------------ or replace the property affected by such Casualty Event (the "Affected -------- Property") within 270 days after receipt of such Net Proceeds and setting forth an estimate of the Casualty Reinvestable Proceeds to be so expended and (ii) no Event of Default shall have occurred and be continuing or would be caused thereby. After such election to reinvest, on the date which is 270 days after the relevant Casualty Event, such Borrower shall (I) deliver a certificate of a Responsible Officer to the relevant Administrative Agent certifying as to the amount and use of such Casualty Reinvestable Proceeds actually used to purchase or replace the Affected Property and (II) deliver to the relevant Administrative Agent, for application in accordance with this subsection 4.4(d), an amount equal to the remaining unused Casualty Reinvestable Proceeds. (e) On the date of the receipt thereof by either Borrower or any of its Subsidiaries, such Borrower shall prepay its Loans (but its Commitments shall not be subject to any reduction) in an aggregate amount equal to 100% of the proceeds of any Tax Refund (net of any marginal increase in income taxes payable as a result of the receipt by such Borrower and/or any of its Subsidiaries of such Tax Refund, such prepayment to be effected in each case in the manner and order specified in subsection 4.4(g). 41 (f) On the date of the receipt thereof by either Borrower or any of its Subsidiaries, such Borrower shall prepay its Loans (but its Commitments shall not be subject to any reduction) in an aggregate amount equal to 100% of the Net Proceeds of any Disposition of property acquired as part of a Permitted Acquisition but not used or useful to the business of such Borrower or such Subsidiary so long as such Disposition is made within 270 days of the date of the consummation of such Permitted Acquisition, such prepayment to be effected in each case in the manner and order specified in subsection 4.4(g). (g) Prepayments of the Loans pursuant to subsections 4.4(b), (c), (d), (e) and (f) and permanent reductions of Commitments pursuant to subsections 4.4(b) and (d) shall be applied in the following manner: (i) to the extent such prepayment is required to be made by the Company, such prepayment shall be applied to reduce (ratably among the US Lenders) such of the then outstanding US$ Loans as the Company shall determine in its sole discretion, and any reduction of the Commitments required pursuant thereto shall be applied ratably to reduce the US Commitments (which reduction of US Commitments shall reduce the remaining scheduled commitment reductions thereof in inverse order of maturity); and (ii) to the extent that such prepayment is required to be made by the Canadian Borrower, such prepayment shall be applied to reduce (ratably among the Canadian Lenders) such of the then outstanding C$ Loans (or, in the case of Bankers' Acceptances, cash collateralization of such Bankers' Acceptances on terms satisfactory to the Canadian Administrative Agent, which cash collateral shall be invested in Cash Equivalents) as the Canadian Borrower shall determine in its sole discretion, and any reduction of the Canadian Commitments required pursuant thereto shall be applied ratably to reduce the Canadian Commitments (which reduction of Canadian Commitments shall reduce the remaining scheduled commitment reductions thereof in inverse order of maturity). (h) Notwithstanding anything to the contrary contained above, all prepayments of each Loan shall be made in the currency in which such Loans were made, and all cash collateralization of Bankers Acceptances shall be made in Canadian Dollars. For purposes of determining the amounts required to be applied, conversions of one currency to another are assumed to be made by using the C$ Equivalent or US$ Equivalent, as the case may be, of amounts received in the other currency. However, it shall remain the responsibility of the respective Borrower to convert amounts received in one currency into the other to the extent needed to repay, or cash collateralize, Loans or Bankers Acceptances maintained in the other such currency. 4.5 Interest Rates and Payment Dates. (a) Each Eurodollar Loan -------------------------------- shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such Interest Period plus the Applicable Margin. 42 (b) Each Base Rate Loan shall bear interest for each day on the unpaid principal amount thereof, at a rate per annum equal to the Base Rate determined for such day plus the Applicable Margin. (c) Each C$ Prime Loan shall bear interest for each day on the unpaid principal amount thereof, at a rate per annum equal to the C$ Prime Rate determined for such day plus the Applicable Margin. (d) If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon, (iii) any Acceptance Fee or any commitment fee or (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of any such overdue interest, Acceptance Fee or commitment fee or other amount, the rate described in paragraph (b) of this subsection (in the case of amounts payable in US Dollars) or paragraph (c) of this subsection (in the case of amounts payable in Canadian Dollars) plus 2%, in each case from the date of such non-payment until such overdue principal, interest, Acceptance Fee or commitment fee or other amount is paid in full (after as well as before judgment). (e) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (d) of this -------- subsection shall be payable from time to time on demand. Interest in respect of US$ Loans (and all other amounts denominated in US$) shall be payable in US$, and interest in respect of C$ Loans (and all other amounts denominated in C$) shall be payable in C$. (f) (i) If any provision of this Agreement would obligate any Loan Party to make any payment of interest or other amount payable to any C$ Lender in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by such C$ Lender of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada)), then notwithstanding such ------------- provision, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in a receipt by such C$ Lender of interest at a criminal rate, such adjustment to be effected, to the extent necessary, as follows: (x) first, by reducing the amount or rates of interest required to be paid under this subsection 4.5; and (y) thereafter, by reducing any fees, commissions, premiums and other amounts which would constitute interest for purposes of Section 347 of the Criminal Code (Canada). ------------- (ii) If, notwithstanding the provisions of clause (i) of this subsection 4.5.(f), and after giving effect to all adjustments contemplated thereby, any C$ Lender shall have received an amount in excess of the maximum permitted by such clause, then the applicable Loan Party shall be entitled, by notice in writing to such C$ Lender, to obtain reimbursement 43 from such C$ Lender of an amount equal to such excess, and, pending such reimbursement, such amount shall be deemed to be an amount payable by such C$ Lender to such Loan Party. (iii) Any amount or rate of interest referred to in this subsection 4.5(f) shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term of any C$ Loan on the assumption that any charges, fees or expenses that fall within the meaning of "interest" (as defined in the Criminal Code (Canada)) ------------- shall, if they relate to a specific period of time, be prorated over that period of time and otherwise be prorated over the period from the Closing Date to the Termination Date and, in the event of dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Canadian Administrative Agent shall be conclusive for the purposes of such determination absent manifest error. 4.6 Computation of Interest and Fees. (a) Interest calculated on -------------------------------- the basis of the Eurodollar Rate and Federal Funds Rate shall be calculated on the basis of a 360-day year for the actual days elapsed; Acceptance Fees and commitment fees and interest calculated on the basis of the CDOR Rate shall be calculated on the basis of a 365-day year for the actual days elapsed; and interest calculated on any other basis shall be calculated on the basis of a 365- or 366- day year, as the case may be, for the actual days elapsed. The relevant Administrative Agent shall as soon as practicable notify the relevant Borrower and the relevant Lenders of each determination of Eurodollar Rates or the Applicable BA Discount Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate, the C$ Prime Rate or the Applicable Margin shall become effective as of the opening of business on the day on which such change becomes effective. The relevant Administrative Agent shall as soon as practicable notify the relevant Lenders and the relevant Borrower of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the relevant Administrative Agent pursuant to any provision of this Agreement shall be prima facie evidence of the accuracy thereof on the Borrowers and the Lenders in the absence of manifest error. When applicable, each determination by CIBC of a rate to be notified to the relevant Administrative Agent pursuant to the definition of "CDOR Rate" shall be prima facie evidence of the accuracy thereof. The relevant Administrative Agent shall, at the request of the relevant Borrower, deliver to such Borrower a statement showing any quotations and the computations used by the relevant Administrative Agent in determining any CDOR Rate. (c) For the purposes of the Interest Act (Canada), in any case in ------------ which an interest rate is stated in this Agreement to be calculated on the basis of a year of 360 days or 365 days, as the case may be, the yearly rate of interest to which such interest rate is equivalent is equal to such interest rate multiplied by the number of days in the year in which the relevant interest payment accrues and divided by 360 or 365, respectively. In addition, the principles of deemed investment of interest do not apply to any interest calculations under this Agreement and the rates of interest stipulated in this Agreement are intended to be nominal rates and not effective rates or yields. 44 4.7 Inability to Determine Eurodollar Rate. If prior to the first -------------------------------------- day of any Interest Period: (a) the US Administrative Agent shall have determined (which determination shall be prima facie evidence of the accuracy thereof) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the US Administrative Agent shall have received notice from the Required US$ Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such US$ Lenders (as conclusively certified by such US$ Lenders) of making or maintaining their affected Loans during such Interest Period, the US Administrative Agent shall give telecopy or telephonic notice (to be confirmed in writing) thereof to the Company and the US$ Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Base Rate Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be converted to or continued as Base Rate Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans. Until such notice has been withdrawn by the US Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Company have the right to convert Loans to Eurodollar Loans. 4.8 Pro Rata Treatment and Payments. (a) Each borrowing by each ------------------------------- Borrower from the Lenders hereunder, each payment by each Borrower on account of any commitment fee or Acceptance Fee hereunder and any reduction of the US Commitments or the Canadian Commitments of the Lenders shall be made pro rata according to the respective US Commitment Percentages, in the case of the US$ Lenders, and the respective C$ Commitment Percentages, in the case of the C$ Lenders. Each payment (excluding prepayments pursuant to subsection 4.4(g)) by each Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal amounts of the relevant Loans then held by the relevant Lenders. All payments (including prepayments) to be made by each Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 11:00 A.M., Local Time, on the due date thereof to the relevant Administrative Agent, for the account of the Lenders, at the relevant Administrative Office, in US$ or C$, as the case may be, and in immediately available funds. The relevant Administrative Agent shall distribute such payments to the relevant Lenders promptly upon receipt in like funds as received, but the relevant Borrower shall have satisfied its payment obligation hereunder upon payment to the relevant Administrative Agent, regardless of whether such Administrative Agent distributes such payments as required hereunder. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. 45 (b) Unless the relevant Administrative Agent shall have received notice from a Lender prior to 11:00 A.M., Local Time, on any Borrowing Date that such Lender will not make available to such Administrative Agent such Lender's share of the borrowing requested to be made on such Borrowing Date, such Administrative Agent may assume that such Lender has made its share of such borrowing available to such Administrative Agent on such Borrowing Date, and such Administrative Agent may, in reliance upon such assumption, make available to the relevant Borrower on such Borrowing Date a corresponding amount. If such Administrative Agent does, in such circumstances, make available to such Borrower such amount, such Lender shall within three Business Days following such Borrowing Date make its share of such borrowing available to such Administrative Agent, together with interest thereon for each day from and including such Borrowing Date that its share of such borrowing was not made available, to but excluding the date such Lender makes its share of such borrowing available to such Administrative Agent, at the Federal Funds Rate (in the case of US$ Loans) or at the then effective CDOR Rate (in the case of C$ Loans). If such amount is so made available, such payment to such Administrative Agent shall constitute such Lender's Loan on such Borrowing Date for all purposes of this Agreement. A certificate of such Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be prima facie evidence of such amounts. If such amount is not so made available to such Administrative Agent by such Lender within three Business Days of such Borrowing Date, such Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the relevant Lender. Nothing contained in this subsection 4.8(b) shall relieve any Lender which has failed to make available its share of any borrowing hereunder from its obligation to do so in accordance with the terms hereof or prejudice any rights which the relevant Borrower may have against any Lender as a result of any default by such Lender to make loans. (c) The failure of any Lender to make the Loan to be made by it on any Borrowing Date shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on such Borrowing Date, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on such Borrowing Date. 4.9 Illegality. Notwithstanding any other provision herein, if the ---------- adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Company shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 4.12. 4.10 Requirements of Law. (a) If the adoption of or any change in ------------------- any Requirement of Law or in the interpretation or application thereof or compliance by any 46 Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to, or cause the withdrawal or termination of a previously granted exemption with respect to, any tax of any kind whatsoever, or change the basis of taxation of, or increase any existing tax on, payments of principal, interest, fees or other amounts payable by either Borrower to such Lender under this Agreement (except for taxes on the overall receipts or overall net income or capital of such Lender, and any related surtaxes, or taxes for which such Lender is being fully compensated under subsection 4.11); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the relevant Borrower shall promptly pay such Lender, upon written demand therefor, such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable; provided, that such Borrower shall not be required to -------- pay any Lender any such additional amount if such additional amount arises (x) in the case of US$ Loans made to the Company, as a consequence of such Lender's failure to meet the requirements of subsection 4.11(b) or (y) in the case of C$ Loans made to the Canadian Borrower, as a result of such Lender's failure to be a Person resident in Canada for the purposes of the Income Tax Act (Canada). -------------- (b) If the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof by any Governmental Authority or compliance by any Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, the Borrowers shall promptly pay to such Lender, upon written demand therefor, such additional amount or amounts as will compensate such Lender for such reduced rate of return. In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable and which will, to the extent the reduced rate of return relates to such Lender's loans or commitments in general and are not specifically 47 attributable to Loans or Commitments hereunder, be calculated with respect to all loans or commitments similar to the Loans or Commitments made by such Lender hereunder whether or not the loan documentation for such other loans or commitments permits the Lender to charge the respective borrower on a basis similar to that provided in this subsection 4.10. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the relevant Borrower (with a copy to the relevant Administrative Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection submitted by such Lender to such Borrower (with a copy to the relevant Administrative Agent), showing in reasonable detail the basis for the calculation thereof, shall be prima facie evidence of such additional amounts payable. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 4.11 Taxes. (a) All payments made by any Loan Party under this ----- Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding gross or net income or gross receipts taxes, ad valorem taxes, personal property and/or sales taxes and franchise taxes (imposed in lieu of net income taxes) imposed on either Administrative Agent or any Lender as a result of a present or former connection between either Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld ------------------ from any amounts payable to either Administrative Agent or any Lender hereunder or under any Note, the amounts so payable to such Administrative Agent or such Lender shall be increased to the extent necessary to yield to such Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that no Loan Party shall -------- ------- be required to increase any such amounts payable to either Administrative Agent, any Lender or any holder of Bankers' Acceptances if such increased amount arises as a result of (i) in the case of amounts payable by the Company with respect to US$ Loans, such Lender's failure to comply with any applicable requirements of subsection 4.11(b), including a material failure of any statement or certification given pursuant to subsection 4.11(b) to be true for any reason other than a change in United States federal income tax law or an amendment, modification or revocation of an applicable double tax treaty or (ii) in the case of amounts payable by any Canadian Borrower with respect to C$ Loans, the failure of such C$ Lender, the Canadian Administrative Agent or any holder of Bankers' Acceptances to be a Person resident in Canada for the purposes of the Income Tax Act (Canada). Each Loan Party shall also indemnify each - -------------- Administrative Agent and each Lender on an after-tax basis for any additional taxes on net income which such Administrative Agent or such Lender, as the case may be, may be obligated to pay as a result of the receipt of additional amounts under this subsection 48 4.11(a). Whenever any Non-Excluded Taxes are payable by any Loan Party, as promptly as possible thereafter but in any event within 45 days after the date of payment such Loan Party shall send to the relevant Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by such Loan Party showing payment thereof. If any Loan Party fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the relevant Administrative Agent the required receipts or other required documentary evidence, such Loan Party shall indemnify such Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by such Administrative Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (i) deliver to the Company and the US Administrative Agent (A) two original signed copies of United States Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the case may be, and (B) two accurate and complete original signed copies of Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be; (ii) deliver to the Company and the US Administrative Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Company; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Company or the US Administrative Agent; unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Company and the US Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. Each Person that shall become a Lender or a Participant pursuant to subsection 11.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this subsection, provided that in the case of a Participant -------- such Participant shall furnish all such required forms and statements to the Lender from which the related participation shall have been purchased. 49 4.12 Indemnity. Each Borrower agrees to indemnify each Lender and to --------- hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by such Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after such Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by such Borrower in making any prepayment of Eurodollar Loans after such Borrower has given a notice thereof in accordance with the provisions of this Agreement, (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto or (d) repayment of any Bankers' Acceptance prior to its maturity date. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 4.13 Change of Lending Office. Each Lender agrees that if it makes ------------------------ any demand for payment under subsection 4.10 or 4.11(a), or if any adoption or change of the type described in subsection 4.9 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or obviate the need for the Company to make payments under subsection 4.10 or 4.11(a), or would eliminate or reduce the effect of any adoption or change described in subsection 4.9. SECTION 5. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agents and the Lenders to enter into this Agreement and to make the Loans, the Company hereby represents and warrants to the Administrative Agents and each Lender that: 5.1 Financial Condition. The consolidated balance sheet of the ------------------- Company and its consolidated Subsidiaries as at December 31, 1996 and the related consolidated statements of income and retained earnings and changes in cash flows for the fiscal year ended on such date, reported on by Arthur Andersen LLP, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly in accordance with GAAP the consolidated financial position of the Company and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at March 31, 1997, and the related unaudited consolidated 50 statements of income and retained earnings and changes in cash flows for the three-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly in accordance with GAAP the consolidated financial position of the Company and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the three-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Neither the Company nor any of its consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee Obligation, contingent liability or liability for taxes, or any long- term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto. Except as set forth on Schedule 5.1, during the period from December 31, 1996 to and including the date hereof there has been no sale, transfer or other disposition by the Company or any of its consolidated Subsidiaries of any material part of its business or property and no purchase or other acquisition of any business or property (including any Capital Stock of any other Person) material in relation to the consolidated financial condition of the Company and its consolidated Subsidiaries at December 31, 1996. 5.2 No Change. (a) Except as set forth on Schedule 5.2, since --------- December 31, 1996 there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect, and (b) except as permitted by the Existing Credit Agreement, during the period from December 31, 1996 to and including the date hereof no dividends or other distributions have been declared, paid or made upon the Capital Stock of the Company nor has any of the Capital Stock of the Company been redeemed, retired, purchased or otherwise acquired for value by the Company or any of its Subsidiaries other than in connection with the Stock Recapitalization. 5.3 Corporate Existence; Compliance with Law. Each of the Company ---------------------------------------- and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization or formation, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation or an extraprovincial corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification (each of which jurisdictions are listed on Schedule 5.3), except where the failure to be so qualified could not have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.4 Corporate Power; Authorization; Enforceable Obligations. Each of ------------------------------------------------------- the Company and its Subsidiaries has the corporate or partnership power and authority, as applicable, and the legal right, to execute, deliver and perform the Loan Documents to which 51 it is a party and, in the case of each Borrower, to borrow hereunder, and each of the Company and its Subsidiaries has taken all necessary corporate or partnership action, as applicable, to authorize the borrowings on the terms and conditions of this Agreement and any Notes and to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents to which the Company or any of its Subsidiaries is a party. This Agreement has been, and each other Loan Document to which it is a party will be, duly executed and delivered on behalf of each Loan Party. This Agreement constitutes, and each other Loan Document when executed and delivered will constitute, a legal, valid and binding obligation of each Loan Party which is a party thereto enforceable against such Loan Party in accordance with its terms, except to the extent that enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 5.5 No Legal Bar. The execution, delivery and performance of the ------------ Loan Documents to which each Loan Party is a party, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of such Loan Party or of any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien (except pursuant to the Loan Documents to which it is a party) on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. 5.6 No Material Litigation. No litigation, investigation or ---------------------- proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrowers, threatened by or against either Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. 5.7 No Default. Neither Borrower nor any of its Subsidiaries is in ---------- default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 5.8 Ownership of Property; Liens. All real property owned or leased ---------------------------- by either Borrower or any of its Subsidiaries and the nature of the interest therein, is correctly set forth on Schedule 5.8. The Company and its Subsidiaries have good and valid title to all real property owned by them and good and merchantable title to all other properties owned by them, in each case, including all property reflected in the balance sheets referred to in subsection 5.1 (except as sold or otherwise disposed of as permitted by this Agreement), free and clear of all Liens, other than (i) as referred to in such balance sheets or in the notes thereto or (ii) as otherwise permitted by subsection 8.1. 52 5.9 Intellectual Property. The Company and each of its Subsidiaries --------------------- owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "Intellectual ------------ Property"). Neither the Company nor any of its Subsidiaries has any knowledge - -------- that any claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Company know of any valid basis for any such claim. The use of such Intellectual Property by the Company and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 5.10 No Burdensome Restrictions. No Requirement of Law or -------------------------- Contractual Obligation of either Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect. 5.11 Taxes. Each of the Company and its Subsidiaries has filed or ----- caused to be filed all tax returns which, to the knowledge of the Company, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than as set forth on Schedule 5.11 and any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Company or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Company, no claim is being asserted, with respect to any such tax, fee or other charge. 5.12 Margin Regulations. No part of the proceeds of any Loans will ------------------ be used to purchase or carry any Margin Stock (as defined in Regulation G, T, U or X) or to extend credit for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Loan, the creation of any Bankers Acceptance or the purchase of any Draft nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 5.13 ERISA; Canadian Pension Plans. (a) Neither a Reportable Event ----------------------------- nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits. Neither the Company nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Company nor any Commonly 53 Controlled Entity would become subject to any liability under ERISA if the Company or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans in which it participates as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. (b) Each Canadian Pension Plan is in substantial compliance with all applicable pension benefits and tax laws; no Canadian Pension Plan has any unfunded liabilities (either on a "going concern" or on a "winding up" basis and determined in accordance with all applicable laws and using assumptions and methods that are appropriate in the circumstances and in accordance with generally accepted actuarial principles and practices in Canada), all contributions (including any special payments to amortize any unfunded liabilities) required to be made in accordance with all applicable laws and the terms of each Canadian Pension Plan have been made; no event has occurred and no condition exists with respect to any Canadian Pension Plan that has resulted or could result in any Canadian Pension Plan being ordered or required to be wound up in whole or in part pursuant to any applicable pension benefits laws or having its registration revoked or refused for the purposes of any applicable pension benefits or tax laws or being placed under the administration of any relevant pension benefits regulatory authority or being required to pay any taxes or penalties under any applicable pension benefits or tax laws, other than events or conditions that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; no order has been made and no notice has been given pursuant to any applicable pension benefits or tax laws in respect of any Canadian Pension Plan requiring (or proposing to require) any Person to take or to refrain from taking any action in respect thereof or that there has (or there are circumstances that indicate that there has) been a contravention of any such applicable laws, other than in respect of matters that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; no event has occurred and no condition exists which has resulted or could result in the Company or any Subsidiary of the Company being required to pay, repay or refund any amount (other than contributions required to be made or expenses required to be paid in the ordinary course) to or on account of any Canadian Pension Plan or a current or former member thereof, other than events or conditions that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; and no event has occurred and no condition exists that has resulted or could result in a payment being made out of a guarantee fund established under any applicable pension benefits laws in respect of a Canadian Pension Plan. (c) With respect to any pension, retirement or other deferred compensation plan maintained by the Canadian Borrower or any of its Subsidiaries which is not a Canadian Pension Plan, all required contributions have been made, and there are no unfunded liabilities in respect of such plans (either on a "going concern" or on a "winding up'" basis and determined in accordance with all applicable laws and using assumptions and methods that are appropriate in the circumstances and in accordance with generally accepted actuarial principles and practices in Canada). 5.14 Investment Company Act; Other Regulations. No Loan Party is an ----------------------------------------- "investment company", or a company "controlled" by an "investment company", within the 54 meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any federal or state statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. 5.15 Environmental Matters. (a) Except as set forth on Schedule --------------------- 5.15: the Company and its Subsidiaries are in compliance in all material respects with, and on the Closing Date and on the date of each Loan will be in compliance in all material respects with, all applicable Environmental Laws; to the best knowledge of the Company, there are no past, pending or threatened Environmental Claims against the Company or any of its Subsidiaries or any real property owned or operated by such Persons; there are no facts, circumstances, conditions or occurrences on any real property owned or operated at any time by the Company or any of its Subsidiaries that could reasonably be expected (i) to form the basis of an Environmental Claim against the Company or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect, or (ii) in the case of real property owned or operated by the Company or any of its Subsidiaries, to cause such real property to be subject to any material restrictions on the ownership, occupancy, use or transferability of such real property under any Environmental Law. (b) The Company and its Subsidiaries have not at any time generated, used, treated or stored Hazardous Materials on, or transported Hazardous Materials to or from, any real property owned or operated at any time by the Company or any of its Subsidiaries, except for (i) Hazardous Materials used in the ordinary course of such Person's business and (ii) petroleum products contained in underground storage tanks at the Canadian Borrower's facility in Saint Lambert, Quebec, in each case, in compliance in all material respects with all Environmental Laws. The Company and its Subsidiaries have not at any time Released or disposed of Hazardous Materials on or from any real property owned or operated at any time by the Company or any of its Subsidiaries, except in compliance in all material respects with Environmental Laws. (c) Except as set forth on Schedule 5.15, there are no underground storage tanks located on any real property owned or operated by the Company or any of its Subsidiaries. (d) Except for asbestos and asbestos-containing materials located at the Texas Avenue Property and also in Murray St., Montreal, Ville Marie, Montreal, St. Helene, St. Lambert, Summerlea Road, Brampton, Wolfdale Road, Mississauga, Coronation Drive, Scarborough, 27th St. N.E., Calgary, all of which are in compliance in all material respects with all Environmental Laws, to the best of the Company's knowledge there is no friable asbestos in any form present or suspected to be present at any real property owned or operated by the Company or any of its Subsidiaries. 5.16 Regulation H. No Mortgage encumbers improved real property ------------ which is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968. 55 5.17 Capitalization. On the Closing Date, the authorized Capital -------------- Stock of the Company will consist of (i) 80,000,000 shares of Common Stock, US$.01 par value per share, of which approximately 16,150,000 shares will be outstanding, and (ii) 10,000,000 shares of Preferred Stock, US$.01 par value per share (the "Preferred Stock"), none of which shares will be outstanding. On the --------------- Closing Date, the authorized Capital Stock of the Canadian Borrower will consist of 10,000 common shares, without nominal or par value, of which 1,000 will be issued and outstanding. All of such outstanding shares will have been duly and validly issued, will be fully paid and nonassessable and will be free of preemptive rights. 5.18 Subsidiaries. Schedule 5.18 correctly sets forth, as of the ------------ Closing Date, the percentage ownership (direct and indirect) of the Company in each class of Capital Stock or partnership interest, as the case may be, of each of its Subsidiaries and also identifies the direct owner thereof. 5.19 Restrictions on or Relating to Subsidiaries. There does not ------------------------------------------- exist any encumbrance or restriction on the ability of (i) any Subsidiary of the Company to pay dividends or make any other distributions on its Capital Stock or any other interest or participation in its profits owned by the Company or any Subsidiary of the Company, or to pay any Indebtedness owed to the Company or a Subsidiary of the Company, (ii) any Subsidiary of the Company to make loans or advances to the Company or any of its Subsidiaries or (iii) the Company or any Subsidiary of the Company to transfer any of its properties or assets to the Company or any Subsidiary of the Company, except, in each case, for such encumbrances or restrictions existing under or by reason of (w) applicable law, (x) this Agreement or the other Loan Documents, (y) customary provisions restricting subletting or assignment of any lease governing a leasehold interest or leases of equipment of the Company or any Subsidiary of the Company and (z) the 1996 Senior Subordinated Notes, the 1996 Senior Subordinated Notes Indenture, the 1997 Senior Subordinated Notes and the 1997 Senior Subordinated Notes Indenture. 5.20 Subchapter S Status. From its incorporation in 1990 until June ------------------- 29, 1997, the Company had validly elected to be treated as a Subchapter S corporation within the meaning of Section 1361 of the Code. The Company was at all times from March 1, 1990 until June 29, 1997 qualified to be treated as a Subchapter S corporation within the meaning of Section 1361 of the Code. 5.21 Leases. With respect to any lease or rental agreement regarding ------ any real property to which the Company or any of its Subsidiaries is a party, (i) such lease or rental agreement is in full force and effect, (ii) the Company and its Subsidiaries have complied in all material respects with all of the terms of such lease or rental agreement, (iii) there exists no event of default or to the best of the Company's knowledge, any event, act or condition which with notice or lapse of time, or both, would constitute an event of default thereunder by the Company or any of its Subsidiaries, or to the best knowledge of the Company, the landlord thereunder and (iv) the Company or its Subsidiaries as the case may be, is in possession of the premises demised under all such leases and rental agreements and is conducting business on such premises. 56 5.22 Related Agreements. The Company has delivered to the US ------------------ Administrative Agent true and correct copies of: (a) any agreement evidencing or relating to material Indebtedness of the Company or any of its Subsidiaries (excluding the Loans) which shall remain outstanding on and after the Closing Date, including the 1996 Senior Subordinated Notes Indenture and the 1997 Senior Subordinated Notes Indenture; (b) any Tax Sharing Agreements; (c) the Management Services Agreement; (d) the Affiliate Contracts; and (e) the Tax Indemnity Agreement. 5.23 Proceeds of Equity Offerings. The Company has received at least ---------------------------- US$60,000,000 in gross proceeds from the issuance during July 1997 of shares of its Common Stock in the Equity Offerings. SECTION 6. CONDITIONS PRECEDENT 6.1 Conditions to Effectiveness. This Agreement and the agreement of --------------------------- each Lender to make Loans hereunder shall not become effective until the following conditions precedent shall have been satisfied on or before September 30, 1997: (a) Loan Documents. The US Administrative Agent shall have received -------------- (i) this Agreement, executed and delivered by a duly authorized officer of each Borrower, with a counterpart for each Lender, (ii) any Notes requested by the Lenders, each executed and delivered by a duly authorized officer of the relevant Borrower and (iii) the US Global Guarantee and Security Agreement, executed and delivered by a duly authorized officer of each party thereto, with a counterpart or a conformed copy for each Lender. Each Note which shall be delivered hereunder at the request of a Lender which is the holder of a Note issued pursuant to the Existing Credit Agreement shall be deemed issued in replacement of and substitution for, and not as payment for, such latter Note. (b) Existing Credit Agreement. All loans, all interest thereon and ------------------------- all commitment and other fees payable under, and in respect of, the Existing Credit Agreement shall have been repaid or paid, as the case may be, in full. (c) Existing Indebtedness. Except as set forth below, the US --------------------- Administrative Agent shall have received, with a copy for each Lender, evidence, in form and substance reasonably satisfactory to the US Administrative Agent that the Company and its Subsidiaries shall have repaid 57 all Indebtedness so that, on the Closing Date, the Company and its Subsidiaries shall have no Indebtedness or Preferred Stock outstanding except for (i) any Loans to be made on the Closing Date, (ii) the 1996 Senior Subordinated Notes and the 1997 Senior Subordinated Notes and (iii) Indebtedness set forth on Schedule 6.1. (d) Corporate Proceedings of the Loan Parties. The US Administrative ----------------------------------------- Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the US Administrative Agent, of the Boards of Directors of each of the Loan Parties authorizing (i) the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, (ii) the borrowings contemplated hereunder and (iii) the granting by it of the Liens created pursuant to its respective Security Documents, certified by its respective Secretary or an Assistant Secretary as of the Closing Date, each of which certificates shall be in form and substance reasonably satisfactory to the US Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (e) Incumbency Certificates of the Loan Parties. The US ------------------------------------------- Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each of the Loan Parties, dated the Closing Date, as to the incumbency and signature of the officers of such Loan Party executing any Loan Document, each of which certificates shall be reasonably satisfactory in form and substance to the US Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of such Loan Party. (f) Corporate Documents. The US Administrative Agent shall have ------------------- received, with a counterpart for each Lender, true and complete copies of (i) the certificate of incorporation and by-laws of each of the corporate Loan Parties, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such Loan Party, (ii) the limited partnership agreement of each Limited Partnership, certified as of the Closing Date as complete and correct copies thereof by a duly authorized officer of the general partner of such Limited Partnership and (iii) the certificate of formation and operating agreement of any Loan Party that is a limited liability company, certified as of the Closing Date as complete and correct copies thereof by a duly authorized officer of the sole member of such limited liability company. (g) Fees. The US Administrative Agent shall have received the fees ---- to be received on the Closing Date referred to in subsection 4.2(c). 6.2 Conditions to Initial Loans. The agreement of each Lender to --------------------------- make the initial Loan requested to be made by it is subject to the satisfaction, immediately prior to or concurrently with the making of such Loan on the initial Borrowing Date, of the following conditions precedent: 58 (a) Leverage Ratio Certificate. The US Administrative Agent shall -------------------------- have received, with a counterpart for each Lender, a certificate of the Company, dated the initial Borrowing Date, stating that after giving effect to all transactions and borrowings on the initial Borrowing Date, the Leverage Ratio on the initial Borrowing Date is not greater than 6.00 to 1.00. (b) Borrowing Certificate. The relevant Administrative Agent shall --------------------- have received, with a counterpart for each Lender, a certificate of the relevant Borrower, dated the initial Borrowing Date, substantially in the form of Exhibit C-1 and Exhibit C-2, respectively, with appropriate insertions and attachments, satisfactory in form and substance to the relevant Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the relevant Borrower. (c) Legal Opinions. The US Administrative Agent shall have received, -------------- with a counterpart for each Lender, the following executed legal opinions: (i) the executed legal opinion of Cozen and O'Connor, counsel to the Borrowers, substantially in the form of Exhibit F-1; and (ii) the executed legal opinion of Blake, Cassels & Graydon, Canadian counsel to the Canadian Borrower, substantially in the form of Exhibit F-2. (d) Actions to Perfect Liens. The US Administrative Agent shall have ------------------------ received evidence in form and substance reasonably satisfactory to it that all filings, recordings, registrations and other actions, including, without limitation, the filing of duly executed financing statements on Form UCC-1, PPSA Form 1-C or the appropriate equivalent thereof, necessary or, in the opinion of the US Administrative Agent, desirable to perfect the Liens created by the Security Documents shall have been completed or that all such financing statements and other documents with respect to such filings, recordings, registrations and other actions shall have been delivered to the applicable Administrative Agent. (e) Lien Searches. The US Administrative Agent shall have received, ------------- with respect to any material properties or assets owned by the Borrowers and their Subsidiaries with respect to which the US Administrative Agent shall not previously have received such a search, (i) the results of a recent search by a Person satisfactory to the US Administrative Agent of the Uniform Commercial Code, judgment and tax lien filings and (ii) PPSA search results certified by the Ontario Registrar of Personal Property or equivalent certificate in any other province or territory with PPSA-type legislation which may have been filed, with respect to personal property of either Borrower and its Subsidiaries, and the results of such searches in clauses (i) and (ii) above shall be reasonably satisfactory to the US Administrative Agent. (f) Insurance. The US Administrative Agent shall have received --------- evidence in form and substance reasonably satisfactory to it that all of the requirements of 59 subsection 5.3 of the US Global Guarantee and Security Agreement and subsection 6.1 of the Canadian Security Agreement shall have been satisfied. 6.3 Additional Conditions for Acquisition Loans. The agreement of ------------------------------------------- each Lender to make any Acquisition Loan requested to be made by it on any Borrowing Date is subject to the satisfaction of the following conditions precedent: (a) Acquisition Documents. The US Administrative Agent shall have --------------------- received, prior to the proposed borrowing date for such Acquisition Loan, true and correct copies, certified as to authenticity by the relevant Borrower, of each Acquisition Document (unless requested by the US Administrative Agent, without exhibits) (or the most recent form thereof) pursuant to which the Permitted Acquisition financed with such Acquisition Loan (the "Relevant Permitted Acquisition") is to be consummated, and such ------------------------------ other documents or instruments as may be reasonably requested by the US Administrative Agent, including, without limitation, a copy of any debt, instrument, security agreement or other material contract to which such Borrower or its Subsidiaries may be a party upon the consummation of such Relevant Permitted Acquisition. The Relevant Permitted Acquisition shall have been (or shall concurrently be) consummated in accordance with such agreements or an agreement substantially similar to the form presented to the US Administrative Agent. (b) Pro Forma Compliance. The Company shall be in compliance, on a -------------------- pro forma basis after giving effect to the Relevant Permitted Acquisition, with the covenants contained in subsection 8.10 recomputed as at the last day of the most recently ended calendar month of the Company for which financial statements shall have been delivered to the Lenders pursuant to subsection 7.1(a) or (b) as if such Relevant Permitted Acquisition had occurred on the first day of each relevant period for testing such compliance, and the Borrower shall have delivered to the US Administrative Agent a certificate of a Responsible Officer to such effect, together with all relevant financial information for such Subsidiary or assets, and, after giving effect to such transaction, any acquired or newly formed Subsidiary shall not be liable for any Indebtedness (except for Indebtedness permitted by subsection 8.4). (c) Corporate Documents. The US Administrative Agent shall have ------------------- received true and complete copies of the certificate of incorporation and by-laws of any new Subsidiary executing any Loan Document to be delivered on such Borrowing Date, certified as of such Borrowing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such new Subsidiary. (d) Litigation. No litigation, investigation, injunction or ---------- restraining order shall be pending, entered or threatened (including any proposed statute, rule or regulation) in respect of the Relevant Permitted Acquisition which could reasonably be expected to have a Material Adverse Effect. (e) Filings. All filings and other actions required to create and ------- perfect a Lien in favor of the relevant Administrative Agent for the benefit of the relevant Lenders in 60 all property to be acquired pursuant to the Relevant Permitted Acquisition shall have been duly made or taken or all necessary financing statements and other documents with respect to such filing and other actions shall have been delivered to the relevant Administrative Agent, and all such property shall be free and clear of other Liens except Liens permitted under the Loan Documents; provided, however, that no such Liens shall be -------- ------- granted with respect to any real property acquired in a Permitted Acquisition with respect to which a Lien permitted by subsection 8.1(l) exists and no Mortgages need to be filed except as required by subsection 7.14. (f) Lien Searches. The US Administrative Agent shall have received ------------- copies of the results of any search conducted in connection with the Relevant Permitted Acquisition on behalf of or at the request of any Loan Party for any Uniform Commercial Code, judgment, tax lien or PPSA filings, which may have been filed with respect to personal property which is to be acquired (or which is owned by any Person to be acquired) in connection with such Permitted Acquisition. (g) Pledged Stock; Stock Powers. The relevant Administrative Agent --------------------------- shall have received the certificates representing any additional shares of Capital Stock to be pledged pursuant to the Security Documents in connection with the Relevant Permitted Acquisition, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and each addendum or supplement as required under subsections 7.15 and 7.16. (h) Legal Opinions. The US Administrative Agent shall have received, -------------- with a counterpart for each Lender, such executed legal opinions of counsel to the Loan Parties, covering substantially the same matters as the opinion delivered pursuant to subsection 6.2(c)(i) or (ii), as the case may be, with respect to any Person acquired in connection with the Relevant Permitted Acquisition which shall become a party to a Loan Document. (i) Environmental Assessment. The US Administrative Agent shall have ------------------------ received to the extent available or prepared on behalf of the Company one or more environmental assessments with respect to the Relevant Permitted Acquisition, in form and substance reasonably satisfactory to it, concerning environmental compliance and liability issues affecting either Borrower and the other Loan Parties. 6.4 Conditions to Each Loan. The agreement of each Lender to make ----------------------- any Loan requested to be made by it on any date (including, without limitation, its initial Loan) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and ------------------------------ warranties made by either Borrower and any other Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except for representations and warranties stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date. 61 (b) No Default. No Default or Event of Default shall have occurred ---------- and be continuing on such date or after giving effect to the Loans requested to be made on such date. (c) Additional Matters. All corporate and other proceedings, and all ------------------ documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to the US Administrative Agent, and the US Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as they shall reasonably request. Each borrowing by either Borrower hereunder shall constitute a representation and warranty by the Borrowers as of the date thereof that the conditions contained in this subsection have been satisfied. SECTION 7. AFFIRMATIVE COVENANTS The Company hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or any Administrative Agent hereunder or under any other Loan Document, the Company shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to: 7.1 Financial Statements, Etc. Furnish to the US Administrative ------------------------- Agent for distribution to each Lender: (a) as soon as available, but in any event within 120 days after the end of each fiscal year of the Company, a copy of the consolidated and consolidating balance sheets of the Company and its consolidated Subsidiaries as at the end of such year and the related consolidated and consolidating statement of income and the related consolidated statements of retained earnings and cash flows for such fiscal year and setting forth comparative figures for the preceding fiscal year and, in the case of the consolidated statements, certified by Arthur Andersen LLP or other independent certified public accountants of recognized national standing reasonably acceptable to the Required Lenders, together with comparative figures for the preceding fiscal year prepared by the Company and an unaudited schedule prepared by the Company containing comparable budgeted figures for such period; and (b) as soon as available, but in any event within 45 days after the end of each of the first three quarterly periods of each fiscal year of the Company, the unaudited consolidated balance sheets of the Company and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income, retained earnings and of cash flows of the Company and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth (i) in the case of such consolidated balance sheet, in comparative form 62 the figures as at the end of the previous fiscal year and (ii) in the case of such consolidated statements of income and of cash flows, in comparative form the budgeted figures for such quarter and the figures for the corresponding quarter of the previous fiscal year, certified by a Responsible Officer as being fairly stated in accordance with GAAP in all material respects (subject to normal year-end audit ad justments); all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or Responsible Officer, as the case may be, and disclosed therein). 7.2 Certificates; Other Information. Furnish to the US ------------------------------- Administrative Agent for distribution to each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 7.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in connection with their audit nothing has come to their attention to cause them to believe that the Company or any of its Subsidiaries failed to comply with the covenants contained in Sections 7 and 8; provided, however, -------- ------- that such audit shall not have been directed primarily toward obtaining knowledge of such noncompliance, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 7.1(a) and (b), a certificate of a Responsible Officer ("Compliance Certificate") stating that, to the best of such ---------------------- Responsible Officer's knowledge, during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Company has complied with the requirements of subsections 7.15 and 7.16 with respect thereto), (ii) neither the Company nor any of its Subsidiaries has changed its name, its principal place of business, its chief executive office or the location of any material item of tangible Collateral without complying with the requirements of this Agreement and the Security Documents with respect thereto, (iii) the Company in all material respects has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to be observed, performed or satisfied by it, except as specified in such certificate, and (iv) the Company has set forth in reasonable detail any and all calculations necessary to show compliance with all of the financial condition covenants set forth in subsections 8.3 through 8.5 inclusive, and 8.7 through 8.10 inclusive, including, without limitation, calculations and reconciliations, if any, necessary to show compliance with such financial condition covenants on the basis of GAAP consistent with those utilized in preparing the audited financial statements referred to in subsection 5.1, and such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; 63 (c) no later than 30 days after the first day of each fiscal year of the Company, a budget for the Company and its Subsidiaries using a format reasonably satisfactory to the Administrative Agents and the Required Lenders (including budgeted statements of income and sources and uses of cash and balance sheets) prepared by the Company for each fiscal quarter of such fiscal year, prepared in reasonable detail with appropriate presentation and discussion of the principal assumptions upon which such budgets are based, accompanied by the statement of a Responsible Officer of the Company to the effect that, to the best of his knowledge, the budget is a reasonable estimate for the period covered thereby; (d) within five days after the same are filed, copies of all financial statements and reports which either Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; and (e) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 7.3 Books, Records and Inspections. The Company and its Subsidiaries ------------------------------ will keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities. The Company and its Subsidiaries will permit officers and designated representatives of either Administrative Agent or any Lender to visit and inspect, under guidance of officers of the Company or such Subsidiaries, any of the properties of the Company and its Subsidiaries, and to examine the books of account of the Company and its Subsidiaries and discuss the affairs, finances and accounts of the Company and its Subsidiaries with, and be advised as to the same by, its and their respective officers, all at such reasonable times and intervals and to such reasonable extent as either Administrative Agent or such Lender may request. 7.4 Maintenance of Property, Insurance. (a) Schedule 7.4 sets forth ---------------------------------- a true and complete listing of all insurance maintained by the Company and its Subsidiaries with respect to its property as of the Closing Date. The Company and its Subsidiaries will (i) keep all property necessary in its business in good working order and condition (ordinary wear and tear excepted), (ii) maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks as is consistent and in accordance with industry practice for companies similarly situated and (iii) furnish to each Lender, upon written request, full information as to the insurance carried. (b) The Company will (i) maintain with a financially sound and reputable insurance company key-man insurance on J. Peter Pierce of at least US$1,000,000 and (ii) furnish to each Lender, upon written request, full information as to the insurance carried. (c) At any time that insurance at levels described in Schedule 7.4 or at the level described in subsection 7.4(b) is not being maintained by the Company, the Company will notify the Lenders in writing within two Business Days thereof. The provisions of this 64 subsection 7.4 shall be deemed to be supplemental to, but not duplicative of, the provisions of any Security Document that require the maintenance of insurance. 7.5 Corporate Franchises. The Company and its Subsidiaries will do -------------------- all things necessary to preserve and keep in full force and effect its existence and all of its rights, franchises, licenses and patents, except where the failure to do so could not have been reasonably expected to have a Material Adverse Effect; provided, however, nothing in this subsection 7.5 shall prevent -------- ------- the withdrawal by the Company or any of its Subsidiaries of its qualification as a foreign corporation in a jurisdiction in which such withdrawal could not be reasonably expected to have a Material Adverse Effect. 7.6 Compliance with Statutes, Etc. The Company and its Subsidiaries ------------------------------ will comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all Governmental Authorities, domestic or foreign, in respect of the conduct of its business and the ownership of its property except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 7.7 Compliance with Environmental Laws. (a) The Company and its ---------------------------------- Subsidiaries will comply in all material respects with all Environmental Laws applicable to ownership or use of their real property (including, without limitation, state laws applicable to underground storage tanks), will promptly pay or cause to be paid by other responsible parties all costs and expenses incurred in such compliance, and will keep or cause to be kept all such real properties free and clear of any Liens or any restrictions on the ownership, occupancy, use or transferability of such real property imposed pursuant to such Environmental Laws, except where the failure to do so could not have been reasonably expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries will use or store or knowingly permit the use or storage of Hazardous Materials on any of its respective real property, or transport or knowingly permit the transportation of Hazardous Materials to or from any of its respective real property except in material compliance with Environmental Laws. Neither the Company nor any of its Subsidiaries will generate, treat, release or dispose of, or permit the generation, treatment, release or disposal of, Hazardous Materials on any of its respective real property except in material compliance with Environmental Laws. (b) At the reasonable request of either Administrative Agent or the Required Lenders that at any time there exists a condition or set of circumstances or facts which has given rise to a material Environmental Claim, material noncompliance with an Environmental Law or an Event of Default exists with respect to this Section 7.7, the Company will provide, at its sole cost and expense, an environmental site assessment report concerning such real property of the Company or its Subsidiaries which is affected by any Environmental Claim, or noncompliance with an Environmental Law or material Event of Default, prepared by an environmental consulting firm approved by the US Administrative Agent or the Required Lenders, indicating the presence or Release or absence of Hazardous Materials and the potential cost of any required removal or remedial action in connection with any Hazardous Materials on such real property. If the Company fails to provide the same within sixty (60) days after such request is made or within a reasonable time thereafter, the US Administrative Agent or the Required Lenders may upon ten (10) days' prior notice order the same or 65 undertake such an assessment all at the expense of the Company, and the Company or its Subsidiary shall grant and hereby grants to the US Administrative Agent and the Lenders and their agents access to such real property. 7.8 ERISA; Canadian Pension Plans. (a) As soon as possible and, in ----------------------------- any event, within 10 days after the Company or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following, the Company will deliver to each of the Lenders a certificate of a Responsible Officer of the Company setting forth details as to such occurrence and the action, if any, which the Company or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Company, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred; that an accumulated funding deficiency has been incurred or an application may be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan; that a Plan has been or may be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an unfunded current liability giving rise to a lien under ERISA or the Code; that proceedings may be or have been instituted to terminate a Plan; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; or that the Company or any ERISA Affiliate will or may incur any liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or with respect to a Plan under Section 4971 or 4975 of the Code or Section 409 or 502(i) or 502(1) of ERISA. The Company will deliver to each of the Lenders a complete copy of the annual report (Form 5500) of each Plan required to be filed with the Internal Revenue Service. In addition to any certificates or notices delivered to the Lenders pursuant to the first sentence hereof, copies of annual reports and any notices received by the Company or any ERISA Affiliate with respect to any Plan shall be delivered to the Lenders no later than 10 days after the later of the date such report or notice has been filed with the Internal Revenue Service or received by the Company or the ERISA Affiliate. (b) As soon as possible and, in any event, within 10 days after the Company or any Subsidiary of the Company knows of any of the following, the Company will deliver to the US Administrative Agent a certificate setting forth the details of any such occurrence or condition and such action, if any, which is required or proposed to be taken, together with any notices required or proposed to be given to or filed with or by the Company or such Subsidiary, the relevant pension or tax regulatory authority, a current or former member of a Canadian Pension Plan, an administrator or member of an advisory committee of a Canadian Pension Plan or a union representing current or former members of a Canadian Pension Plan with respect thereto: that a Canadian Pension Plan is not in substantial compliance with any applicable pension benefits and tax laws; that a Canadian Pension Plan has an unfunded liability (either on a "going concern" or on a "winding up" basis and determined in accordance with all applicable laws and using assumptions and methods that are appropriate in the circumstances and in accordance with generally accepted actuarial principles and practices in Canada); that any contribution (including any special payment to amortize any 66 unfunded liability) required to be made in accordance with any applicable law or the terms of a Canadian Pension Plan has not been made; that an event has occurred or a condition exists with respect to a Canadian Pension Plan that has resulted or could result in the Canadian Pension Plan being ordered or required to be wound up in whole or in part pursuant to any applicable pension benefits laws or having its registration revoked or refused for the purposes of any applicable pension benefits and tax laws or being placed under the administration of any relevant pension benefits regulatory authority or being required to pay any taxes or penalties under any applicable pension benefits and tax laws; that an order has been made or notice has been given pursuant to any applicable pension benefits and tax laws in respect of any Canadian Pension Plan requiring (or proposing to require) any person to take or refrain from taking any action in respect thereof or that there has (or there are circumstances that indicate that there has) been a contravention of any such applicable laws; or that an event has occurred or a condition exists that has resulted or could result in the Company or any Subsidiary of the Company being required to pay, repay or refund any amount (other than contributions required to be made or expenses required to be paid in the ordinary course) to or on account of any Canadian Pension Plan or a current or former member thereof; or that an event has occurred or a condition exists that has resulted or could result in a payment being made out of a guarantee fund established under the applicable pension benefits laws in respect of a Canadian Pension Plan. (c) The Company will, and will cause each of its Subsidiaries, to make all contributions (including any special payments to amortize any unfunded liabilities) required to be made in accordance with all applicable laws and the terms of each Canadian Pension Plan in a timely manner. 7.9 End of Fiscal Years; Fiscal Quarters. The Company will cause its ------------------------------------ and each of its Subsidiaries' fiscal years to end on December 31, and each of its and its Subsidiaries' first three fiscal quarters to end on March 31, June 30 and September 30. 7.10 Performance of Obligations. The Company will, and will cause -------------------------- each of its Subsidiaries to, perform all of its obligations under the terms of each mortgage, indenture, security agreement and other debt instrument by which it is bound and each other agreement or contract to which it is a party, except such non-performances as could not reasonably be expected to individually or in the aggregate have a Material Adverse Effect. 7.11 Payment of Taxes. Each of the Company and its Subsidiaries will ---------------- pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a Lien upon any properties of such Person; provided, that such Person shall not be required to pay any such tax, - -------- assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP. 7.12 Use of Proceeds. The proceeds of Loans shall be used by the --------------- Borrowers (i) to fund Permitted Acquisitions, (ii) provided that no Default or Event of Default shall have 67 occurred and be continuing, to provide funds in an aggregate amount not to exceed US$5,000,000 per annum, through December 31, 2000, for the purchase, repurchase, redemption or other payment in respect of shares of the Common Stock of the Company, (iii) provided that no Default or Event of Default shall have occurred and be continuing, to provide funds in an aggregate amount not to exceed US$50,000,000 for the purchase, repurchase, redemption or other payment in respect of the 1996 Senior Subordinated Notes and (iv) for general corporate purposes, including to finance the working capital needs of the Borrowers. 7.13 Notices. Promptly give notice to the US Administrative Agent ------- and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Company or any of its Subsidiaries, including, without limitation, under the 1996 Senior Subordinated Notes and the 1997 Senior Subordinated Notes or (ii) litigation, investigation or proceeding which may exist at any time between the Company or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting the Company or any of its Subsidiaries (i) in which the amount involved is US$3,000,000 or more and not covered by insurance or (ii) in which injunctive or similar relief is sought which could reasonably be expected to have a Material Adverse Effect; (d) any material adverse change in the business, operations, property, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole; and (e) as soon as possible after a Responsible Officer of the Company knows or reasonably should know thereof, (i) any Release by the Company or any of its Subsidiaries of any Hazardous Materials required to be reported under applicable Environmental Laws to any Governmental Authority, unless the Company reasonably determines that the total Environmental Costs arising out of such release or discharge are unlikely to exceed US$1,000,000 or to have a Material Adverse Effect; (ii) any condition, circumstance, occurrence or event not previously disclosed in writing to the US Administrative Agent that could result in liability under applicable Environmental Laws unless the Company reasonably determines that the total Environmental Costs arising out of such condition, circumstance, occurrence or event are unlikely to exceed US$1,000,000 or to have a Material Adverse Effect, or could result in the imposition of any Lien or other restriction on the title, ownership or transferability of any facilities and properties owned, leased or operated by the Company or any of its Sub sidiaries that could reasonably be expected to have a Material Adverse Effect; and (iii) any proposed action to be taken by the Company or any of its Subsidiaries that would 68 reasonably be expected to subject the Company or any of its Subsidiaries to any material additional or different requirements or liabilities under Environmental Laws, unless the Company determines that the total Environmental Costs arising out of such proposed action are unlikely to exceed US$1,000,000 or to have a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 7.14 Additional Mortgages. (a) The Company shall grant, and shall -------------------- cause its Subsidiaries to grant, to the relevant Administrative Agent, for the benefit of the relevant Lenders a lien and security interest in any real property of such Person not covered by a Mortgage (including, without limitation, any real property acquired by such Loan Party pursuant to a Permitted Acquisition, but excluding any property that has a Lien thereon permitted by subsection 8.1(l)) so long as the fair market value of such property exceeds US$5,000,000 (or the C$ Equivalent thereof) an "Additional ---------- Mortgaged Property"), and shall take all actions reasonably requested by the US - ------------------ Administrative Agent (including, without limitation, the obtaining of title insurance policies and title surveys) in connection with the granting of such security interest, provided, however, that no such Mortgage shall be required to -------- ------- be created with respect to any real property that is subject to a Lien permitted by subsection 8.1(l). (b) The liens and security interests required to be granted pursuant to clause (a) above shall be granted pursuant to security documentation (which shall be substantially similar to the Security Documents) reasonably satisfactory in form and substance to the US Administrative Agent and shall constitute valid and enforceable perfected security interests prior to the rights of all third Persons and subject to no other Liens except such Liens as are permitted by subsection 8.1. The Mortgages and other instruments related thereto shall be duly recorded or filed in such manner and in such places and at such times as are required by law to establish, perfect, preserve and protect the Liens, in favor of the relevant Administrative Agent for the benefit of the relevant Lenders, required to be granted pursuant to the Mortgages, as the case may be, and, all taxes, fees and other charges payable in connection therewith shall be paid in full by the respective Borrower. At the time of the execution and delivery of the Mortgages, such Borrower shall cause to be delivered to the relevant Administrative Agent such opinions of counsel, title insurance, title surveys and other related documents other than real estate appraisals as may be reasonably requested by such Administrative Agent or the relevant Required Lenders to assure themselves that this subsection has been complied with. (c) Each Borrower agrees that each action required by subsections (a) or (b) with respect to any Mortgages, as the case may be, shall be completed within 60 days of the later of (i) the date such action is requested to be taken and (ii) the date of the Relevant Permitted Acquisition. 69 7.15 Additional Stock Pledges. (a) The Company will, and will cause ------------------------ each of its Subsidiaries to, pledge to the US Administrative Agent 100% of the issued and outstanding Capital Stock (other than directors' qualifying shares) which it or such Subsidiary holds of each Domestic Subsidiary of the Company which has not previously been pledged hereunder. Such pledge shall be granted pursuant to an addendum to the US Global Guarantee and Security Agreement substantially in the form of Annex 1 thereto. (b) The Company will, and will cause each of its US Subsidiaries to, pledge (or grant analogous security interests) to the US Administrative Agent in accordance with the laws of the jurisdiction of organization of the issuer thereof 65% (rounded downward to eliminate any fraction of a share) of the issued and outstanding shares of each class of Capital Stock entitled to vote (within the meaning of Treasury Regulations (S)1.956-2(c)(2)) ("Voting Stock") ------------ and 100% of the issued and outstanding shares of each class of Capital Stock not entitled to vote (within the meaning of such Regulation) ("Non-Voting Stock") of ---------------- each first-tier Foreign Subsidiary from time to time of the Company which (in each case) is owned of record by the Company or any Domestic Subsidiary of the Company and which has not previously been pledged hereunder. Each such pledge shall, unless otherwise agreed to by the US Administrative Agent, be granted pursuant to an addendum to the US Global Guarantee and Security Agreement in such form as (x) may be reasonably required in order to perfect a security interest in the pledged stock delivered thereto as defined therein under the laws of the jurisdiction in which the issuer of such pledged stock is organized and (y) is in form and substance reasonably satisfactory to the US Administrative Agent. (c) The Company will, and will cause each of the US Subsidiaries to, execute and deliver each addendum required to be executed and delivered pursuant to this subsection 7.15 promptly following the organization, acquisition or identification of any such Subsidiary or first-tier Foreign Subsidiary. Each such addendum shall be accompanied by (i) share certificates evidencing the pledged stock thereunder (to the extent that such pledged stock is certificated) as defined therein, together with an undated stock power for each such share certificate (duly executed in blank and delivered by a duly authorized officer of the pledgor of the pledged stock represented by such certificate), (ii) in the case of the pledge of Capital Stock of any Foreign Subsidiary, evidence of the taking of all such other actions as may be necessary or appropriate for the perfection and first priority of such pledge and (iii) in the case of any Subsidiary, such resolutions, incumbency certificates and legal opinions as are reasonably requested by the US Administrative Agent and shall otherwise be in form and substance reasonably satisfactory to the US Administrative Agent. (d) The Canadian Borrower will, and will cause each of its Subsidiaries to, pledge to the Canadian Administrative Agent 100% of the issued and outstanding Capital Stock or other equity interests (other than directors' qualifying shares) which it or such Subsidiary holds of each of its Subsidiaries which has not previously been pledged hereunder. Such pledge shall, unless otherwise agreed to by the Canadian Administrative Agent, be granted pursuant to an addendum to the Canadian Security Agreement substantially in the form of Exhibit A thereto. 70 (e) The Canadian Borrower will, and will cause each of its Subsidiaries to, execute and deliver each addendum required to be executed and delivered pursuant to this subsection 7.15 promptly following the organization, acquisition or identification of any such Subsidiary. Each such addendum shall be accompanied by (i) share certificates, if any, evidencing the pledged stock thereunder (to the extent that such pledged stock is certificated) as defined therein, together with an undated stock power for each such share certificate (duly executed in blank and delivered by a duly authorized officer of the pledgor of the pledged stock represented by such certificate), (ii) in the case of the pledge of Capital Stock of any Foreign Subsidiary, evidence of the taking of all such other actions as may be necessary or appropriate for the perfection and first priority of such pledge and (iii) in the case of any Subsidiary, such resolutions, incumbency certificates and legal opinions as are reasonably requested by the Canadian Administrative Agent and shall otherwise be in form and substance reasonably satisfactory to the Canadian Administrative Agent. 7.16 Additional Guarantee and Security Agreements. Each Borrower -------------------------------------------- will cause each of its respective Subsidiaries which has not previously done so to execute and deliver to the relevant Administrative Agent an addendum to, and thereby become a party to, the respective US Global Guarantee and Security Agreement or Canadian Security Agreement and to take such other action as reasonably shall be necessary or as the relevant Administrative Agent reasonably shall request to grant to such Administrative Agent a perfected (to the extent required in the US Global Guarantee and Security Agreement or Canadian Security Agreement) security interest in all Collateral described in the US Global Guarantee and Security Agreement or Canadian Security Agreement (subject to any Liens permitted to encumber such Collateral pursuant to subsection 8.1). Each such addendum to the relevant US Global Guarantee and Security Agreement or Canadian Security Agreement shall be accompanied by such evidence of the taking of all actions as may be necessary or appropriate for the perfection (to the extent required in such US Global Guarantee and Security Agreement or Canadian Security Agreement) of such security interest (including, without limitation, the filing of any necessary Uniform Commercial Code or PPSA financing statements) and such resolutions, incumbency certificates and legal opinions as are reasonably requested by such Administrative Agent, all of which shall be in form and substance reasonably satisfactory to such Administrative Agent. SECTION 8. NEGATIVE COVENANTS Each Borrower covenants and agrees with the Lenders and the Administrative Agents that, so long as any Commitment or Loan is outstanding and until payment in full of all amounts payable by such Borrower hereunder: 8.1 Liens. Such Borrower will not, and will not permit any of its ----- Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any of its property or assets (real or personal, tangible or intangible), whether now owned or hereafter acquired, except: 71 (a) inchoate Liens for taxes not yet due or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with GAAP; (b) Liens imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness, such as carriers', warehousemen's, materialmen's, mechanics' and similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of such Person's property or assets or materially impair the use thereof in the operation of the business of such Person or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; (c) Liens in existence on the Closing Date and listed on Schedule 8.1; (d) Liens created pursuant to the Security Documents; (e) easements, rights-of-way, restrictions, encroachments and other similar charges, encumbrances or defects or irregulations of title not materially interfering with the conduct of the business of such Borrower or such Subsidiary; (f) any attachment or judgment Lien so long as no Event of Default shall have arisen under subsection 9(h) in connection therewith; (g) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security benefits as required by law, or securing leases incurred in the ordinary course of business; (h) Liens created by leases or subleases granted to others not interfering in any material respect with the business of such Borrower or such Subsidiary; (i) Liens on property of such Borrower or any of its Subsidiaries securing Capitalized Lease Obligations permitted by subsection 8.4(f), provided that such Liens only secure the payment of such Capitalized Lease -------- Obligation and encumber only the asset giving rise to the Capitalized Lease Obligation; (j) Liens placed upon equipment or machinery used in the ordinary course of business of such Borrower or such Subsidiary at the time of the acquisition thereof to secure Indebtedness incurred to pay all or a portion of the purchase price thereof; provided that the Indebtedness secured by -------- Liens permitted by this clause is permitted pursuant to subsection 8.4(f) and that such Liens do not encumber any other asset or property of such Borrower or any of its Subsidiaries; (k) Liens on real property acquired in connection with a Permitted Acquisition, or which is owned by a Person acquired in connection with a Permitted Acquisition 72 which becomes a Subsidiary after the date hereof, in either case, securing Indebtedness permitted by subsection 8.4(f), provided that (i) such Liens -------- existed at the time of such Permitted Acquisition and were not created in anticipation thereof, (ii) any such Lien is not spread to cover any other property or assets after the date of such Permitted Acquisition and (iii) the amount of Indebtedness secured thereby is not increased; (l) Liens arising pursuant to purchase money mortgages securing Indebtedness representing a portion of the purchase price of real property acquired by such Borrower or such Subsidiary in accordance with subsection 8.2(d) or (e), provided, that (i) any such Liens attach only to the real -------- property so purchased, (ii) the Indebtedness secured by any such Lien does not exceed 100% of the lesser of the fair market value or the purchase price of such real property at the time of the incurrence of such Indebtedness and (iii) the Indebtedness secured by Liens permitted by this clause is permitted pursuant to subsection 8.4(f); (m) Liens created by applicable by-laws and other governmental regulations and restrictions provided that the same do not materially interfere with the conduct of the business of the owner of the property subject thereto; and (n) reservations, limitations and conditions expressed in any original grants from the Crown. 8.2 Consolidation, Merger, Purchase or Sale of Assets, Etc. Such ------------------------------------------------------- Borrower will not, and will not permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger, amalgamation or consolidation, nor convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any part of its property or assets (including, without limitation, stock of any Subsidiary), nor enter into any partnerships, joint ventures or sale-leaseback transactions, nor purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions by such Borrower or such Subsidiary of inventory, materials and equipment in the ordinary course of business) of any Person, except: (a) Capital Expenditures permitted by subsection 8.7; (b) sales of inventory and other assets in the ordinary course of business; (c) investments permitted by subsection 8.5; (d) Permitted Acquisitions; (e) so long as prior to and after giving effect thereto, there shall not be a Default or Event of Default in existence, (i) the purchase of the Travelers Corporation Building Archives, provided that the aggregate -------- consideration paid in connection therewith shall not exceed US$6,000,000, (ii) the consummation of the Knott Transaction, provided that the aggregate -------- consideration paid in connection therewith shall not exceed US$3,000,000 and (iii) other purchases of real property in the 73 ordinary course of business, provided that the aggregate consideration paid -------- during any fiscal year of the Company in connection with all such other purchases (excluding any purchases in connection with a Permitted Acquisition) shall not exceed US$7,500,000; (f) other Dispositions of property or assets (i) which do not exceed US$2,500,000 in the aggregate or (ii) with respect to which (x) the Company or a Subsidiary, as the case may be, receives consideration at the time of such Disposition at least equal to the fair market value thereof; (y) not less than 85% of such consideration is in the form of cash; and (z) the Net Proceeds thereof are applied in accordance with subsections 4.4(b), (g) and (h); (g) leases (as lessee) of real or personal property (so long as such lease does not create Capitalized Lease Obligations); (h) mergers, consolidations or amalgamations of one or more Subsidiaries (i) with and into the Company or another Subsidiary or (ii) in which any Subsidiary is the surviving or resulting company; and (i) "Restricted Payments" to the extent permitted by subsection 8.3. 8.3 Limitation on Restricted Payments. The Company will not make any --------------------------------- "Restricted Payments" (as defined in the 1996 Senior Subordinated Notes Indenture and the 1997 Senior Subordinated Notes Indenture) other than in accordance with, respectively, the provisions of Section 4.09 of the 1996 Senior Subordinated Notes Indenture and Section 4.9 of the 1997 Senior Subordinated Notes Indenture (relating to "Limitation on Restricted Payments") as such provisions are in effect on the date hereof without giving effect to any amendments, supplements or other modifications thereto or any termination thereof, which provisions, together with related definitions, are deemed incorporated herein by reference, as if set forth at length herein. 8.4 Indebtedness. Such Borrower will not, and will not permit any of ------------ its Subsidiaries to, contract, create, incur, assume nor suffer to exist any Indebtedness, except: (a) Indebtedness in respect of the Loans, any Notes, the Security Documents and the other obligations of the Loan Parties under this Agreement and the other Loan Documents; (b) Indebtedness outstanding on the Closing Date (including Indebtedness evidenced by the 1996 Senior Subordinated Notes and the 1997 Senior Subordinated Notes) and listed on Schedule 6.1, and any subsequent extension, renewal or refinancing thereof which does not increase the amount thereof or result in any advancement in the maturity date of any portion of the principal thereof; (c) so long as prior to, and after giving effect thereto, there shall not be a Default or Event of Default then in existence, Indebtedness of the Company incurred to finance the purchase by the Company of (i) the Travelers Corporation Building 74 Archives in an aggregate principal amount not to exceed US$4,250,000 and (ii) the Knott Transaction, in an aggregate principal amount not to exceed US$3,000,000; (d) Permitted Intercompany Indebtedness; (e) Indebtedness under Interest Rate Protection Agreements entered into in the ordinary course of business; and (f) additional Indebtedness (including, without limitation, (i) Capitalized Lease Obligations and other Indebtedness secured by Liens permitted under subsection 8.1(j) or 8.1(k), (ii) Indebtedness assumed in connection with any Permitted Acquisition and (iii) Indebtedness incurred to finance the acquisition of any real property in accordance with subsection 8.2(e)(iii)) up to but not exceeding US$20,000,000 at any one time outstanding. 8.5 Advances, Investments and Loans. Such Borrower will not, and ------------------------------- will not permit any of its Subsidiaries to, directly or indirectly lend money or credit or make advances to any Person, nor purchase or acquire any stock, obligations or securities of, or any other interest in, nor make any capital contribution to, any other Person, except: (a) receivables created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms; (b) Permitted Acquisitions; (c) such Borrower may make and maintain travel, relocation and other expense advances to employees for business-related activities in the ordinary course of business and consistent with past practice, in an aggregate outstanding principal amount not to exceed US$500,000 at any time; (d) loans and advances which create Indebtedness permitted by subsection 8.4(d); (e) the Company may enter into Interest Rate Protection Agreements to the extent permitted pursuant to subsection 8.4(e); (f) Permitted Intercompany Indebtedness; and (g) reasonable and customary loans made to employees not to exceed $500,000 in the aggregate at any one time outstanding, plus any loans which may be required to be made under the Company's Nonqualified Stock Option Plan in an amount not to exceed US$2,000,000. 8.6 Transactions with Affiliates. Such Borrower will not, and will ---------------------------- not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate except that: 75 (a) the Company may enter into transactions permitted by subsection 8.5(g); (b) the Company may pay customary and reasonable fees to any directors of the Company who would not be Affiliates of the Company if they were not directors; (c) the Company and the Canadian Borrower shall be permitted to perform the Management Services Agreement; (d) the Company shall be permitted to perform under any Tax Indemnity Agreement; (e) the Company may make any "Restricted Payment" that is not prohibited by the provisions described under "Limitations on Restricted Payments" contained in Section 4.09 of the 1996 Senior Subordinated Notes Indenture and Section 4.9 of the 1997 Senior Subordinated Notes Indenture and incorporated by reference in subsection 8.3, including, without limitation, payments made to Leo W. Pierce, Sr. or his spouse pursuant to a pension obligation of the Company in the annual amount of $96,000; or (f) the Company or any Subsidiary of the Company may pay customary investment banking, underwriting, placement agent or financial advisor fees paid in connection with services rendered to the Company or any Subsidiary of the Company; (g) the Company may enter into any transaction, approved by the Board of Directors of the Company in good faith, with an officer, director, employee or consultant of the Company or of any Subsidiary in his or her capacity as an officer, director, employee or consultant entered into in the ordinary course of business, including compensation, indemnity and employee benefit arrangements with any officer, director, employee or consultant of the Company or of any Subsidiary; (h) the Company may enter into transactions creating Permitted Intercompany Indebtedness; and (i) the Company may make rental or lease payments and perform its obligations under existing leases with Affiliates in accordance with the terms thereof; provided, however, that the Company and its Subsidiaries may renew any of the - -------- ------- existing Affiliate Contracts through either a renewal option or upon expiration of an arrangement on substantially similar terms to those in effect immediately preceding such expiration. 8.7 Capital Expenditures. Such Borrower will not, and will not -------------------- permit any of its Subsidiaries to, make any expenditure (collectively, "Capital ------- Expenditures") for fixed or capital assets (including, without limitation, - ------------ expenditures for maintenance and repairs which should be capitalized in accordance with GAAP and including Capitalized Lease Obligations and excluding Client Acquisition Costs (whether or not such costs would be classified as capital expenditures in accordance with GAAP) but excluding (a) Capital Expenditures related to a Permitted Acquisition; (b) insurance proceeds received in connection with any Casualty 76 Event used as and permitted by subsection 4.4(d) to effect the repair, construction or rebuilding of the asset which is the subject of such Casualty Event; (c) amounts expended to purchase the Travelers Corporation Building Archives and consummate the Knott Transaction in accordance with subsections 8.2(e)(i) and 8.2(e)(ii), respectively; and (d) amounts expended to purchase real property pursuant to subsection 8.2(e)(iii) and (iv)) which should be capitalized in accordance with GAAP; provided that the Company and its -------- Subsidiaries may make Capital Expenditures so long as the aggregate amount thereof (other than those described in clauses (a) through (d) above) does not exceed, during any fiscal year of the Company, an amount equal to the sum of (x) 17% of total consolidated revenues of the Company and its Subsidiaries during the 12-month period ending on September 30 of such year plus (y) to the extent not included in clause (x) above, 17% of the total revenues for such 12-month period of all businesses acquired by the Company and its Subsidiaries during such 12-month period (including the revenues of each such business for the period from the beginning of such 12-month period through the date of the acquisition thereof). 8.8 Fixed Charge Coverage Ratio. Commencing on September 30, 1997, --------------------------- the Company will not permit its Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters ending on and after such date, in each case taken as one accounting period, to be less than 1.0:1.0. 8.9 Interest Coverage Ratio. The Company will not permit its ratio ----------------------- of EBITDA to Interest Expense for any period of four consecutive fiscal quarters ending during any period set forth below, in each case taken as one accounting period, to be less than the ratio set forth opposite such period below:
Period Ratio - ------------------------------------- ------------ From and including the Closing Date 1.50 to 1.00 through December 31, 1997 From and including January 1, 1998 1.75 to 1.00 through June 30, 1998 From and including July 1, 1998 2.00 to 1.00 through December 31, 2000 From and including January 1, 2001 2.50 to 1.00 and thereafter - ---------------------------------------------------
8.10 Leverage Ratio. (a) The Company will not permit the Leverage -------------- Ratio at any time during any period set forth below to exceed the ratio set forth opposite such period below: 77
Period Ratio - ------------------------------------- ------------ From and including the Closing Date 6.00 to 1.00 through December 31, 2000 From and including January 1, 2001 5.50 to 1.00 through December 31, 2001 From and including January 1, 2002 4.50 to 1.00 through December 31, 2002 From and including January 1, 2003 3.50 to 1.00 and thereafter - ---------------------------------------------------
(b) The Company will not at any time during any period set forth below permit the ratio of (i) the aggregate principal amount of Loans then outstanding, less any cash balances in excess of US$500,000 then outstanding to the credit of the Company and its Subsidiaries in their operating accounts to (ii) Adjusted EBITDA of the Company for the then most recently ended period of four consecutive fiscal quarters for which financial statements shall have been delivered to the Lenders pursuant to subsection 7.1(a) or 7.1(b) to exceed the ratio set forth opposite such period below:
Period Ratio - ------------------------------------- ----------- From and including the Closing Date 2.75 to 1.0 through June 30, 1998 From and including July 1, 1998 2.50 to 1.0 through December 31, 2000 From and including January 1, 2001 2.00 to 1.0 through December 31, 2002 From and including January 1, 2003 1.50 to 1.0 and thereafter - --------------------------------------------------
8.11 Limitation on Voluntary Payments and Modifications of ----------------------------------------------------- Indebtedness and Certain Other Agreements, Etc. The Company will not, and will - ----------------------------------------------- not permit any of its Subsidiaries to: (a) make (or give any notice in respect of) any voluntary or optional payment or prepayment, defeasance or redemption or acquisition for value of any Indebtedness (other than the Loans and Permitted Intercompany Indebtedness), provided that the Company may utilize the proceeds of any -------- sale of shares of its Capital Stock completed subsequent to the date hereof to redeem 1997 Senior Subordinated Notes in accordance with Section 3.7(b) of the Senior Subordinated Notes Indenture so long as simultaneously therewith the Borrowers shall prepay the Loans in accordance with subsection 4.4(a) in an amount at least equal to the amount of such proceeds so 78 utilized (or, if the aggregate then unpaid principal amount of the Loans is less than such amount, the Borrowers shall prepay the Loans in full) and provided further that the Company may purchase, repurchase, redeem or make -------- ------- any other payment in respect of the 1996 Senior Subordinated Notes to the extent permitted by subsection 7.12(iii); (b) amend or modify, or permit the amendment or modification of, or relating to the payment or prepayment of the principal of or interest on any Indebtedness other than Permitted Intercompany Indebtedness (other than any such amendment or modification which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon); (c) amend or modify, or permit the amendment or modification of, any of the terms and conditions of the 1996 Senior Subordinated Note Indenture, the 1997 Senior Subordinated Notes Indenture, the 1996 Senior Subordinated Notes or the 1997 Senior Subordinated Notes (other than (i) as permitted by clause (b) above and (ii) those that would relax any restriction on the Company imposed thereby and would not have an adverse effect upon the Lenders); or (d) amend, modify or change, or enter into any new Affiliate Contract, Management Services Agreement, Tax Indemnity Agreement or Tax Sharing Agreement, except for any such amendment, modification or change which is beneficial to the Company and its Subsidiaries. 8.12 Limitation on Issuance of Capital Stock. The Company will not --------------------------------------- permit any of its Subsidiaries to issue any Capital Stock (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, Capital Stock, except for issuances which do not decrease the percentage of the ownership of any Subsidiary currently held, directly or indirectly, by the Company. 8.13 Business. The Company will not, and will not permit any of its -------- Subsidiaries to, engage (directly or indirectly) in any business other than the business in which it is engaged on the date hereof and any other reasonably related businesses. The Limited Partnerships shall engage in no business other than owning the stock of the Canadian Borrower. 8.14 Designation of "Designated Senior Indebtedness". The Company ----------------------------------------------- will not, without the prior written consent of the Required Lenders, designate any Indebtedness as "Designated Senior Indebtedness" within the meaning of such term as used in the 1996 Senior Subordinated Notes Indenture and the 1997 Senior Subordinated Notes Indenture. 79 SECTION 9. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) Either Borrower shall fail to pay any principal of any Loan when due in accordance with the terms thereof or hereof; or either Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by the Company or any other Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) The Company or any other Loan Party shall default in the observance or due performance of any agreement contained in Section 8, Sections 6 and 7 of the US Mortgage, and Article 2 of the Canadian Security Agreement; or (d) The Company or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after the earlier of (i) the date upon which written notice thereof is given to the Company by either Administrative Agent or any Lender or (ii) the date upon which either Borrower obtains knowledge of such default; or (e) The Company or any of its Subsidiaries shall (i) default (unless such default has been waived by the relevant creditor) in any payment of principal of or interest on any Indebtedness (other than the Loans) or in the payment of any Guarantee Obligation, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; provided, however, that no Default or Event -------- ------- of Default shall exist under this paragraph unless the aggregate amount of Indebtedness and/or Guarantee Obligations in respect of which any default or other event or condition referred to in this paragraph shall have occurred shall be equal to at least US$1,000,000; or 80 (f) (i) The Company or any of its material Subsidiaries shall commence any voluntary case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Company or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Company or any of its material Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Company or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Company or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Company or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) Any Person shall engage in any non-exempt "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Company or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Company or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; but only if, in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, involve an aggregate amount in excess of US$3,000,000; or (h) One or more judgments or decrees shall be entered against the Company or any of its Subsidiaries involving in the aggregate a liability (not paid or fully 81 covered by insurance) of US$3,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (i) (i) Any of the Security Documents shall cease, for any reason, to be in full force and effect, or the Company or any other Loan Party which is a party to any of the Security Documents shall so assert; or (ii) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or (iii) any guarantee in any of the Security Documents shall cease, for any reason, to be in full force and effect or any Loan Party which is a guarantor thereunder shall so assert; or (j) Any Change of Control shall occur; or (k) Any "Dissolution Event," as defined in the Articles of Association of the Canadian Borrower shall occur; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section with respect to either Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (including the face amount of all Bankers' Acceptances accepted by any C$ Lender), with accrued interest thereon, and all other amounts owing under this Agreement shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) (x) with the consent of the Required US$ Lenders, the US Administrative Agent may, or upon the request of the Required US$ Lenders, the US Administrative Agent shall, by notice to the Company declare the US Commitments to be terminated forthwith, whereupon the US Commitments shall immediately terminate; and (y) with the consent of the Required US$ Lenders, the US Administrative Agent may, or upon the request of the Required US$ Lenders, the US Administrative Agent shall, by notice to the Company, declare the US$ Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement to the US$ Lenders to be due and payable forthwith, whereupon the same shall immediately become due and payable; and (ii) (x) with the consent of the Required C$ Lenders, the Canadian Administrative Agent may, or upon the request of the Required C$ Lenders, the Canadian Administrative Agent shall, by notice to the Canadian Borrower declare the Canadian Commitments to be terminated forthwith, whereupon the Canadian Commitments shall immediately terminate; and (y) with the consent of the Required C$ Lenders, the Canadian Administrative Agent may, or upon the request of the Required C$ Lenders, the Canadian Administrative Agent shall, by notice to the Canadian Borrower declare the C$ Loans hereunder (including the face amount of all Bankers' Acceptances accepted by any C$ Lender), with accrued interest thereon, and 82 all other amounts owing under this Agreement to the Canadian Lenders to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 10. THE ADMINISTRATIVE AGENTS 10.1 Appointment. Each Lender hereby irrevocably designates and ----------- appoints the Administrative Agents as the agents of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agents, in such capacities, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agents by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agents shall not have any duties or responsibilities, except those expressly set forth in this Agreement, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against either Administrative Agent. The Borrowers shall be entitled to conclusively rely upon any statement made by either Administrative Agent that it has received the approval of the Required Lenders, the Required US$ Lenders, the Required C$ Lenders, all of the Lenders, all of the US$ Lenders or all of the C$ Lenders. 10.2 Delegation of Duties. Each Administrative Agent may execute any -------------------- of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Neither Administrative Agent shall be responsible to any Lender for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 10.3 Exculpatory Provisions. Neither Administrative Agent nor any of ---------------------- its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by such Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party to perform its obligations hereunder or thereunder. Neither Administrative Agent shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of 83 any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. 10.4 Reliance by Administrative Agent. Each Administrative Agent -------------------------------- shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrowers), independent accountants and other experts selected by the Administrative Agent. Each Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Administrative Agent. Each Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 10.5 Notice of Default. Neither Administrative Agent shall be deemed ----------------- to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Administrative Agent has received notice from a Lender or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that either Administrative Agent receives such a notice, such Administrative Agent shall give notice thereof to the Lenders. The Administrative Agents shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the -------- Administrative Agents shall have received such directions, the Administrative Agents may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as they shall deem advisable and in the best interests of the Lenders. 10.6 Non-Reliance on Administrative Agents and Other Lenders. Each ------------------------------------------------------- Lender expressly acknowledges that neither Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by either Administrative Agent hereinafter taken, including any review of the affairs of either Borrower, shall be deemed to constitute any representation or warranty by such Administrative Agent to any Lender. Each Lender represents to the Administrative Agents that it has, independently and without reliance upon either Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of either Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also 84 represents that it will, independently and without reliance upon either Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of any Loan Party. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agents hereunder, neither Administrative Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party which may come into the possession of such Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 10.7 Indemnification. The Lenders agree to indemnify the --------------- Administrative Agents in their respective capacities as such (to the extent not reimbursed by the Borrowers and without limiting the obligation of either Borrower to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agents in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agents under or in connection with any of the foregoing; provided that no Lender shall be liable -------- for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from an Administrative Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. 10.8 Administrative Agents in Their Individual Capacity. The -------------------------------------------------- Administrative Agents and their Affiliates may make loans to, accept deposits from and generally engage in any kind of business with either Borrower as though the Administrative Agents were not the Administrative Agents hereunder and under the other Loan Documents. With respect to the Loans made by it, each Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include such Administrative Agent in its individual capacity. 10.9 Successor Administrative Agent. Each Administrative Agent may ------------------------------ resign as Administrative Agent upon 15 Business Days' prior written notice to the Borrowers and the Lenders. If either Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent (provided that it shall have been approved by the Company), shall succeed to the rights, powers and duties of such Administrative Agent hereunder. Such resignation shall take effect upon the 85 appointment of a successor agent. Effective upon such appointment and approval, the term "Administrative Agent" shall mean such successor agent, and such former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. SECTION 11. MISCELLANEOUS 11.1 Amendments and Waivers. (a) Neither this Agreement nor any ---------------------- other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. The Required Lenders may, or, with the written consent of the Required Lenders, the US Administrative Agent may, from time to time, (1) enter into with the Borrowers written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Borrowers hereunder or thereunder or (2) waive, on such terms and conditions as the Required Lenders or the Administrative Agents, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, -------- ------- supplement or modification shall (i) reduce the amount or extend the scheduled date of maturity of any Loan or of any installment thereof, or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender's Commitments, in each case without the consent of each Lender affected thereby, or (ii) amend, modify or waive any provision of this subsection or reduce the percentage specified in the definition of Required Lenders or consent to the assignment or transfer by either Borrower of any of its rights and obligations under this Agreement and the other Loan Documents or release all or substantially all of the Collateral, in each case without the written consent of all the Lenders, or (iii) reduce the percentage specified in the definition of Required US$ Lenders or Required C$ Lenders without the written consent of all the US$ Lenders or C$ Lenders, respectively, or (iv) amend, modify or waive any provision of Section 10 without the written consent of the then Administrative Agents, or (v) amend, modify or waive any provision of this Agreement regarding the allocation of prepayment amounts among the US$ Loans and the C$ Loans or the application of such prepayment amounts to the respective installments of principal under the respective US$ Loans and C$ Loans without the written consent of the Required US$ Lenders and the Required C$ Lenders; or (vi) subject to clause (i) of this proviso as it relates to reducing the amount or extending the scheduled date of maturity of any Loan or any installment thereof, amend, modify or waive any provision of (x) Section 2 without the written consent of the Required US$ Lenders or (y) Section 3 without the written consent of the Required C$ Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrowers, the Lenders, the Administrative Agents and all 86 future holders of the Loans. In the case of any waiver, the Borrowers, the Lenders and the Administrative Agents shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. (b) If in connection with any proposed amendment, supplement, waiver or other modification of any of the provisions of this Agreement as contemplated by subsection 11.1(a), the consent of the Required Lenders or of all of the Lenders, as the case may be, for the relevant level of consent required, is not obtained, the Borrowers shall have the rights as follows. In matters requiring the consent of all Lenders or the consent of the Required Lenders, the Borrowers shall have the right to require any nonconsenting Lender to transfer or assign, in whole or in part, without recourse (in accordance with subsection 11.6) all or part of its interest, rights and obligations under this Agreement to another Person (provided that the relevant Borrower with the reasonable cooperation of such Lender identifies a Person which is ready, willing and able to be an Assignee with respect to thereto which shall assume such assigned obligations (which Assignee may be another Lender, if such Assignee Lender accepts such assignment); provided that (A) the Assignee shall have paid to such Lender in -------- immediately available funds an amount equal to the principal of and interest accrued to the date of such payment on the Loans made by it hereunder and all other amounts owed to it hereunder, including, without limitation, any amounts that would be owing under subsection 4.12 if such Loans were prepaid on the date of such assignment, and (B) such assignment of the Commitment of such Lender and prepayment of Loans does not conflict with any law, rule or regulation or order of any Governmental Authority. In cases where the consent referred to above is only with respect to the Required C$ Lenders or Required US$ Lenders, the foregoing provisions shall only apply to the Required C$ Lenders or Required US$ Lenders, as the case may be. 11.2 Notices. Unless otherwise expressly provided herein, all ------- notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrowers and the Administrative Agents, and as set forth in Schedule 1.1 in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: Company: Pierce Leahy Corp. 631 Park Avenue King of Prussia, PA 19406 Attention: President Fax: (610) 992-8394 87 Canadian Borrower: Pierce Leahy Command Company 195 Summerlea Road Brampton, Canada, Ontario, L6T 4P6 Fax: (905) 792-2567 with a copy to: -------------- Pierce Leahy Corp. 631 Park Avenue King of Prussia, PA 19406 Attention: President Fax: (610) 992-8394 US Administrative Agent: Canadian Imperial Bank of Commerce, New York Agency, Syndications 425 Lexington Avenue New York, New York 10017 Attention: Aimee Evans Fax: (212) 856-3763 with a copy to: --------------- CIBC Wood Gundy Securities Corp. 425 Lexington Avenue New York, New York 10017 Attention: Lorain Granberg Fax: (212) 856-3558 Canadian Administrative Agent: Canadian Imperial Bank of Commerce, Commerce Court West 7 Toronto, Ontario, Canada N5L 1A2 Attention: Cindy Grenough Fax: 416-980-5855 provided that any notice, request or demand to or upon the Administrative Agents - -------- or the Lenders pursuant to Section 2, 3 or 4 shall not be effective until received. 11.3 No Waiver; Cumulative Remedies. No failure to exercise and no ------------------------------ delay in exercising, on the part of either Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, 88 remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 11.4 Survival of Representations and Warranties. All representations ------------------------------------------ and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 11.5 Payment of Expenses and Taxes. The Company agrees (a) to pay or ----------------------------- reimburse each Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agents, (b) to pay or reimburse each Lender and each Administrative Agent for all of its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents following an Event of Default, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to each Administrative Agent, (c) to pay, indemnify, and hold each Lender and each Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay (other than delay caused by any Administrative Agent or Lender) in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any other documents prepared in connection herewith, and (d) to pay, indemnify, and hold each Lender and each Administrative Agent harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, and performance of this Agreement, the other Loan Documents and any such other documents, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of either Borrower, any of their Subsidiaries or any of their properties (all the foregoing in this clause (d), collectively, the "Indemnified Liabilities"), provided that neither ----------------------- -------- Borrower shall have any obligation hereunder to either Administrative Agent or any Lender with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of either Administrative Agent or any such Lender. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 11.6 Successors and Assigns; Participations and Assignments. (a) ------------------------------------------------------ This Agreement shall be binding upon and inure to the benefit of the Borrowers, the Lenders, the Administrative Agents and their respective successors and assigns, except that neither Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. 89 (b) Any Lender may, with the consent of the relevant Borrower and the relevant Administrative Agent (which in each case shall not be unreasonably withheld), in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such ------------ Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrowers and the Administrative Agents shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Loan Document except for those specified in clauses (i) and (ii) of the proviso to subsection 11.1(a). Each Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such -------- Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 11.7(a) as fully as if it were a Lender hereunder. The Company also agrees that each Participant shall be entitled to the benefits of subsections 4.10, 4.11 and 4.12 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that, in the case of subsection 4.11, such -------- Participant shall have complied with the requirements of said subsection and provided, further, that no Participant shall be entitled to receive any greater - -------- ------- amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to any Lender or any Affiliate thereof or, with the consent of the relevant Borrower and the relevant Administrative Agent (which in each case shall not be unreasonably withheld), to an additional bank or financial institution (an "Assignee") all or any part of its rights and obligations under this Agreement - --------- and the other Loan Documents pursuant to an Assignment and Acceptance (an "Assignment and Acceptance"), substantially in the form of Exhibit G, executed - -------------------------- by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an Affiliate thereof, by the Company and the relevant Administrative Agent) and delivered to the relevant Administrative Agent for its acceptance and recording in the relevant Register, provided that, in the case of -------- any such assignment to an additional bank or financial institution, the sum of the aggregate principal amount of the Loans and the aggregate amount of the Available US 90 Commitment or Available Canadian Commitment, as the case may be, being assigned is equal to at least US$10,000,000 and C$10,000,000, respectively (or such lesser amount as may be agreed to by the relevant Borrower and the relevant Administrative Agent). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (e) of this subsection, the consent of either Borrower shall not be required, and, unless requested by the Assignee and/or the assigning Lender, new Notes shall not be required to be executed and delivered by the relevant Borrower, for any assignment which occurs at any time when any of the events described in subsection 9(f) shall have occurred and be continuing. (d) Each Administrative Agent, on behalf of the relevant Borrower shall maintain at the address of such Administrative Agent referred to in subsection 11.2 a copy of each Assignment and Acceptance delivered to it and a register (each a "Register") for the recordation of the names and addresses of -------- the Lenders and the Commitments of, and principal amounts of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Administrative Agents and the Lenders may (and, in the case of any Loan or other obligation hereunder not evidenced by a Note, shall) treat each Person whose name is recorded in the Registers as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary. Any assignment of any Loan or other obligation hereunder not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the relevant Register. The Registers shall be available for inspection by either Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the relevant Borrower and the relevant Administrative Agent) together with payment by the Assignee and/or the assigning Lender to the US Administrative Agent of a registration and processing fee of US$3,500, the US Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the relevant Borrower. (f) Each Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee ---------- approved by the Company any and all financial information in such Lender's possession concerning such Borrower and its Subsidiaries which has been delivered to such Lender by or on behalf of such Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of 91 such Borrower in connection with such Lender's credit evaluation of such Borrower and its Subsidiaries prior to becoming a party to this Agreement; provided that such Transferee or prospective Transferee agrees to be bound by - -------- the provisions of subsection 11.16. (g) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. 11.7 Adjustments; Set-off. (a) If any Lender (a "Benefitted -------------------- ---------- Lender") shall at any time receive any payment of all or part of its Loans which shall have been made under either Commitment, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set- off, pursuant to events or proceedings of the nature referred to in subsection 9(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans made under such Commitment, or interest thereon, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders which hold Loans made under such Commitment; provided, however, that if all or -------- ------- any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to either Borrower, any such notice being expressly waived by such Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by such Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set- off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of such Borrower. Each Lender agrees promptly to notify the relevant Borrower and the relevant US Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give -------- such notice shall not affect the validity of such set-off and application. 11.8 Counterparts. This Agreement may be executed by one or more of ------------ the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with each Borrower and each Administrative Agent. 92 11.9 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 provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11.10 Integration. This Agreement and the other Loan Documents ----------- represent the agreement of the Borrowers, the Administrative Agents and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by either Administrative Agent, either Borrower or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 11.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ------------- OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 11.12 Submission To Jurisdiction; Waivers. Each Borrower hereby ----------------------------------- irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgement in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Borrower at its address set forth in subsection 11.2 or at such other address of which the Administrative Agents shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. 93 11.13 Foreign Currency Judgments. (a) If, for the purpose of -------------------------- obtaining judgment in any court, it is necessary to convert a sum due hereunder in one currency into another currency, each Loan Party agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the relevant Lender (or agent acting on its behalf) or the relevant Administrative Agent could purchase the first currency with such other currency for the first currency on the Business Day immediately preceding the day on which final judgment is given. (b) The obligations of each Loan Party in respect of any sum due hereunder shall, notwithstanding any judgment in a currency (the "Judgment -------- Currency") other than that in which such sum is denominated in accordance with - -------- this Agreement (the "Agreement Currency"), be discharged only to the extent ------------------ that, on the Business Day following receipt by any Lender (or agent acting on its behalf) (the "Applicable Creditor") of any sum adjudged to be so due in the ------------------- Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, such Loan Party agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss, provided that if the amount of the Agreement Currency so purchased exceeds the - -------- sum originally due to the Applicable Creditor, the Applicable Creditor agrees to remit such excess to such Loan Party. The obligations of each Loan Party and Lender contained in this subsection shall survive the termination of this Agreement and the payment of all amounts owing hereunder. 11.14 Acknowledgements. Each Borrower hereby acknowledges that: ---------------- (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) none of either Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrowers arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Borrowers, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrowers and the Lenders. 11.15 WAIVERS OF JURY TRIAL. THE BORROWERS, THE ADMINISTRATIVE --------------------- AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 94 11.16 Confidentiality. Each Lender agrees to keep confidential all --------------- non-public information provided to it by the Company or any of its Subsidiaries pursuant to this Agreement or any other Loan Document and to use such information solely for the purposes contemplated by this Agreement; provided -------- that nothing herein shall prevent any Lender from disclosing any such information (i) to either Administrative Agent or any other Lender, (ii) to any Transferee which receives such information having been made aware of the confidential nature thereof and which agrees to comply with the provisions of this subsection, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors who are advised of the confidential nature of such information, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement, or (vii) in connection with the exercise of any remedy hereunder. 11.17 Conflicts. In case of any conflict or inconsistency between --------- the provisions of this Agreement and the provisions of any other Loan Document, the provisions of this Agreement shall control. 11.18 Reference to and Effect on the Existing Credit Agreement. On -------------------------------------------------------- and after the date hereof, each reference to the "Credit Agreement" in any of the Security Documents, the other Loan Documents and all other agreements, documents and instruments delivered by all or any one or more of the Borrowers, the Lenders, the Administrative Agents and any other Person shall mean and be a reference to this Agreement. Except as specifically amended hereby, the Existing Credit Agreement shall remain in full force and effect in the form of this Agreement, and is hereby ratified and confirmed in such form. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. PIERCE LEAHY CORP. By:/s/ Joseph P. Linaugh ------------------------------- Title: Vice President PIERCE LEAHY COMMAND COMPANY By:/s/ Joseph P. Linaugh ------------------------------- Title: Vice President CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY as US Administrative Agent and as a US$ Lender By:/s/ Lorain Granberg ------------------------------- Title: Director, CIBC Wood Gundy Securities Corp., as Agent CANADIAN IMPERIAL BANK OF COMMERCE as Canadian Administrative Agent and as a C$ Lender By:/s/ Lorain Granberg ------------------------------- Title: Director, CIBC Wood Gundy Securities Corp., as Agent CORESTATES BANK, N.A. as a Lender By:/s/ Michael M.A. Zahaby ------------------------------- Title: Senior Vice President CREDIT LYONNAIS NEW YORK BRANCH as a Lender By:/s/ Attila Koc ------------------------------- Title: First Vice President FLEET NATIONAL BANK as Documentation Agent and as a Lender By:/s/ James C. Silva ------------------------------- Title: Assistant Vice President THE FIRST NATIONAL BANK OF MARYLAND as a Lender By:/s/ John C. Acker ------------------------------- Title: Vice President HELLER FINANCIAL as a Lender By:/s/ Patrick Hayes ------------------------------- Title: Vice President STATE STREET BANK AND TRUST COMPANY as a Lender By:/s/ Hamilton H. Wood, Jr. ------------------------------- Title: Vice President THE BANK OF NEW YORK as a Lender By:/s/ Peter H. Abdill ------------------------------- Title: Vice President AMENDMENT, dated as of February 9, 1998 (this "Amendment"), to the Amended --------- and Restated Credit Agreement, dated as of August 12, 1997 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit ------ Agreement"), among PIERCE LEAHY CORP., a Pennsylvania corporation (the - --------- "Company"), PIERCE LEAHY COMMAND COMPANY, a company organized and existing under ------- the laws of the Province of Nova Scotia (the "Canadian Borrower" and, together ----------------- with the Company, the "Borrowers"), the several banks and other financial --------- institutions from time to time parties thereto (the "Lenders"), Canadian ------- Imperial Bank of Commerce, New York Agency, as US Administrative Agent for the US$ Lenders thereunder, and Canadian Imperial Bank of Commerce, as Canadian Administrative Agent for the C$ Lenders thereunder. W I T N E S S E T H : - - - - - - - - - - WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make certain loans and other extensions of credit to the Borrowers; and WHEREAS, the Borrowers have requested, and, upon this Amendment becoming effective, the Lenders have agreed, that certain provisions of the Credit Agreement be modified in the manner provided for in this Amendment; NOW, THEREFORE, the parties hereto hereby agree as follows: I. Defined Terms. Terms defined in the Credit Agreement and used herein ------------- shall have the meanings given to them in the Credit Agreement. II. Amendments to Credit Agreement. ------------------------------ 1. Amendment to Recitals of the Credit Agreement. The third recital of --------------------------------------------- the Credit Agreement is hereby amended by deleting the amount "US$140,000,000" in clause (a) thereof and substituting in lieu thereof the amount "US$150,000,000". 2. Amendments to Subsection 1.1 of the Credit Agreement. Subsection 1.1 ---------------------------------------------------- of the Credit Agreement is hereby amended as follows: (a) by deleting the amount "C$35,000,000" in the last sentence of the definition of "Canadian Commitment" and substituting in lieu thereof the amount "C$40,000,000"; (b) by deleting the amount "US$140,000,000" in the last sentence of the definition of "US Commitment" and substituting in lieu thereof the amount "US$150,000,000"; and (c) by adding thereto the following definition in its appropriate alphabetical order: 2 "Permitted Intercompany Investment": the equity capital investment by --------------------------------- the Company into the Canadian Borrower in the amount of approximately US$6,200,000 on or about December 31, 1997, through the purchase of additional shares of Capital Stock of the Canadian Borrower with a corresponding amount of Permitted Intercompany Indebtedness outstanding on such date. 3. Amendment to Schedule 1.1 of the Credit Agreement. Schedule 1.1 of the ------------------------------------------------- Credit Agreement is hereby amended by deleting said Schedule in its entirety and substituting in lieu thereof a new Schedule 1.1 in the form of Schedule 1.1 to this Amendment. 4. Amendment to Subsection 4.3 of the Credit Agreement. Subsection --------------------------------------------------- 4.3(b) of the Credit Agreement is hereby amended by deleting the amount "C$6,112,500" wherever such amount appears therein and substituting in lieu thereof the amount "C$8,625,000". 5. Amendment to Subsection 8.5 of the Credit Agreement. Subsection 8.5 --------------------------------------------------- of the Credit Agreement is hereby amended (1) by deleting the word "and" at the end of paragraph (f) thereof, (2) by deleting the period at the end of paragraph (g) thereof and substituting in lieu thereof "; and" and (3) by adding thereto the following paragraph: (h) the Permitted Intercompany Investment. III. Conditions to Effectiveness. This Amendment shall become effective --------------------------- (provided that Subsection 2(c) and Subsection 4 of Section II hereof shall be deemed to have become effective as of December 31, 1997) on the date (the "Amendment Effective Date") upon which: - ------------------------- (a) the Borrowers, each of the Guarantors, the US Administrative Agent, the Canadian Administrative Agent and each of the Lenders shall have executed and delivered to the US Administrative Agent this Amendment; (b) the Borrowers shall have paid all outstanding Loans in full, and subsequent borrowings of Loans hereunder shall be made after giving effect to the effectiveness of this Amendment; (c) the US Administrative Agent shall have received any US$ Notes meeting the requirements of Subsection 2.2 of the Credit Agreement requested by the Lenders, if any, and any C$ Notes meeting the requirements of Subsection 3.2 of the Credit Agreement requested by the Lenders, if any, each executed and delivered by a duly authorized officer of the relevant Borrower; (d) the US Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the US Administrative Agent, of the Boards of Directors of each of the Company and the Canadian Borrower authorizing the execution, delivery and performance of this Amendment and the Credit Agreement and the Loan Documents, as amended hereby; 3 (e) the US Administrative Agent shall have received amendments to each of the Mortgages, executed and delivered by the US Administrative Agent and the Company, and the Canadian Borrower and the Canadian Administrative Agent, as the case may be; and (f) each of the Loan Parties shall have executed and delivered such documents and taken such other actions as may have been requested by or on behalf of the Administrative Agents, and in the form and manner as may have been so requested, to perfect the security interests and liens created by the Loan Documents, as amended by this Amendment, in each case with the priority contemplated by such Loan Documents, as amended by this Amendment, including, without limitation, any and all amendments to and confirmations in respect of the Canadian Security Documents deemed necessary or advisable by counsel to the Canadian Administrative Agent, certified PPSA search results from each applicable Canadian jurisdiction and new registrations in each applicable Canadian jurisdiction. IV. General. ------- 1. Representation and Warranties. To induce the Administrative Agents and ----------------------------- the Lenders to enter into this Amendment, the Company hereby represents and warrants to the US Administrative Agent and each of the Lenders as of the Amendment Effective Date that: (a) Corporate Power; Authorization; Enforceable Obligations. ------------------------------------------------------- (i) Each Borrower has the corporate power and authority, and the legal right, to make and deliver this Amendment and to perform the Loan Documents, as amended by this Amendment, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Amendment and the performance of the Loan Documents, as so amended. (ii) No consent or authorization of, approval by, notice to, filing with or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the execution and delivery of this Amendment or with the performance, validity or enforceability of the Loan Documents, as amended by this Amendment. (iii) This Amendment has been duly executed and delivered on behalf of each Borrower. (iv) Each of this Amendment and each Loan Document, as amended by this Amendment, constitutes a legal, valid and binding obligation of each Borrower enforceable against such Borrower in accordance with its terms, except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a 4 proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (b) No Legal Bar. The execution, delivery and performance of this ------------ Amendment and the performance of the Loan Documents, as amended by this Amendment, will not violate any Requirement of Law or Contractual Obligation of each Borrower or of any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. (c) Representations and Warranties. The representations and warranties ------------------------------ made by the Company in the Loan Documents are true and correct in all material respects on and as of the Amendment Effective Date, before and after giving effect to the effectiveness of this Amendment, as if made on and as of the Amendment Effective Date (other than any representations and warranties made as of a specific date, which continue to be true and correct in all material respects as of such date). 2. Payment of Expenses. The Company agrees to pay or reimburse the ------------------- Administrative Agents for all of their reasonable out-of-pocket costs and expenses incurred in connection with this Amendment, any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the US Administrative Agent and the Canadian Administrative Agent. 3. No Other Amendments and Consents; Confirmation. Except as expressly ---------------------------------------------- amended, modified and supplemented hereby, the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect. 4. Governing Law; Counterparts. --------------------------- (a) This Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. (b) This Amendment may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Amendment signed by all the parties shall be lodged with each of the Company and the US Administrative Agent. This Amendment may be delivered by facsimile transmission of the relevant signature pages hereof. 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. PIERCE LEAHY CORP. By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President PIERCE LEAHY COMMAND COMPANY By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as US Administrative Agent and as a US$ Lender By: /s/ Lorain Granberg ------------------------------------- Title: Executive Director CIBC Oppenheimer Corp. AS AGENT CANADIAN IMPERIAL BANK OF COMMERCE as Canadian Administrative Agent and as a C$ Lender By: /s/ Lorain Granberg ------------------------------------- Title: Executive Director CIBC Oppenheimer Corp. AS AGENT BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION as a Lender By: /s/ Terrence A. Walsh ------------------------------------- Title: Vice President BANK OF AMERICA CANADA as a Lender By: /s/ David C. King ------------------------------------- Title: Vice President 6 CORESTATES BANK, N.A. as a Lender By: /s/ Richard G. Hood ------------------------------------- Title: Vice President CREDIT LYONNAIS NEW YORK BRANCH as a Lender By: /s/ Vladimir Labun ------------------------------------- Title: First Vice President - Manager FLEET NATIONAL BANK as Documentation Agent and as Lender By: /s/ James C. Silva ------------------------------------- Title: Assistant Vice President THE FIRST NATIONAL BANK OF MARYLAND as a Lender By: /s/ John C. Acker ------------------------------------- Title: Vice President HELLER FINANCIAL as a Lender By: /s/ Patrick Hayes ------------------------------------- Title: Vice President ROYAL BANK OF CANADA as a Lender By: /s/ Tej Panjwani ------------------------------------- Title: Senior Account Manager 7 STATE STREET BANK AND TRUST COMPANY as a Lender By: /s/ Hamilton H. Wood, Jr. ------------------------------------- Title: Vice President THE BANK OF NEW YORK as a Lender By: /s/ Peter H. Abdill ------------------------------------- Title: Vice President ACKNOWLEDGEMENT AND CONSENT Each of the undersigned, as a Guarantor under that certain Amended and Restated US Global Guarantee and Security Agreement, dated as of August 12, 1997, made by each of such Guarantors in favor of the US Administrative Agent, hereby acknowledges and consents to the execution and delivery of this Amendment to which this Acknowledgement and Consent is attached and hereby reaffirms its obligations as a Guarantor under said US Global Guarantee and Security Agreement. PIERCE LEAHY CORP. By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President PLC COMMAND I, INC. By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President PLC COMMAND II, INC. By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President PLC COMMAND I, L.P. By PLC Command I, Inc., as its general partner By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President PLC COMMAND II, L.P. By PLC Command II, Inc., as its general partner By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President MONARCH BOX, INC. By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President ADVANCED BOX, INC. By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President PIERCE MARYLAND, LLC By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President EXHIBIT A-1 TO AMENDED AND RESTATED CREDIT AGREEMENT ---------------------------------------- [FORM OF US$ NOTE] $___________ New York, New York _______________ ___, ____ FOR VALUE RECEIVED, the undersigned, PIERCE LEAHY CORP., a Pennsylvania corporation (the "Borrower"), hereby unconditionally promises to pay to the -------- order of ________________ (the "Lender") at the office of Canadian Imperial Bank ------ of Commerce, New York Agency, located at 425 Lexington Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, on the Termination Date the principal amount of (a) ________________ US DOLLARS (US$__________), or, if less, (b) the aggregate unpaid principal amount of all US$ Loans made by the Lender to the Borrower pursuant to subsection 2.1 of the Credit Agreement, as hereinafter defined. The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in subsection 4.5 of such Credit Agreement. The holder of this US$ Note is authorized to endorse on the schedule annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of each US$ Loan made pursuant to the Credit Agreement and the date and amount of each payment or prepayment of principal thereof, each continuation thereof, each conversion of all or a portion thereof to another Type and, in the case of Eurodollar Loans, the length of each Interest Period with respect thereto. Each such endorsement shall constitute prima facie evidence of the accuracy of the ----- ----- information endorsed. The failure to make any such endorsement shall not affect the obligations of the Borrower in respect of such US$ Loan. This US$ Note (a) is one of the US$ Notes referred to in the Amended and Restated Credit Agreement dated as of August 12, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the ---------------- Borrower, the Canadian Borrower, the Lender, the other banks and financial institutions from time to time parties thereto and Canadian Imperial Bank of Commerce, New York Agency as US Administrative Agent and Canadian Imperial Bank of Commerce, as Canadian Administrative Agent, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. This US$ Note is secured and guaranteed as provided in the Loan Documents. Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions upon which the security interests and each guarantee were granted and the rights of the holder of this US$ Note in respect thereof. In case an Event of Default shall occur and be continuing, all amounts then remaining unpaid on this US$ Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. The Borrower hereby waives presentment, demand, protest and all other notices of any kind. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. THIS US$ NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. PIERCE LEAHY CORP. By: ------------------------- Name: ------------------------- Title: EXHIBIT B TO AMENDED AND RESTATED CREDIT AGREEMENT ---------------------------------------- FORM OF DRAFT BANKERS' ACCEPTANCE Due___________ ____/1/ ACCEPTATION BANCAIRE Echeant le NO. B.A. IL.______ Toronto, Ontario ___________ ____/2/ On/Le ___________ ____/1/ without grace, for value received, pay to the order --- of the undersigned drawer the sum of/sans jours de grace et contra valeur, payez a l'ordre du tireur soussigne la somme de ___________ Canadian dollars (Cdn. $____________). To/A - [Name of Bank] [Address] PIERCE LEAHY COMMAND COMPANY Per: par:__________________________ Authorized Signature Signature Autorisee /1/ Maturity date, which must be a Business Day which occurs approximately 30, 60, 90 or, subject to the availability of all C$ Lenders with the applicable Canadian Commitments, 180 days after the date hereof. /2/ Date of drawing. EXECUTION COPY ================================================================================ AMENDED AND RESTATED US GLOBAL GUARANTEE AND SECURITY AGREEMENT made by PIERCE LEAHY CORP., and certain of its Affiliates and Subsidiaries in favor of CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as US Administrative Agent Dated as of August 12, 1997 ================================================================================ TABLE OF CONTENTS -----------------
Page - ----------------------------------------------------------------------------- SECTION 1. DEFINED TERMS.................................................... 2 1.1 Definitions 2 1.2 Other Definitional Provisions...................................... 5 SECTION 2. GUARANTEE........................................................ 6 2.1 Guarantee 6 2.2 Right of Contribution.............................................. 7 2.3 No Subrogation..................................................... 7 2.4 Amendments, etc. with respect to the Guarantor Obligations......... 7 2.5 Guarantee Absolute and Unconditional............................... 8 2.6 Reinstatement...................................................... 9 2.7 Payments........................................................... 9 SECTION 3. GRANT OF SECURITY INTEREST....................................... 9 SECTION 4. REPRESENTATIONS AND WARRANTIES OF GUARANTORS..................... 10 4.1 Representations.................................................... 10 4.2 Title; No Other Liens.............................................. 11 4.3 Perfected Liens.................................................... 11 4.4 Chief Executive Office............................................. 12 4.5 Inventory and Equipment............................................ 12 4.6 Farm Products...................................................... 12 4.7 Pledged Securities................................................. 12 4.8 Receivables........................................................ 13 4.9 Intellectual Property.............................................. 13 4.10 Vehicles.......................................................... 13 SECTION 5. COVENANTS OF GUARANTORS.......................................... 13 5.1 Covenants in Amended and Restated Credit Agreement................. 13 5.2 Delivery of Instruments and Chattel Paper.......................... 13 5.3 Maintenance of Insurance........................................... 13 5.4 Maintenance of Perfected Security Interest; Further Documentation.. 14 5.6 Notices............................................................ 15 5.7 Pledged Securities................................................. 15 5.8 Receivables........................................................ 16 5.9 Intellectual Property.............................................. 16 SECTION 6. REMEDIAL PROVISIONS.............................................. 17 6.1 Certain Matters Relating to Receivables............................ 17 6.2 Communications with Obligors; Guarantors Remain Liable............. 18 6.3 Pledged Stock...................................................... 18 6.4 Proceeds to be Turned Over To US Administrative Agent.............. 19 6.5 Application of Proceeds............................................ 20
6.6 Code and Other Remedies............................................ 20 6.7 Registration Rights................................................ 21 6.8 Waiver; Deficiency................................................. 22 SECTION 7. THE US ADMINISTRATIVE AGENT...................................... 22 7.1 US Administrative Agent's Appointment as Attorney-in-Fact, etc..... 22 7.2 Duty of Administrative Agent....................................... 24 7.3 Execution of Financing Statements.................................. 24 7.4 Authority of Administrative Agent.................................. 25 SECTION 8. MISCELLANEOUS.................................................... 25 8.1 Amendments in Writing.............................................. 25 8.2 Notices............................................................ 25 8.3 No Waiver by Course of Conduct; Cumulative Remedies................ 25 8.4 Enforcement Expenses; Indemnification.............................. 26 8.5 Successors and Assigns............................................. 26 8.6 Set-Off............................................................ 26 8.7 Counterparts....................................................... 27 8.8 Severability....................................................... 27 8.9 Section Headings................................................... 27 8.10 Integration....................................................... 27 8.11 GOVERNING LAW..................................................... 27 8.12 Submission To Jurisdiction; Waivers............................... 27 8.13 Acknowledgements.................................................. 28 8.14 WAIVER OF JURY TRIAL.............................................. 28 8.15 Additional Guarantors; Pledged Stock.............................. 28 8.16 Releases.......................................................... 29
SCHEDULES: Schedule 1 Notice Addresses of Guarantors Schedule 2 Description of Pledged Securities Schedule 3 Filings and Other Actions Required to Perfect Security Interests Schedule 4 Location of Jurisdiction of Organization and Chief Executive Office Schedule 5 Location of Inventory and Equipment Schedule 6 Copyrights, Patents and Trademarks Schedule 7 Vehicles AMENDED AND RESTATED US GLOBAL GUARANTEE AND SECURITY AGREEMENT AMENDED AND RESTATED US GLOBAL GUARANTEE AND SECURITY AGREEMENT, dated as of August 12, 1997, made by each of the signatories hereto, in favor of CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as US Administrative Agent (in such capacity, the "US Administrative Agent") for the banks and other ----------------------- financial institutions (the "Lenders") from time to time parties to the Amended ------- and Restated Credit Agreement, dated as of August 12, 1997 (as amended, supplemented or otherwise modified from time to time, the "Amended and Restated -------------------- Credit Agreement"), among PIERCE LEAHY CORP., a Pennsylvania corporation (the - ---------------- "Company"), PIERCE LEAHY COMMAND COMPANY, a company organized under the laws of - -------- the Province of Nova Scotia (the "Canadian Borrower" and, together with the ----------------- Company, the "Borrowers"), the Lenders, the US Administrative Agent and the --------- Canadian Administrative Agent named therein (together with the US Administrative Agent, the "Administrative Agents"). --------------------- W I T N E S S E T H: ------------------- WHEREAS, pursuant to the Amended and Restated Credit Agreement, the Lenders have severally agreed to make extensions of credit to the Borrowers upon the terms and subject to the conditions set forth therein; WHEREAS, each Borrower is a member of an affiliated group of companies that includes each other Guarantor or entities owned by such Guarantor; WHEREAS, each Borrower and each such Guarantor will derive substantial direct and indirect benefit from the making of the extensions of credit under the Amended and Restated Credit Agreement; and WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective extensions of credit to the Borrowers under the Amended and Restated Credit Agreement that the Guarantor shall have executed and delivered this Agreement to the US Administrative Agent for the benefit of the Lenders; NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agents and the Lenders to enter into the Amended and Restated Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrowers thereunder, each Guarantor hereby agrees with the US Administrative Agent, for the benefit of the Lenders, as follows: SECTION 1. DEFINED TERMS 1.1 Definitions. (a) Unless otherwise defined herein, terms defined ----------- in the Amended and Restated Credit Agreement and used herein shall have the meanings given to them in the Amended and Restated Credit Agreement, and the following terms which are defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are used herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products, Instruments and Inventory. (b) The following terms shall have the following meanings: "Agreement": this Amended and Restated US Global Guarantee and --------- Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Canadian Borrower Obligations": the collective reference to the ----------------------------- unpaid principal of and interest on the C$ Loans and all other obligations and liabilities of the Canadian Borrower (including, without limitation, interest accruing at the then applicable rate provided in the Amended and Restated Credit Agreement after the maturity of the C$ Loans and interest accruing at the then applicable rate provided in the Amended and Restated Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Canadian Borrower, whether or not a claim for post-filing or post- petition interest is allowed in such proceeding) to either Administrative Agent or any C$ Lender (or, in the case of any Interest Rate Protection Agreement referred to below, any Affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Amended and Restated Credit Agreement, this Agreement, the other Loan Documents, or any Interest Rate Protection Agreement entered into by the Canadian Borrower with any Lender (or any Affiliate of any Lender) or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise with respect to the foregoing (including, without limitation, all fees and disbursements of counsel to either Administrative Agent or to the Lenders that are required to be paid by the Canadian Borrower pursuant to the terms of any of the foregoing agreements). "Code": the Uniform Commercial Code as from time to time in effect in ---- the State of New York. "Collateral": as defined in Section 3.1. ---------- "Collateral Account": any collateral account established by the US ------------------ Administrative Agent as provided in Section 6.1 or 6.4. "Company Obligations": the collective reference to the unpaid ------------------- principal of and interest on the US$ Loans and all other obligations and liabilities of the Company (including, without limitation, interest accruing at the then applicable rate provided in the Amended and Restated Credit Agreement after the maturity of the US$ Loans and interest accruing at the then applicable rate provided in the Amended and Restated Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Company, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to either Administrative Agent or any US$ Lender (or, in the case of any Interest Rate Protection Agreement referred to below, any Affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Amended and Restated Credit Agreement, this Agreement (including, without limitation, pursuant to the guarantee by the Company of the Canadian Borrower Obligations provided for in Section 2 hereof), the other Loan Documents, or any Interest Rate Protection Agreement entered into by the Company with any Lender (or any Affiliate of any Lender) or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to either Administrative Agent or to the Lenders that are required to be paid by the Company pursuant to the terms of any of the foregoing agreements). "Copyrights": (i) all copyrights owned by a Guarantor (including, ---------- without limitation, those listed in Schedule 6), all registration and ---------- recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, and (ii) all renewals thereof. "General Intangibles": all "general intangibles" as such term is ------------------- defined in Section 9-106 of the Uniform Commercial Code in effect in the State of New York on the date hereof. "General Partners": (i) PLC Command I, Inc., a Pennsylvania ---------------- corporation, in its capacity as the general partner of PLC Command I, L.P., and (ii) PLC Command II, Inc., a Pennsylvania corporation, in its capacity as the general partner of PLC Command II, L.P. "Guarantor Obligations": with respect to any Guarantor, the --------------------- collective reference to (i) (x) with respect to the Company, the Canadian Borrower Obligations and (y) with respect to any other Guarantor, the Company Obligations and (ii) all obligations and liabilities of such Guarantor which may arise under or in connection with this Agreement or any other Loan Document to which such Guarantor is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise relating thereto (including, without limitation, all fees and disbursements of counsel to either Administrative Agent or to the Lenders that are required to be paid by such Guarantor pursuant to the terms of this Agreement or any other Loan Document). "Guarantors": the collective reference to the Company, each General ---------- Partner, the Limited Partnerships, each other Domestic Subsidiary of the Company and any other entity that may become a party to this Agreement as provided herein. "Intellectual Property": the collective reference to the Copyrights, --------------------- the Patents, and the Trademarks. "Intercompany Note": any promissory note evidencing loans made by any ----------------- Guarantor to the Company or any of its Domestic Subsidiaries. "Interest Rate Protection Agreement": any interest rate protection ---------------------------------- agreement, interest rate future, interest rate option, interest rate cap or collar or other interest rate hedge arrangement, to or under which the Company or any of its Subsidiaries is a party or a beneficiary. "Issuers": the collective reference to the Persons identified on ------- Schedule 2 as the issuers of the Pledged Securities. ---------- "Limited Partnerships": (i) PLC Command I, L.P., a Pennsylvania -------------------- limited partnership, and (ii) PLC Command II, L.P., a Pennsylvania limited partnership. "Obligations": (i) in the case of each Guarantor other than the ----------- Company, its Guarantor Obligations and (ii) in the case of the Company, its Guarantor Obligations and the Company Obligations. "Patents": (i) all letters patent of a Guarantor issued by the United ------- States or any other country, all reissues and extensions thereof and all goodwill associated therewith, including, without limitation, any of the foregoing referred to in Schedule 6, and (ii) all applications for letters ---------- patent of a Guarantor issued by the United States or any other country and all divisions, continuations and continuations-in-part thereof, including, without limitation, any of the foregoing referred to in Schedule 6. ---------- "Pledged Notes": all promissory notes listed on Schedule 2, all ------------- ---------- Intercompany Notes at any time issued to any Guarantor and all other promissory notes issued to or held by any Guarantor (other than promissory notes issued in connection with extensions of trade credit by any Guarantor in the ordinary course of business). "Pledged Securities": the collective reference to (i) the Pledged ------------------ Stock, (ii) the Pledged Notes and (iii) any and all partnership interests (including any and all general partnership interests) any Guarantor may hold in either Borrower or any of its Domestic Subsidiaries, as set forth in Schedule 2 attached hereto including, without limitation, all of such ---------- Guarantor's rights to properties, assets, and partnership interests under their respective Partnership Agreements, including, without limitation, any liquidating distributions in respect of such partnership interests. "Pledged Stock": with respect to each Guarantor, the shares of ------------- Capital Stock of such Guarantor listed on Schedule 2, together with any ---------- other shares, stock certificates, options or rights of any nature whatsoever in respect of the Capital Stock of any Issuer that may be issued or granted to, or held by, such Guarantor while this Agreement is in effect. "Proceeds": all "proceeds" as such term is defined in Section 9- -------- 306(1) of the Uniform Commercial Code in effect in the State of New York on the date hereof. "Receivable": any right to payment for goods sold or leased or for ---------- services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including, without limitation, any Account). "Securities Act": the Securities Act of 1933, as amended. -------------- "Trademarks": (i) all trademarks, trade names, corporate names, ---------- company names, business names, fictitious business names, trade styles, service marks, logos and other source of business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, including, without limitation, any of the foregoing referred to in Schedule 6, and (ii) all renewals thereof. ---------- "Vehicles": all cars, trucks, trailers, construction and earth moving -------- equipment and other vehicles owned by a Guarantor (with an original purchase price paid by the Guarantor which is the owner thereof in excess of US$50,000) and covered by a certificate of title law of any state and, in any event including, without limitation, the vehicles listed on Schedule -------- 7 and all tires and other appurtenances to any of the foregoing. - 1.2 Other Definitional Provisions. (a) The words "hereof," ----------------------------- "herein," "hereto," and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified. (b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. (c) Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Guarantor, shall refer to such Guarantor's Collateral or the relevant part thereof. SECTION 2. GUARANTEE 2.1 Guarantee. (a)(i) The Company hereby, unconditionally and --------- irrevocably, guarantees to the US Administrative Agent, for the benefit of the C$ Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Canadian Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Canadian Borrower Obligations, and (ii) each of the Guarantors other than the Company hereby, jointly and severally, unconditionally and irrevocably, guarantees to the US Administrative Agent, for the benefit of the US$ Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Company when due (whether at the stated maturity, by acceleration or otherwise) of the Company Obligations. (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor (other than the Company) hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 2.2). (c) Each Guarantor agrees that the Company Obligations or the Canadian Borrower Obligations, as the case may be, may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the US Administrative Agent or any Lender hereunder. (d) The guarantee contained in this Section 2 shall remain in full force and effect until all the Company Obligations and the Canadian Borrower Obligations, and the obligations of each Guarantor under the guarantee contained in this Section 2 shall have been satisfied by payment in full, no Bankers' Acceptance shall be outstanding, and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Amended and Restated Credit Agreement either Borrower may be free from any Company Obligations or Canadian Borrower Obligations, as the case may be. (e) No payment made by either Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the US Administrative Agent or any Lender from either Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Company Obligations or the Canadian Borrower Obligations, as the case may be, shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Company Obligations or the Canadian Borrower Obligations or any payment received or collected from such Guarantor in respect of the Company Obligations or Canadian Borrower Obligations, as the case may be), remain liable for the Company Obligations or the Canadian Borrower Obligations, as the case may be, up to the maximum liability of such Guarantor hereunder until the Company Obligations and the Canadian Borrower Obligations are paid in full, no Bankers' Acceptance shall be outstanding, and the Commitments are terminated. 2.2 Right of Contribution. Each Guarantor (other than the Company) --------------------- hereby agrees that to the extent that a Guarantor (other than the Company) shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to the US Administrative Agent and the US$ Lenders or C$ Lenders, as the case may be, and each Guarantor shall remain liable to the US Administrative Agent and the US$ Lenders or C$ Lenders, as the case may be, for the full amount guaranteed by such Guarantor hereunder. 2.3 No Subrogation. Notwithstanding any payment made by any -------------- Guarantor hereunder or any set-off or application of funds of any Guarantor by the US Administrative Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the US Administrative Agent or any US$ Lender or C$ Lender, as the case may be, against the Company or the Canadian Borrower, as the case may be, or any other Guarantor or any collateral security or guarantee or right of offset held by the US Administrative Agent or any US$ Lender or C$ Lender, as the case may be, for the payment of the Company Obligations or the Canadian Borrower Obligations, as the case may be, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the relevant Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the US Administrative Agent and the US$ Lenders or the C$ Lenders, as the case may be, by the relevant Borrower on account of the Company Obligations or the Canadian Borrower Obligations, as the case may be, are paid in full, no Bankers' Acceptance shall be outstanding and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Company Obligations or the Canadian Borrower Obligations, as the case may be, shall not have been paid in full, such amount shall be held by such Guarantor in trust for the US Administrative Agent and the US$ Lenders or the C$ Lenders, as the case may be, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the US Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the US Administrative Agent, if required), to be applied against the Company Obligations, or the Canadian Borrower Obligations, as the case may be, whether matured or unmatured, in such order as the US Administrative Agent may determine. 2.4 Amendments, etc. with respect to the Guarantor Obligations. Each ---------------------------------------------------------- Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Company Obligations or the Canadian Borrower Obligations, as the case may be, made by the US Administrative Agent or any Lender may be rescinded by the US Administrative Agent or such Lender and any of the Company Obligations or the Canadian Borrower Obligations, as the case may be, may be continued, and the Company Obligations, the Canadian Borrower Obligations or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the US Administrative Agent or any Lender, and the Amended and Restated Credit Agreement and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the US Administrative Agent (or the Required Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the US Administrative Agent or any Lender for the payment of the Company Obligations or the Canadian Borrower Obligations, as the case may be, may be sold, exchanged, waived, surrendered or released. Neither the US Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Company Obligations, the Canadian Borrower Obligations or for the guarantee contained in this Section 2 or any property subject thereto, except as provided in Section 7.2. 2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any ------------------------------------ and all notice of the creation, renewal, extension or accrual of any of the Company Obligations or the Canadian Borrower Obligations, as the case may be, and notice of or proof of reliance by the US Administrative Agent or any Lender upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Company Obligations, the Canadian Borrower Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between either Borrower and any of the Guarantors, on the one hand, and the US Administrative Agent and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon either Borrower or any of the Guarantors with respect to the Company Obligations or the Canadian Borrower Obligations, as the case may be. Each Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of the Amended and Restated Credit Agreement or any other Loan Document, any of the Company Obligations or the Canadian Borrower Obligations, as the case may be, or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the US Administrative Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by either Borrower against the US Administrative Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of either Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of either Borrower for the Company Obligations or the Canadian Borrower Obligations, as the case may be, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the US Administrative Agent or any Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against either Borrower, any other Guarantor or any other Person or against any collateral security or guarantee for the Company Obligations or the Canadian Borrower Obligations, as the case may be, or any right of offset with respect thereto, and any failure by the US Administrative Agent or any Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from either Borrower, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of either Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the US Administrative Agent or any Lender against any Guarantor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 2.6 Reinstatement. The guarantee contained in this Section 2 shall ------------- continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Company Obligations or the Canadian Borrower Obligations is rescinded or must otherwise be restored or returned by the US Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of either Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, either Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. 2.7 Payments. Each Guarantor hereby guarantees that payments -------- hereunder will be paid to the US Administrative Agent without set-off or counterclaim in US Dollars at the office of the US Administrative Agent located at 425 Lexington Avenue, New York, New York 10017. SECTION 3. GRANT OF SECURITY INTEREST Each Guarantor hereby grants to the US Administrative Agent, for the benefit of the Lenders, a security interest in, all of the following property now owned or at any time hereafter acquired by such Guarantor or in which such Guarantor now has or at any time in the future may acquire any right, title or interest (collectively, the "Collateral"), as collateral security for the prompt ---------- and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Guarantor's Obligations: (a) all Accounts; (b) all Chattel Paper; (c) all Documents; (d) all Equipment; (e) all General Intangibles; (f) all Instruments; (g) all Intellectual Property; (h) all Inventory; (i) all Pledged Securities; (j) all Vehicles; (k) all books and records pertaining to the Collateral; and (l) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing (except to the extent the creation of such Lien would cause a breach or termination of such collateral security or guarantees under the terms thereof and of any applicable law). SECTION 4. REPRESENTATIONS AND WARRANTIES OF GUARANTORS To induce the Administrative Agents and the Lenders to enter into the Amended and Restated Credit Agreement and to induce the Lenders to make their respective extensions of credit to the applicable Borrower thereunder, each Guarantor hereby represents and warrants severally, not jointly, to each Administrative Agent and each Lender that: 4.1 Representations. (a) General Partners' Representations. (i) --------------- --------------------------------- Each General Partner (w) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (x) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (y) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to qualify could not reasonably be expected to have a Material Adverse Effect and (z) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. (ii) Each General Partner has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of the Loan Documents to which the General Partner is a party, except for any filings required to perfect the Liens created hereby. This Agreement has been, and each other Loan Document to which it is a party will be, duly executed and delivered on behalf of such General Partner. This Agreement constitutes, and each other Loan Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of such General Partner enforceable against such General Partner in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (iii) Each General Partner has the right, subject to the terms and provisions of its Partnership Agreement, the Amended and Restated Credit Agreement and the other Loan Documents (x) to vote its Pledged Securities and (y) to pledge and grant a security interest in all or any of its Pledged Securities. (iv) The execution, delivery and performance of the Loan Documents to which each General Partner is a party will not violate any Requirement of Law or material Contractual Obligation of such General Partner and will not result in, or require, the creation or imposition of any Lien on any of its properties or revenues pursuant to any such Requirement of Law or Contractual Obligation (other than pursuant to this Agreement or the Loan Documents). (v) No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of each General Partner, threatened by or against such General Partner or against any of its properties or revenues (x) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (y) which could reasonably be expected to have a Material Adverse Effect. 4.2 Title; No Other Liens. Except for the security interest granted --------------------- to the US Administrative Agent for the benefit of the Lenders pursuant to this Agreement and the other Liens permitted to exist on the Collateral by the Amended and Restated Credit Agreement, such Guarantor owns each item of the Collateral, free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the US Administrative Agent, for the benefit of the Lenders, pursuant to this Agreement or as are permitted by the Amended and Restated Credit Agreement. 4.3 Perfected Liens. The security interests granted pursuant to this --------------- Agreement (a) (i) upon giving of appropriate notices pursuant to Article 8 of the Code in the form of Annexes 2 and 3 to this Agreement with respect to each --------- - partnership interest and (ii) upon completion of the filings and other actions specified on Schedule 3 (which, in the case of all filings and other documents ---------- referred to on said Schedule, have been delivered to the US Administrative Agent in completed and duly executed form) will constitute valid perfected security interests in all of the Collateral in favor of the US Administrative Agent, for the benefit of the Lenders, as collateral security for such Guarantor's Obligations, enforceable in accordance with the terms hereof against all creditors of such Guarantor and any Persons purporting to purchase any Collateral from such Guarantor and (b) will be prior to all other Liens on the Collateral in existence on the date hereof except for Liens permitted by the Amended and Restated Credit Agreement which have priority over the Liens on the Collateral by operation of law. 4.4 Chief Executive Office. On the date hereof, such Guarantor's ---------------------- jurisdiction of organization and the location of such Guarantor's chief executive office or, if such Guarantor has only one place of business, such place of business are specified on Schedule 4. ---------- 4.5 Inventory and Equipment. On the date hereof, the Inventory and ----------------------- the Equipment (other than mobile goods) of the Guarantors are kept at the locations listed on Schedule 5. ---------- 4.6 Farm Products. None of the Collateral constitutes, or is the ------------- Proceeds of, Farm Products. 4.7 Pledged Securities. (a) The Pledged Securities of each Issuer ------------------ pledged by such Guarantor constitutes (i) all the issued and outstanding shares of all classes of the Capital Stock of each domestic Issuer owned by such Guarantor and (ii) 65% of the issued and outstanding shares of the voting class of Capital Stock and all of the non-voting class of Capital Stock of each foreign Issuer owned by such Guarantor. (b) All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable. (c) Such Guarantor is the record and beneficial owner of, and has good and marketable title to, the Pledged Securities pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by this Agreement or any of the Loan Documents. (d) None of the Pledged Securities are evidenced by any certificates or other instruments which have not been delivered to the US Administrative Agent, and none of the Partnership Agreements make any provision for the issuance of any such certificates or instruments. (e) None of the Pledged Securities are subject to any options to purchase or similar rights. (f) There are no restrictions, other than those contained in the Partnership Agreements, the Amended and Restated Credit Agreement and the other Loan Documents, upon any of the voting rights associated with, or the transfer of, any of the Pledged Securities. 4.8 Receivables. (a) No amount payable to such Guarantor under or ----------- in connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not been delivered to the US Administrative Agent. (b) The amounts represented by such Guarantor to the Lenders from time to time as owing to such Guarantor in respect of the Receivables will at such times be accurate in all material respects. 4.9 Intellectual Property. Schedule 6 lists all Intellectual --------------------- ---------- Property owned by such Guarantor in its own name on the date hereof. 4.10 Vehicles. Schedule 7 is a complete and correct list of all -------- ---------- Vehicles owned by such Guarantor on the date hereof. SECTION 5. COVENANTS OF GUARANTORS Each Guarantor covenants and agrees with each Administrative Agent and the Lenders that, from and after the date of this Agreement until the Obligations shall have been paid in full, no Bankers' Acceptance shall be outstanding and the Commitments shall have terminated: 5.1 Covenants in Amended and Restated Credit Agreement. Such -------------------------------------------------- Guarantor shall take, or shall refrain from taking, as the case may be, each action that is necessary to be taken or not taken, as the case may be, so that no Default or Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor or any of its Subsidiaries. 5.2 Delivery of Instruments and Chattel Paper. If any amount payable ----------------------------------------- under or in connection with any of the Collateral shall be or become evidenced by any Instrument (other than checks acquired in the ordinary course of business) or Chattel Paper, such Instrument or Chattel Paper shall be immediately delivered to the US Administrative Agent, duly indorsed in a manner reasonably satisfactory to the US Administrative Agent, to be held as Collateral pursuant to this Agreement. 5.3 Maintenance of Insurance. (a) Such Guarantor will maintain, ------------------------ with financially sound and reputable companies, insurance policies (i) insuring the Inventory, Equipment and Vehicles against loss by fire, explosion, theft and such other casualties as may be reasonably satisfactory to the US Administrative Agent and (ii) insuring such Guarantor, the US Administrative Agent and the Lenders against liability for personal injury and insuring against property damage relating to such Inventory, Equipment and Vehicles, such policies to be in such form and amounts and having such coverage as may be reasonably satisfactory to the US Administrative Agent. (b) All insurance maintained by the Guarantors shall (i) name the US Administrative Agent as insured party or loss payee, (ii) if reasonably requested by the US Administrative Agent, include a breach of warranty clause and (iii) be reasonably satisfactory in all other respects to the US Administrative Agent. (c) The Borrowers shall deliver to the US Administrative Agent such reports of a reputable insurance broker with respect to such insurance as the US Administrative Agent may from time to time reasonably request. 5.4 Maintenance of Perfected Security Interest; Further --------------------------------------------------- Documentation. (a) Such Guarantor shall not take any action inconsistent with maintaining the security interest created by this Agreement as a perfected security interest and shall defend such security interest against the claims and demands of all Persons whomsoever. (b) Such Guarantor will furnish to the US Administrative Agent and the Lenders from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the US Administrative Agent may reasonably request, all in reasonable detail. (c) At any time and from time to time, upon the written request of the US Administrative Agent, and at the sole expense of such Guarantor, such Guarantor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the US Administrative Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby. 5.5 Changes in Locations, Name, etc. Such Guarantor will not, except -------------------------------- upon 15 days' prior written notice to the US Administrative Agent: (i) permit any material amount of the Inventory or Equipment to be kept at a location other than those listed on Schedule 5, as the same shall ---------- be supplemented from time to time, and those with respect to which financing statements and other documents reasonably requested by the US Administrative Agent to maintain the validity, perfection and priority of the security interests provided for herein shall have been filed; (ii) change the location of its chief executive office or, if such Guarantor has only one place of business, such sole place of business from that referred to in Section 4.4; or (iii) change its name, identity or corporate structure to such an extent that any financing statement filed by the US Administrative Agent in connection with this Agreement would become misleading. Such Guarantor will deliver to the US Administrative Agent (a) all additional executed financing statements and other documents reasonably requested by the US Administrative Agent to maintain the validity, perfection and priority of the security interests provided for herein and (b) together with each set of financial statements delivered pursuant to subsection 7.1(a) and (b) of the Amended and Restated Credit Agreement, a written supplement to Schedule 5 showing any ---------- additional location at which Inventory or Equipment shall be kept. 5.6 Notices. Such Guarantor will advise the US Administrative Agent ------- and the Lenders promptly, in reasonable detail, of: (a) any Lien (other than security interests created hereby or Liens permitted under the Amended and Restated Credit Agreement) on any of the Collateral which would materially adversely affect the ability of the US Administrative Agent to exercise any of its remedies hereunder; and (b) the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby. 5.7 Pledged Securities. (a) If such Guarantor shall become entitled ------------------ to receive or shall receive any certificate, instrument or other document (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Securities, such Guarantor shall accept the same as the agent of the US Administrative Agent and the Lenders, hold the same in trust for the US Administrative Agent and deliver the same forthwith to the US Administrative Agent in the exact form received, duly indorsed by such Guarantor to the US Administrative Agent, if required, together with an undated stock or bond power covering such certificate duly executed in blank by such Guarantor and with, if the US Administrative Agent so requests, signature guaranteed, to be held by the US Administrative Agent, subject to the terms hereof, as additional collateral security for the Obligations. Any sums paid upon or in respect of the Pledged Securities upon the liquidation or dissolution of any Issuer shall be paid over to the US Administrative Agent to be held by it hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Securities or any property shall be distributed upon or with respect to the Pledged Securities pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the US Administrative Agent, be delivered to the US Administrative Agent to be held by it hereunder as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Pledged Securities shall be received by such Guarantor, such Guarantor shall, until such money or property is paid or delivered to the US Administrative Agent, hold such money or property in trust for the Lenders, segregated from other funds of such Guarantor, as additional collateral security for the Obligations. (b) Without the prior written consent of the US Administrative Agent, such Guarantor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer (except the issuance of options pursuant to the Company's Nonqualified Stock Option Plan and any option exercises thereunder), (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Pledged Securities or Proceeds thereof (except pursuant to a transaction expressly permitted by the Amended and Restated Credit Agreement), (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Pledged Securities or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement or any of the Loan Documents or (iv) enter into any agreement or undertaking restricting the right or ability of such Guarantor or the US Administrative Agent to sell, assign or transfer any of the Pledged Securities or Proceeds thereof (except pursuant to any Loan Document). (c) In the case of each Guarantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Pledged Securities issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the US Administrative Agent promptly in writing of the occurrence of any of the events described in Section 5.7(a) with respect to the Pledged Securities issued by it and (iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to ------- -------- all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the Pledged Securities issued by it. 5.8 Receivables. (a) Other than in the ordinary course of business ----------- consistent with its past practice, such Guarantor will not (i) grant any extension of the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any Receivable in any manner that could adversely affect the value thereof. (b) Such Guarantor will deliver to the US Administrative Agent a copy of each material demand, notice or document received by it that questions or calls into doubt the validity or enforceability of more than 5% of the aggregate amount of the then outstanding Receivables. 5.9 Intellectual Property. (a) Such Guarantor is the true and --------------------- lawful owner of all rights to the Patents, Trademarks and Copyrights and such Patents, Trademarks and Copyrights constitute all of the United States Patents, Trademarks and Copyrights and applications for United States Patents, Trademarks and Copyrights that such Guarantor now owns. The Guarantor has no knowledge of any third party claim that any aspect of such Guarantor's present business operations or business operations contemplated as of the date hereof infringes or will infringe any patent, trademark or copyright. (b) Such Guarantor agrees, promptly upon learning thereof, to furnish the US Administrative Agent in writing all pertinent information available to such Guarantor with respect to any infringement, contributing infringement or active inducement to infringe in any material Patent or Trademark or to any claim that practice of any material Patent or Trademark violates any property right of a third party, or with respect to any misappropriation of any material Patent or Trademark. Such Guarantor agrees, absent direction from the US Administrative Agent to the contrary, to diligently prosecute any Person infringing or misappropriating any Patent or Trademark. (c) At its own expense, such Guarantor shall make timely payment of all post-issuance fees required to maintain in force rights under each Patent absent prior written consent of the US Administrative Agent. (d) At its own expense, such Guarantor shall diligently prosecute all applications for United States Patents or Trademarks and shall not abandon any such application prior to exhaustion of all administrative judicial remedies, absent written consent of the US Administrative Agent. (e) Prior to the later to occur of (i) 30 days of acquisition of a United States Patent or Trademark, or of filing of an application for a United States Patent or Trademark or (ii) five Business Days after the last day of the fiscal quarter in which such acquisition or filing occurs, such Guarantor shall report such acquisition or filing to the US Administrative Agent, and upon request of the US Administrative Agent, such Guarantor shall execute and deliver any and all agreements, instruments, documents and papers as the US Administrative Agent may request to evidence the US Administrative Agent's and the Lenders' security interest in any Patent or Trademark. SECTION 6. REMEDIAL PROVISIONS 6.1 Certain Matters Relating to Receivables. (a) The US --------------------------------------- Administrative Agent shall have the right, at its own cost and expense, to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and each Guarantor shall furnish all such assistance and information as the US Administrative Agent may reasonably require in connection with such test verifications. At any time after an Event of Default which is continuing, upon the US Administrative Agent's request and at the expense of the relevant Guarantor, such Guarantor shall cause independent public accountants or others satisfactory to the US Administrative Agent to furnish to the US Administrative Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Receivables. (b) If required by the US Administrative Agent at any time during the continuance of an Event of Default, any payments of Receivables, when collected by any Guarantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Guarantor in the exact form received, duly indorsed by such Guarantor to the US Administrative Agent if required, in a Collateral Account maintained under the sole dominion and control of the US Administrative Agent, subject to withdrawal by the US Administrative Agent for the account of the Lenders only as provided in Section 6.5, and (ii) until so turned over, shall be held by such Guarantor in trust for the US Administrative Agent and the Lenders, segregated from other funds of such Guarantor. Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit. (c) At the US Administrative Agent's request, each Guarantor shall make available to the US Administrative Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including, without limitation, all original invoices. 6.2 Communications with Obligors; Guarantors Remain Liable. (a) ------------------------------------------------------ The US Administrative Agent in its own name or in the name of others may at any time during the continuance of an Event of Default communicate with obligors under the Receivables to verify with them to the US Administrative Agent's satisfaction the existence, amount and terms of any Receivables. (b) Upon the request of the US Administrative Agent at any time during the continuance of an Event of Default, each Guarantor shall notify obligors on the Receivables that the Receivables have been assigned to the US Administrative Agent for the benefit of the Lenders and that payments in respect thereof shall be made directly to the US Administrative Agent. (c) Anything herein to the contrary notwithstanding, each Guarantor shall remain liable under each agreement relating to a Receivable to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Neither the US Administrative Agent nor any Lender shall have any obligation or liability under any agreement relating to a Receivable by reason of or arising out of this Agreement or the receipt by the US Administrative Agent or any Lender of any payment relating thereto, nor shall the US Administrative Agent or any Lender be obligated in any manner to perform any of the obligations of any Guarantor under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. 6.3 Pledged Stock. (a) Unless an Event of Default shall have ------------- occurred and be continuing and the US Administrative Agent shall have given notice to the relevant Guarantor of the US Administrative Agent's intent to exercise its corresponding rights pursuant to Section 6.3(b), each Guarantor shall be permitted to receive all cash dividends and other distributions paid in respect of the Pledged Stock and all payments made in respect of the Pledged Notes, and to exercise all voting and corporate or partnership rights with respect to the Pledged Securities; provided, however, that no vote shall be cast -------- ------- or corporate or partnership right exercised or other action taken which, in the US Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Amended and Restated Credit Agreement, this Agreement or any other Loan Document. (b) If an Event of Default shall occur and be continuing and the US Administrative Agent shall give notice of its intent to exercise such rights to the relevant Guarantor or Guarantors, (i) the US Administrative Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Pledged Securities and make application thereof to the Obligations in such order as the US Administrative Agent may determine, and (ii) any or all of the Pledged Securities shall be registered in the name of the US Administrative Agent or its nominee, and the US Administrative Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Pledged Securities at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such Pledged Securities as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Securities upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by any Guarantor or the US Administrative Agent of any right, privilege or option pertaining to such Pledged Securities, and in connection therewith, the right to deposit and deliver any and all of the Pledged Securities with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the US Administrative Agent may determine), all without liability except to account for property actually received by it, but the US Administrative Agent shall have no duty to any Guarantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (c) Each Guarantor hereby authorizes and instructs each Issuer of any Pledged Securities pledged by such Guarantor hereunder to (i) comply with any instruction received by it from the US Administrative Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Guarantor, and each Guarantor agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Pledged Securities directly to the US Administrative Agent. 6.4 Proceeds to be Turned Over To US Administrative Agent. In ----------------------------------------------------- addition to the rights of the US Administrative Agent and the Lenders specified in Section 6.1 with respect to payments of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any Guarantor consisting of cash, checks and other near-cash items shall be held by such Guarantor in trust for the US Administrative Agent and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the US Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the US Administrative Agent, if required). All Proceeds received by the US Administrative Agent hereunder shall be held by the US Administrative Agent in a Collateral Account maintained under its sole dominion and control. All Proceeds while held by the US Administrative Agent in a Collateral Account (or by such Guarantor in trust for the US Administrative Agent and the Lenders) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 6.5. 6.5 Application of Proceeds. At such intervals as may be agreed upon ----------------------- by the Borrowers and the US Administrative Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the US Administrative Agent's election, the US Administrative Agent may apply all or any part of Proceeds held in any Collateral Account in payment of the Obligations in such order as the US Administrative Agent may elect (provided that all such payments in respect of principal, interest, fees and other amounts then due and payable hereunder shall in each case be applied pro rata among those Lenders to which -------- such types of amounts are payable), and any part of such funds which the US Administrative Agent elects not so to apply and deems not required as collateral security for the Obligations shall be paid over from time to time by the US Administrative Agent to the Borrowers or to whomsoever may be lawfully entitled to receive the same. Any balance of such Proceeds remaining after the Obligations shall have been paid in full, no Bankers' Acceptances shall be outstanding and the Commitments shall have terminated shall be paid over to the Borrowers or to whomsoever may be lawfully entitled to receive the same. 6.6 Code and Other Remedies. If an Event of Default shall occur and ----------------------- be continuing, the US Administrative Agent, on behalf of the Lenders, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code or any other applicable law. Without limiting the generality of the foregoing, the US Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Guarantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of the US Administrative Agent or any Lender or elsewhere upon such terms and conditions as it may deem commercially reasonable and at such prices as it may deem best for cash or on credit or for future delivery without assumption of any credit risk. The US Administrative Agent or any Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Guarantor, which right or equity is hereby waived or released. Each Guarantor further agrees, at the US Administrative Agent's request, to assemble the Collateral and make it available to the US Administrative Agent at places which the US Administrative Agent shall reasonably select, whether at such Guarantor's premises or elsewhere. The US Administrative Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the US Administrative Agent and the Lenders hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the US Administrative Agent may elect (provided that such application -------- shall in each case be applied pro rata among those Lenders to which such types -------- of amounts are payable), and only after such application and after the payment by the US Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(1)(c) of the Code, need the US Administrative Agent account for the surplus, if any, to any Guarantor. To the extent permitted by applicable law, each Guarantor waives all claims, damages and demands it may acquire against the US Administrative Agent or any Lender arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. 6.7 Registration Rights. (a) If the US Administrative Agent shall ------------------- determine to exercise its right to sell any or all of the Pledged Stock pursuant to Section 6.6, and if in the opinion of the US Administrative Agent it is necessary or advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act, upon written request, the relevant Guarantor will use its best efforts to cause the Issuer thereof to (i) execute and deliver, and cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the US Administrative Agent, necessary or advisable to register the Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Pledged Stock, or that portion thereof to be sold, and (iii) make all amendments thereto and/or to the related prospectus which, in the opinion of the US Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; provided, that the Guarantor shall not be required to effect such -------- registration under the Securities Act or with applicable state securities laws if the Guarantor delivers to the US Administrative Agent an opinion of counsel (who shall be satisfactory to the US Administrative Agent) satisfactory to the US Administrative Agent that such sale may be made pursuant to an exemption from the Securities Act and such state securities laws, and provided further, that ---------------- the US Administrative Agent shall furnish to such Guarantor such information regarding the US Administrative Agent and the Lenders as such Guarantor may request in writing and as shall be required in connection with any such registration, qualification or compliance. Each Guarantor agrees to use its best efforts to cause such Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the US Administrative Agent shall designate and, except where the US Administrative Agent does not deem it necessary or desirable to do so under the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto, to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act. (b) Each Guarantor recognizes that the US Administrative Agent may be unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Guarantor acknowledges and agrees that the mere fact that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and agrees that the mere fact that such sale is a private sale shall not be deemed to have made such sale one not made in a commercially reasonable manner, provided that such Pledged Stock is sold at a price that the US -------- Administrative Agent has determined in good faith is reasonable under the circumstances. The US Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so. (c) Each Guarantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Stock pledged by it pursuant to this Section 6.7 valid and binding and in compliance with any and all other applicable Requirements of Law. Each Guarantor further agrees that a breach of any of the covenants contained in this Section 6.7 will cause irreparable injury to the US Administrative Agent and the Lenders, that the US Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 6.7 shall be specifically enforceable against such Guarantor, and such Guarantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing under the Amended and Restated Credit Agreement. 6.8 Waiver; Deficiency. Each Guarantor waives and agrees not to ------------------ assert any rights or privileges which it may acquire under Section 9-112 of the Code. Each Guarantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the fees and disbursements of any attorneys employed by the US Administrative Agent or any Lender to collect such deficiency. SECTION 7. THE US ADMINISTRATIVE AGENT 7.1 US Administrative Agent's Appointment as Attorney-in-Fact, etc. -------------------------------------------------------------- (a) Each Guarantor hereby irrevocably constitutes and appoints the US Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Guarantor and in the name of such Guarantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be reasonably necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Guarantor hereby gives the US Administrative Agent the power and right, on behalf of such Guarantor, without notice to or assent by such Guarantor, to do any or all of the following: (i) in the name of such Guarantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the US Administrative Agent for the purpose of collecting any and all such moneys due under any Receivable or with respect to any other Collateral whenever payable; (ii) in the case of any Copyright, Patent or Trademark, execute and deliver any and all agreements, instruments, documents and papers as the US Administrative Agent may request to evidence the US Administrative Agent's and the Lenders' security interest in such Copyright, Patent or Trademark and the goodwill and general intangibles of such Guarantor relating thereto or represented thereby; (iii) pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof; (iv) execute, in connection with any sale provided for in Section 6.6 or 6.7, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and (v) (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the US Administrative Agent or as the US Administrative Agent shall direct; (2) ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against such Guarantor with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, to give such discharges or releases as the US Administrative Agent may deem appropriate; (7) assign any Copyright, Patent or Trademark (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the US Administrative Agent shall in its sole discretion determine; and (8) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the US Administrative Agent were the absolute owner thereof for all purposes, and do, at the US Administrative Agent's option and such Guarantor's expense, at any time, or from time to time, all acts and things which the US Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the US Administrative Agent's and the Lenders' security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Guarantor might do. Anything in this Section 7.1(a) to the contrary notwithstanding, the US Administrative Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.1(a) unless an Event of Default shall have occurred and be continuing. (b) If any Guarantor fails to perform or comply with any of its agreements contained herein, the US Administrative Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement. (c) The expenses of the US Administrative Agent incurred in connection with actions undertaken as provided in this Section 7.1, together with interest thereon at a rate per annum equal to the rate per annum at which interest would then be payable on past due Base Rate Loans, in the case of expenses paid in US$, or C$ Prime Loans, in the case of expenses paid in C$ under the Amended and Restated Credit Agreement, from the date of payment by the US Administrative Agent to the date reimbursed by the relevant Guarantor, shall be payable by such Guarantor to the US Administrative Agent on demand. (d) Each Guarantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released. 7.2 Duty of Administrative Agent. The US Administrative Agent's sole ---------------------------- duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the US Administrative Agent deals with similar property for its own account. Neither the US Administrative Agent, any Lender nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Guarantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the US Administrative Agent and the Lenders hereunder are solely to protect the US Administrative Agent's and the Lenders' interests in the Collateral and shall not impose any duty upon the US Administrative Agent or any Lender to exercise any such powers. The US Administrative Agent and the Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Guarantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. 7.3 Execution of Financing Statements. Pursuant to Section 9-402 of --------------------------------- the Code and any other applicable law, each Guarantor authorizes the US Administrative Agent to file or record financing statements and other filing or recording documents or instruments with respect to the Collateral without the signature of such Guarantor in such form and in such offices as the US Administrative Agent reasonably determines appropriate to perfect the security interests of the US Administrative Agent under this Agreement. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction. 7.4 Authority of Administrative Agent. Each Guarantor acknowledges --------------------------------- that the rights and responsibilities of the US Administrative Agent under this Agreement with respect to any action taken by the US Administrative Agent or the exercise or non-exercise by the US Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the US Administrative Agent and the Lenders, be governed by the Amended and Restated Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the US Administrative Agent and the Guarantors, the US Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting as provided herein, and no Guarantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority. SECTION 8. MISCELLANEOUS 8.1 Amendments in Writing. None of the terms or provisions of this --------------------- Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each affected Guarantor and the US Administrative Agent, provided that any provision of this Agreement imposing obligations on any -------- Guarantor may be waived by the US Administrative Agent in a written instrument executed by the US Administrative Agent. 8.2 Notices. All notices, requests and demands to or upon the US ------- Administrative Agent or any Guarantor hereunder shall be effected in the manner provided for in subsection 11.2 of the Amended and Restated Credit Agreement; provided that any such notice, request or demand to or upon any Guarantor shall - -------- be addressed to such Guarantor at its notice address set forth on Schedule 1 as ---------- such Schedule may be revised from time to time. 8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the --------------------------------------------------- US Administrative Agent nor any Lender shall by any act (except by a written instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the US Administrative Agent or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the US Administrative Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the US Administrative Agent or such Lender would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor ------------------------------------- agrees to pay or reimburse each Lender and the US Administrative Agent for all its costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Agreement and the other Loan Documents to which such Guarantor is a party, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to the US Administrative Agent. (b) Each Guarantor agrees to pay, and to save the US Administrative Agent and the Lenders harmless from, any and all liabilities with respect to, or resulting from any delay (except for any delay caused by the US Administrative Agent or any Lender) in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. (c) Each Guarantor agrees to pay, and to save the US Administrative Agent and the Lenders harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement and performance of this Agreement (collectively, the "indemnified liabilities") to the extent the Company would be required to do so - ------------------------ pursuant to subsection 11.5 of the Amended and Restated Credit Agreement. (d) The agreements in this Section 8.4 shall survive repayment of the Obligations and all other amounts payable under the Amended and Restated Credit Agreement and the other Loan Documents. 8.5 Successors and Assigns. This Agreement shall be binding upon the ---------------------- successors and assigns of each Guarantor and shall inure to the benefit of the US Administrative Agent and the Lenders and their successors and assigns; provided that no Guarantor may assign, transfer or delegate any of its rights or - -------- obligations under this Agreement without the prior written consent of the US Administrative Agent. 8.6 Set-Off. In addition to any rights and remedies of the Lenders ------- provided by law, each Lender shall have the right, without prior notice to either Borrower, any such notice being expressly waived by such Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by such Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of such Borrower. Each Lender agrees promptly to notify the relevant Borrower and the relevant Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of - -------- such set-off and application. 8.7 Counterparts. This Agreement may be executed by one or more of ------------ the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 8.8 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 provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 8.9 Section Headings. The Section headings used in this Agreement ---------------- are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 8.10 Integration. This Agreement and the other Loan Documents ----------- represent the agreement of the Guarantors, the US Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the US Administrative Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. In the event of any conflict between the provisions of this Agreement and the Amended and Restated Credit Agreement, the provisions of the Amended and Restated Credit Agreement shall be controlling. 8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 8.12 Submission To Jurisdiction; Waivers. Each Guarantor hereby ----------------------------------- irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgement in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Guarantor at its address referred to in Section 8.2 or at such other address of which the US Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 8.13 Acknowledgements. Each Guarantor hereby acknowledges that: ---------------- (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party; (b) neither the US Administrative Agent nor any Lender has any fiduciary relationship with or duty to any Guarantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Guarantors, on the one hand, and the US Administrative Agent and Lenders, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Guarantors and the Lenders. 8.14 WAIVER OF JURY TRIAL. EACH GUARANTOR HEREBY IRREVOCABLY AND -------------------- UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 8.15 Additional Guarantors; Pledged Stock. (a) Each Domestic ------------------------------------ Subsidiary of the Company that is required to become a party to this Agreement pursuant to subsection 7.16 of the Amended and Restated Credit Agreement shall become a Guarantor for all purposes of this Agreement upon execution and delivery by such Domestic Subsidiary of an Assumption Agreement in the form of Annex 1A hereto. (b) Subsection 7.15 of the Amended and Restated Credit Agreement also requires that the Company or any Domestic Subsidiary of the Company which holds the Capital Stock of any new Subsidiary (including a Foreign Subsidiary) of the Company created or acquired after the Closing Date, pledge 100% of the issued and outstanding Capital Stock of such new Subsidiary (provided, that in no event -------- shall Capital Stock representing more than 65% of the voting power of the Capital Stock of any such new Subsidiary which is not a Domestic Subsidiary be so pledged) to the US Administrative Agent for the benefit of the Lenders by executing and delivering a Supplement to this Agreement in the form of Annex 1A hereto. From and after the date any Guarantor executes and delivers a Supplement to this Agreement, the pledged stock set forth on Schedule 1 to such Supplement shall be deemed to be Pledged Stock for all purposes under this Agreement and the issuer of such pledged stock shall be deemed to be an Issuer for all purposes under this Agreement. 8.16 Releases. (a) At such time as the Loans and the other -------- Obligations shall have been paid in full and the Commitments have been terminated and no Bankers' Acceptances shall be outstanding, the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the US Administrative Agent and each Guarantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Guarantors. At the request and sole expense of the Company following any such termination, the US Administrative Agent shall promptly, assign, transfer and deliver to such Guarantor any Collateral held by the US Administrative Agent hereunder, and execute and deliver to such Guarantor such documents as such Guarantor shall reasonably request to evidence such termination. (b) If any of the Collateral shall be sold, transferred or otherwise disposed of by any Guarantor in a transaction permitted by the Amended and Restated Credit Agreement, then the US Administrative Agent, at the request of such Guarantor and sole expense of the Company, shall execute and deliver to such Guarantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral. At the request and sole expense of the Company, a Guarantor shall be released from its obligations hereunder in the event that all the Capital Stock of such Guarantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the Amended and Restated Credit Agreement; provided that the Company shall -------- have delivered to the US Administrative Agent, at least ten Business Days prior to the date of the proposed release, a written request for release identifying the relevant Guarantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Company stating that such transaction is in compliance with the Amended and Restated Credit Agreement and the other Loan Documents. IN WITNESS WHEREOF, each of the undersigned has caused this US Global Guarantee and Security Agreement to be duly executed and delivered as of the date first above written. PIERCE LEAHY CORP. By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President PLC COMMAND I, INC. By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President PLC COMMAND II, INC. By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President PLC COMMAND I, L.P. By PLC Command I, Inc., as its general partner By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice president PLC COMMAND II, L.P. By PLC Command II, Inc., as its general partner By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President MONARCH BOX, INC. By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President ADVANCED BOX, INC. By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President PIERCE MARYLAND, LLC By: /s/ Joseph P. Linaugh ------------------------------------- Title: Vice President AMENDED AND RESTATED PLEDGE AND INTERCREDITOR AGREEMENT AMENDED AND RESTATED PLEDGE AND INTERCREDITOR AGREEMENT, dated as of July 7, 1997, by and among (a) PLC COMMAND I, L.P., a Pennsylvania limited partnership ("PLC I"), PLC COMMAND II, L.P., a Pennsylvania limited partnership ----- ("PLC II" and, together with PLC I, the "Pledgors"), (b) CANADIAN IMPERIAL BANK ------ -------- OF COMMERCE, NEW YORK AGENCY, as collateral agent (together with its successors in such capacity, the "Collateral Agent") for (i) the lenders (the "Lenders") ---------------- ------- from time to time parties to the Credit Agreement (as hereinafter defined) and CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders, (ii) the holders -------------------- from time to time (the "1996 Holders") of the 11 1/8% Senior Subordinated Notes ------------ due 2006 (collectively, the "1996 Notes") issued pursuant to the 1996 Indenture ---------- (as defined below) of PIERCE LEAHY CORP., a Pennsylvania corporation as successor by merger with a New York corporation having the same name (the "Company"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York corporation, - -------- as trustee (together with its successors in such capacity, the "1996 Trustee") ------------ for the 1996 Holders in accordance with the 1996 Indenture, and (iii) the holders from time to time (the "1997 Holders") of the Company's 9 1/8% Senior ------------ Subordinated Notes due 2007 (collectively, the "1997 Notes") issued from time to ---------- time pursuant to the 1997 Indenture (as defined below) of the Company and THE BANK OF NEW YORK, a New York banking corporation, as trustee (together with its successors in such capacity, the "1997 Trustee") for the 1997 Holders in ------------ accordance with the 1997 Indenture, (c) the Administrative Agent, (d) the 1996 Trustee and (e) the 1997 Trustee. The 1996 Holders and the 1997 Holders are collectively referred to herein as the "Holders," the 1996 Notes and the 1997 ------- Notes are collectively referred to herein as the "Notes," the 1996 Indenture and ----- the 1997 Indenture are collectively referred to herein as the "Indentures," and ---------- the 1996 Trustee and the 1997 Trustee are collectively referred to herein as the "Trustees." -------- W I T N E S S E T H: ------------------- WHEREAS, pursuant to the Credit Agreement, dated as of August 13, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit ------ Agreement"), among the Company, Pierce Leahy Command Company, a Nova Scotia - --------- unlimited liability company (together with the Company, the "Borrowers"), the --------- Lenders and the administrative agents named therein, including, without limitation, the Administrative Agent (the "Administrative Agents"), the Lenders --------------------- have agreed to make loans (the "Loans") to the Borrowers upon the terms and ----- subject to the conditions set forth therein; WHEREAS, pursuant to the Indenture, dated as of July 15, 1996 (as amended, supplemented or otherwise modified from time to time (the " 1996 Indenture"), --------------- between the Company and the 1996 Trustee, the Company has issued the 1996 Notes to the 1996 Holders, upon the terms and subject to the conditions set forth therein; WHEREAS, pursuant to the Pledge and Intercreditor Agreement, dated as of August 13, 1996, by and among the Pledgor, the Collateral Agent, the Administrative Agent and the 1996 Trustee (the "Existing Pledge and ------------------- Intercreditor Agreement"), the Pledgors granted to the Collateral Agent (a) for - ----------------------- the benefit of the Lenders and the Administrative Agent, a first priority lien on the Pledged Stock and (b) for the benefit of the 1996 Holders and the 1996 Trustee, a second priority lien on the Pledged Stock; WHEREAS, pursuant to the Indenture, dated as of July 7, 1997 (as amended, supplemented or otherwise modified from time to time, the "1997 Indenture"), -------------- between the Company and the 1997 Trustee, the Company has issued the 1997 Notes to the 1997 Holders, upon the terms and subject to the conditions set forth therein; WHEREAS, in connection with the 1997 Indenture, the Company has agreed to cause each Pledgor to grant to the Collateral Agent for the benefit of the 1997 Holders and the 1997 Trustee a third priority lien on the Pledged Stock; WHEREAS, each Pledgor is a Subsidiary of the Company, and it is to the advantage of each Pledgor that the 1997 Holders purchase the 1997 Notes from the Company; WHEREAS, the Lenders have consented to the grant to the Collateral Agent for the benefit of the 1997 Holders and the 1997 Trustee of a third priority lien on the Pledged Stock; WHEREAS, the parties hereto have agreed to amend and restate the Existing Pledge and Intercreditor Agreement to (a) provide for the grant to the Collateral Agent for the benefit of the 1997 Holders and the 1997 Trustee of a third priority lien on the Pledged Stock and (b) make certain other changes to the Existing Pledge and Intercreditor Agreement; WHEREAS, each Pledgor is the legal and beneficial owner of the shares of the Pledged Stock pledged by it hereunder; and WHEREAS, (a) pursuant to the Credit Agreement, the Administrative Agent has been granted the authority to act on behalf of all Lenders with respect to matters specified herein, including the execution and delivery of this Amended and Restated Pledge and Intercreditor Agreement; (b) pursuant to the 1996 Indenture, the 1996 Trustee has been granted the authority to act on behalf of all 1996 Holders with respect to matters specified therein, including the execution and delivery of this Amended and Restated Pledge and Intercreditor Agreement; and (c) pursuant to the 1997 Indenture, the 1997 Trustee has been granted the authority to act on behalf of all 1997 Holders with respect to matters specified therein, including the execution and delivery of this Amended and Restated Pledge and Intercreditor Agreement. NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration the receipt and adequacy of which is hereby acknowledged, the parties hereby agree that the Existing Pledge and Intercreditor Agreement shall be amended and restated to read in its entirety as follows: 1. Defined Terms. (a) Unless otherwise defined herein, terms defined in ------------- the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms shall have the following meanings: "Agreement": this Amended and Restated Pledge and Intercreditor --------- Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Code": the Uniform Commercial Code from time to time in effect in ---- the State of New York. "Collateral": the Pledged Stock and all Proceeds. ---------- "Collateral Account": any account established to hold money Proceeds, ------------------ maintained under the sole dominion and control of the Collateral Agent, subject to withdrawal by the Collateral Agent for the account of the Secured Parties only as provided in Section 9(a). "Default": until the Senior Payout Date, the meaning ascribed to such ------- term in the Credit Agreement and, after the Senior Payout Date but prior to the Senior Subordinated Payout Date, the meaning ascribed to such term in the 1996 Indenture and, after the Senior Payout Date and the Senior Subordinated Payout Date, the meaning ascribed to such term in the 1997 Indenture. "Event of Default": until the Senior Payout Date, the meaning ---------------- ascribed to such term in the Credit Agreement and, after the Senior Payout Date but prior to the Senior Subordinated Payout Date, the meaning ascribed to such term in the 1996 Indenture and, after the Senior Payout Date and the Senior Subordinated Payout Date, the meaning ascribed to such term in the 1997 Indenture. "Insolvency Event: (i) Either Pledgor commencing any case, proceeding ---------------- or other action (x) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (y) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or either Pledgor making a general assignment for the benefit of its creditors; or (ii) there being commenced against either Pledgor any case, proceeding or other action of a nature referred to in clause (i) above which (x) results in the entry of an order for relief or any such adjudication or appointment or (y) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there being commenced against either Pledgor any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) either Pledgor taking any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clauses (i), (ii) or (iii) above. "Issuer": Pierce Leahy Command Company, a company incorporated under ------ the laws of Nova Scotia. "Junior Subordinated Secured Obligations": the unpaid principal of --------------------------------------- and interest on the 1997 Notes and all other obligations and liabilities of the Company to the 1997 Trustee and the 1997 Holders (including, without limitation, interest accruing at the then applicable rate provided in the 1997 Indenture after the maturity of the 1997 Notes and interest accruing at the then applicable rate provided in the 1997 Indenture after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to either Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with the 1997 Notes, the 1997 Indenture or this Agreement. "Junior Subordinated Secured Parties": collectively, the 1997 Trustee ----------------------------------- and the 1997 Holders. "Pledged Stock": the shares of capital stock listed on Schedule 1 ------------- ---------- hereto, together with all stock certificates, options or rights of any nature whatsoever with respect to the Issuer's Capital Stock that may be issued or granted by the Issuer to either Pledgor in respect of the Pledged Stock while this Agreement is in effect. "Proceeds": all "proceeds" as such term is defined in Section 9- -------- 306(1) of the Uniform Commercial Code in effect in the State of New York on the date hereof and, in any event, shall include, without limitation, all dividends or other income from the Pledged Stock, collections thereon or distributions with respect thereto. "Secured Obligations": the collective reference to the Senior Secured ------------------- Obligations and the Subordinated Secured Obligations. "Secured Parties": collectively, the Senior Secured Parties and the --------------- Subordinated Secured Parties. "Securities Act": the Securities Act of 1933, as amended. -------------- "Senior Payout Date": the date upon which the Senior Secured ------------------ Obligations shall have been paid in full and the Commitments under the Credit Agreement shall have expired or been terminated. "Senior Secured Obligations": the collective reference to: -------------------------- (a) unpaid principal of and interest on the Loans and all other obligations and liabilities of the Borrowers to the Administrative Agents and the Lenders (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to either Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, this Agreement, the other Loan Documents or any other document made, delivered or given in connection therewith; (b) all obligations and liabilities of each Pledgor which may arise under or in connection with this Agreement or any other Loan Document to which such Pledgor is a party; and (c) all obligations of the Borrowers with respect to any Interest Rate Protection Agreement entered into with any Lender or any affiliate thereof. "Senior Secured Parties": collectively, the Administrative Agents, the ---------------------- Lenders and, in connection with the obligations described in clause (c) of the definition of Senior Secured Obligations, affiliates of Lenders. "Senior Subordinated Payout Date": the date upon which the Senior ------------------------------- Subordinated Secured Obligations shall have been paid in full. "Senior Subordinated Secured Obligations": the unpaid principal of --------------------------------------- and interest on the 1996 Notes and all other obligations and liabilities of the Company to the 1996 Trustee and the 1996 Holders (including, without limitation, interest accruing at the then applicable rate provided in the 1996 Indenture after the maturity of the 1996 Notes and interest accruing at the then applicable rate provided in the 1996 Indenture after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to either Borrower, whether or not a claim for post- filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the 1996 Notes, the 1996 Indenture or this Agreement. "Senior Subordinated Secured Parties": collectively, the 1996 Trustee ----------------------------------- and the 1996 Holders. "Subordinated Secured Obligations": the collective reference to the -------------------------------- Senior Subordinated Secured Obligations and the Junior Subordinated Secured Obligations. "Subordinated Secured Parties": collectively, the Senior Subordinated ---------------------------- Secured Parties and the Junior Subordinated Secured Parties. (b) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section and paragraph references are to this Agreement unless otherwise specified. (c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Pledge; Grant of Security Interests. (a) Each Pledgor hereby confirms ----------------------------------- and reaffirms its mortgage, pledge and assignment of the Collateral to the Collateral Agent, for the benefit of the Senior Secured Parties, and its grant to the Collateral Agent, for the benefit of the Senior Secured Parties, of a security interest in the Collateral, in each case as collateral security on a first priority basis for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Senior Secured Obligations. (b) Each Pledgor hereby confirms and reaffirms its mortgage, pledge and assignment of the Collateral to the Collateral Agent, for the benefit of the Senior Subordinated Secured Parties, and its grant to the Collateral Agent, for the benefit of the Senior Subordinated Secured Parties, of a security interest in the Collateral, in each case as collateral security on a second priority basis for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Senior Subordinated Secured Obligations. (c) Each Pledgor hereby mortgages, pledges and assigns the Collateral to the Collateral Agent, for the benefit of the Junior Subordinated Secured Parties, and grants to the Collateral Agent, for the benefit of the Junior Subordinated Secured Parties, a security interest in the Collateral, in each case as collateral security on a third priority basis for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Junior Subordinated Secured Obligations. (d) As set forth in the separate granting clauses contained in Sections 2(a), (b) and (c), it is the intent of the parties hereto that this Agreement shall confirm, reaffirm and create three separate and distinct Liens in favor of the Collateral Agent, the first for the benefit of the Senior Secured Parties, the second for the benefit of the Senior Subordinated Secured Parties, and the third for the benefit of the Junior Subordinated Secured Parties. 3. Subordination of Lien of Subordinated Secured Parties; Bailment. (a) --------------------------------------------------------------- The 1996 Trustee acknowledges and agrees that (1) any interest that it or any 1996 Holder has or may have in the Collateral shall be junior and subordinate to the interest of the Senior Secured Parties; (2) prior to the Senior Payout Date, it will not take any action to enforce any rights it may have hereunder, without the prior written consent of the Administrative Agent; and (3) prior to the Senior Payout Date, any consent given in accordance with the terms of this Agreement by the Collateral Agent at the direction of the Administrative Agent to any amendment, waiver or other modification in respect of the obligations of each Pledgor hereunder shall be binding upon the Senior Subordinated Secured Parties with respect to any similar obligations of each Pledgor hereunder as fully as if such consent had been given by the Senior Subordinated Secured Parties. (b) The 1996 Trustee appoints and authorizes the Collateral Agent, and the Collateral Agent accepts such appointment and authorization by the 1996 Trustee, to act as the agent of, and bailee for, the Senior Subordinated Secured Parties to hold for the benefit of the Senior Subordinated Secured Parties those shares of the Pledged Stock evidenced by certificates, subject, however, to the prior security interest therein and rights thereto and to the proceeds thereof of the Senior Secured Parties. (c) The 1997 Trustee acknowledges and agrees that (1) any interest that it or any 1997 Holder has or may have in the Collateral shall be junior and subordinate to the interests of the Senior Secured Parties and the Senior Subordinated Secured Parties; (2) prior to (x) the Senior Payout Date and (y) the Senior Subordinated Payout Date, it will not take any action to enforce any rights it may have hereunder, without the prior written consent of the Administrative Agent and the 1996 Trustee or, if the Senior Payout Date shall have occurred, of the 1996 Trustee; (3) prior to the Senior Payout Date, any consent given in accordance with the terms of this Agreement by the Collateral Agent at the direction of the Administrative Agent to any amendment, waiver or other modification in respect of the obligations of each Pledgor hereunder shall be binding upon the Junior Subordinated Secured Parties with respect to any similar obligations of each Pledgor hereunder as fully as if such consent had been given by the Junior Subordinated Secured Parties; and (4) after the Senior Payout Date but prior to the Senior Subordinated Payout Date, any consent given in accordance with the terms of this Agreement by the Collateral Agent at the direction of the 1996 Trustee to any amendment, waiver or other modification in respect of the obligations of each Pledgor hereunder shall be binding upon the Junior Subordinated Secured Parties with respect to any similar obligations of each Pledgor hereunder as fully as if such consent had been given by the Junior Subordinated Secured Parties. (d) The 1997 Trustee appoints and authorizes the Collateral Agent, and the Collateral Agent accepts such appointment and authorization by the 1997 Trustee, to act as the agent of, and bailee for, the Junior Subordinated Secured Parties to hold for the benefit of the Junior Subordinated Secured Parties those shares of the Pledged Stock evidenced by certificates, subject, however, to the prior security interests therein and the respective rights thereto and to the proceeds thereof of the Senior Secured Parties and the Senior Subordinated Secured Parties. 4. Stock Powers. Concurrently with the delivery to the Collateral Agent ------------ of each certificate representing one or more shares of Pledged Stock, each Pledgor has delivered an undated stock power, or such other instrument of transfer as may have been reasonably requested by the Collateral Agent, covering such certificate, duly executed in blank by such Pledgor with, if the Collateral Agent so requested, signature guaranteed. 5. Representations and Warranties. Each Pledgor hereby represents and ------------------------------ warrants that: (a) Such Pledgor has the partnership power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the first, second and third priority security interests in the Collateral pursuant to, this Agreement and has taken all necessary action to authorize its execution, delivery and performance of, and grant each of the security interests in the Collateral pursuant to, this Agreement. (b) This Agreement constitutes a legal, valid and binding obligation of such Pledgor, enforceable in accordance with its terms, except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (c) The execution, delivery and performance of this Agreement will not violate any provision of any Requirement of Law or Contractual Obligation of such Pledgor and will not result in the creation or imposition of any Lien on any of the properties or revenues of such Pledgor pursuant to any Requirement of Law or Contractual Obligation of such Pledgor, except the security interests created by this Agreement. (d) No consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority, and no consent of any other Person (including, without limitation, any stockholder or creditor of such Pledgor), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. (e) No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of such Pledgor, threatened by or against such Pledgor or against any of its properties or revenues with respect to this Agreement or any of the transactions contemplated hereby. (f) The shares of Pledged Stock constitute 65% of the issued and outstanding shares of all classes of the Capital Stock of the Issuer. (g) All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable. (h) Such Pledgor is the record and beneficial owner of, and has good and marketable title to, the shares of Pledged Stock pledged by such Pledgor, free of any and all Liens or options in favor of, or claims of, any other Person, except for the separate and distinct security interests granted to the Senior Secured Parties, the Senior Subordinated Secured Parties and the Junior Subordinated Secured Parties. (i) The stock certificates evidencing the Pledged Stock having been delivered to the Collateral Agent and assuming continuous possession by the Collateral Agent of such certificates, each of the security interests granted pursuant to this Agreement constitutes a separate, distinct and valid perfected security interest in the Pledged Stock in favor of the Collateral Agent, for the benefit of the Senior Secured Parties, the Senior Subordinated Secured Parties and the Junior Subordinated Secured Parties, respectively, enforceable in accordance with its terms against all creditors of such Pledgor and any Persons purporting to purchase any shares of Pledged Stock from such Pledgor. 6. Covenants. Each Pledgor covenants and agrees with the Collateral Agent --------- and the Secured Parties that, from and after the date of this Agreement until this Agreement is terminated and the security interests created hereby are released: (a) If such Pledgor shall, as a result of its ownership of the Pledged Stock, become entitled to receive or shall receive any stock certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights to Capital Stock, whether in addition to, in substitution of, as a conversion of, or in exchange for any shares of the Pledged Stock, or otherwise in respect thereof, such Pledgor shall accept the same as the agent of the Collateral Agent and the Secured Parties, hold the same in trust for the Collateral Agent and the Secured Parties and deliver the same forthwith to the Collateral Agent in the exact form received, duly indorsed by such Pledgor to the Collateral Agent, if required, together with an undated stock power, or such other instrument of transfer as may be reasonably requested by the Collateral Agent, covering such certificate duly executed in blank by such Pledgor and with, if the Collateral Agent so requests, signature guaranteed, to be held by the Collateral Agent, subject to the terms hereof, as additional collateral security for the Secured Obligations. Any sums paid upon or in respect of the Pledged Stock upon the liquidation or dissolution of the Issuer shall be paid over to the Collateral Agent to be held by it hereunder as additional collateral security for the Secured Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Stock or any property shall be distributed upon or with respect to the Pledged Stock pursuant to the recapitalization or reclassification of the capital of the Issuer or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Collateral Agent to be held by it hereunder as additional collateral security for the Secured Obligations, unless, in either case, such sums or property are distributed or otherwise paid to the holders of the equity interests of such Pledgor. Subject to the "unless" clause at the end of the previous sentence, if any sums of money or property so paid or distributed in respect of the Pledged Stock shall be received by such Pledgor, such Pledgor shall, until such money or property is paid or delivered to the Collateral Agent, hold such money or property in trust for the Secured Parties, segregated from other funds of such Pledgor, as additional collateral security for the Secured Obligations. (b) Without the prior written consent of the Administrative Agent (if the Senior Payout Date shall not have occurred), the 1996 Trustee (if the Senior Payout Date shall have occurred but the Senior Subordinated Payout Date shall not have occurred) or the 1997 Trustee (if the Senior Payout Date and the Senior Subordinated Payout Date shall have occurred), such Pledgor will not (1) vote to enable, or take any other action to permit, the Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of the Issuer except as permitted in the Credit Agreement or the respective Indenture, as the case may be, (2) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Collateral except as permitted in the Credit Agreement or the respective Indenture, as the case may be, (3) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the security interests created by this Agreement and except for any Lien on the Collateral which is junior to the Liens created hereby and which is created pursuant to an amendment and restatement of this Agreement in form and substance satisfactory to, and executed by, each of the parties hereto pursuant to which such junior Lien is subordinated to all prior Liens on terms and conditions substantially similar to those pursuant to which the Liens created hereby in favor of the Junior Subordinated Secured Obligations are subordinated to the Liens created hereby in favor of the Senior Secured Parties and the Senior Subordinated Secured Parties or (4) enter into any agreement or undertaking restricting the right or ability of such Pledgor or the Collateral Agent to sell, assign or transfer any of the Collateral except as provided for in this Agreement, the Credit Agreement and the Indentures. (c) Such Pledgor shall not take any action inconsistent with maintaining (i) the security interest created by Section 2(a) of this Agreement as a first priority, perfected security interest, (ii) the security interest created by Section 2(b) of this Agreement as a second priority, perfected security interest and (iii) the security interest created by Section 2(c) of this Agreement as a third priority, perfected security interest and, in each case of clauses (i), (ii) and (iii), shall defend such security interest against claims and demands of all Persons whomsoever. (d) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Pledgor, such Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Agreement. (e) Such Pledgor shall pay, and save the Collateral Agent and the Secured Parties harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 7. Cash Dividends; Voting Rights. Unless an Event of Default shall have ----------------------------- occurred and be continuing and the Collateral Agent shall have given notice to the Pledgors of the Collateral Agent's intent to exercise its corresponding rights pursuant to Section 9 below, each Pledgor shall be permitted to receive all cash dividends or other distributions paid in the normal course of business of the Issuer, to the extent permitted in the Credit Agreement, in respect of the Pledged Stock and to exercise all voting and corporate rights with respect to the Pledged Stock; provided, however, that no vote shall be cast or corporate -------- ------- right exercised or other action taken which, in the Collateral Agent's reasonable judgment, would impair the Pledged Stock or which would be inconsistent with or result in any violation of any provision of the Credit Agreement, any other Loan Document, any Notes, the Indentures or this Agreement. 8. Rights of the Secured Parties and the Collateral Agent. (a) All money ------------------------------------------------------ Proceeds received by the Collateral Agent hereunder shall be held by the Collateral Agent for the benefit of the Secured Parties in a Collateral Account. All Proceeds while held by the Collateral Agent in a Collateral Account (or by each Pledgor in trust for the Collateral Agent and the Secured Parties) shall continue to be held as collateral security for all the Secured Obligations and shall not constitute payment thereof until applied as provided in Section 10(c). (b) If an Event of Default shall occur and be continuing and the Collateral Agent shall give notice of its intent to exercise any of such rights to each Pledgor (1) the Collateral Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Secured Obligations in the order provided in Section 10(c), and (2) all shares of the Pledged Stock shall be registered in the name of the Collateral Agent or its nominee, and the Collateral Agent or its nominee may thereafter exercise (A) all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders of the Issuer or otherwise and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the Issuer, or upon the exercise by either Pledgor or the Collateral Agent of any right, privilege or option pertaining to such shares of the Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may determine), all without liability except to account for property actually received by it, but the Collateral Agent shall have no duty to any pledgee to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. 9. Remedies. (a) If an Event of Default shall have occurred and be -------- continuing, at any time at the Collateral Agent's election, the Collateral Agent may apply all or any part of Proceeds held in any Collateral Account in payment of the Secured Obligations in such order as provided in Section 10(c). (b) If an Event of Default shall have occurred and be continuing, the Collateral Agent, on behalf of the Secured Parties, may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured party with respect to the Collateral under the Code. Without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon either Pledgor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or office of the Collateral Agent or any Lender or Holder or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Collateral Agent or any other Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in either Pledgor, which right or equity is hereby waived or released. The Collateral Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred in respect thereof or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Collateral Agent and the Secured Parties hereunder, including, without limitation, reasonable attorneys' fees and disbursements of counsel to the Collateral Agent, to the payment in whole or in part of the Secured Obligations, in the order provided in Section 10(c), and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, including, without limitation, Section 9- 504(1)(c) of the Code, need the Collateral Agent account for the surplus, if any, to the Pledgors. To the extent permitted by applicable law, each Pledgor waives all claims, damages and demands it may acquire against the Collateral Agent or any other Secured Party arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. 10. Rights in Collateral; Application of Payments and Proceeds. (a) ---------------------------------------------------------- Notwithstanding anything to the contrary contained in any agreement, document or instrument in favor of the Senior Subordinated Secured Parties and/or the Junior Subordinated Secured Parties and irrespective of: (1) the time, order or method of attachment or perfection of the security interests created hereby, (2) the time or order of filing or recording of financing statements or other documents filed or recorded to perfect security interests in any Collateral, (3) anything contained in any filing or agreement to which the Senior Secured Parties, the Senior Subordinated Secured Parties and/or the Junior Subordinated Secured Parties now or hereafter may be a party, and (4) the rules for determining priority under the Code or any other law governing the relative priorities of secured creditors, any security interest in the Collateral in favor of the Senior Secured Parties has and shall have priority, to the extent of any unpaid Senior Secured Obligations, over any security interest in such Collateral in favor of the Senior Subordinated Secured Parties and the Junior Subordinated Secured Parties, and any security interest in the Collateral in favor of the Senior Subordinated Secured Parties has and shall have priority, to the extent of any unpaid Senior Subordinated Secured Obligations, over any security interest in such Collateral in favor of the Junior Subordinated Secured Parties. (b) In exercising rights and remedies with respect to the Collateral, the Collateral Agent may enforce the provisions hereof and exercise remedies hereunder, all in such order and in such manner as the Senior Secured Parties may determine in the exercise of their sole business judgment. Such exercise and enforcement shall include, without limitation, the rights to collect, sell, dispose of or otherwise realize upon all or any part of the Collateral, to incur expenses in connection with such collection, sale, disposition or other realization and to exercise all the rights and remedies of a secured lender under the Code of any applicable jurisdiction. The Subordinated Secured Parties hereby (1) waive any right that they may have (whether by contract, by law or otherwise) to require the Collateral Agent to give notice of any collection, sale, disposition or other realization of or upon any or all of the Collateral contemplated by this Agreement or any such right the Subordinated Secured Parties may have to object to or otherwise contest any such collection, sale, disposition or other realization of or upon any or all of the Collateral by the Senior Secured Parties (including, without limitation, any requirement that the Collateral Agent foreclose upon such Collateral under applicable law) and (2) agree not to contest or otherwise challenge any such collection, sale, disposition or other realization of or upon all or any of the Collateral or to assert any claim or defense that any such collection, sale, disposition or other realization of or upon all or any part of the Collateral was not commercially reasonable or otherwise failed to comply in any respect with applicable law. It is understood and agreed that, for purposes of this paragraph, after the Senior Payout Date, the term "Senior Secured Parties", when used in this paragraph, shall be deemed to mean the Senior Subordinated Secured Parties and the term "Subordinated Secured Parties", when used in this paragraph, shall be deemed to mean the Junior Subordinated Secured Parties. (c) Any money, property or securities realized upon the sale, disposition or other realization by the Collateral Agent or the Subordinated Secured Parties, as the case may be, upon all or any part of the Collateral (including, without limitation, any payment or distribution of assets of either Pledgor consisting of, or in respect of, Collateral, whether in cash, property or securities during the continuance of an Insolvency Event with respect to such Pledgor) (collectively, "Realizations"), shall be applied in the following ------------ order: (1) First, to the payment in full of all reasonable costs and ----- expenses (including, without limitation, attorneys' reasonable fees and disbursements) paid or incurred by the Collateral Agent in connection with such Realization or the protection of its rights and interests in the Collateral; (2) Second, to the Administrative Agent to be applied to the payment ------ in full of all Senior Secured Obligations then due and payable in such order as the Administrative Agent may elect in its sole discretion; (3) Third, to the 1996 Trustee to be applied to the payment in full ----- of all Senior Subordinated Secured Obligations then due and payable in such order as the 1996 Trustee may elect in its sole discretion; (4) Fourth, to the 1997 Trustee to be applied to the payment in full ------ of all Junior Subordinated Secured Obligations then due and payable in such order as the 1997 Trustee may elect in its sole discretion; and (5) Fifth, to pay to the applicable Pledgor, or its representative or ----- as a court of competent jurisdiction may direct, any surplus then remaining. (d) Prior to the Senior Payout Date, the Subordinated Secured Parties shall not (1) enforce or apply any security interest in all or any of the Collateral, (2) collect or receive any proceeds of any of the Collateral or otherwise enforce or apply any security interest in the proceeds of any of the Collateral; or (3) in any other manner interfere with the security interest granted in favor of the Senior Secured Parties in any of the Collateral (or the proceeds thereof). In addition, the Subordinated Secured Parties hereby (x) agree not to assert prior to the Senior Payout Date any claim for marshalling; (y) consent to the collection, sale, disposition or other realization of or upon all or any of the Collateral by the Collateral Agent prior to the Senior Payout Date free of any security interest therein in favor of the Subordinated Secured Parties; and (z) at the sole cost and expense of the Pledgors, agree to execute prior to the Senior Payout Date all such releases and other documents that the Administrative Agent may reasonably request in writing to facilitate the collection, sale, disposition or other realization of or upon any or all of the Collateral by the Collateral Agent (including, without limitation, the termination of any security interests in any of the Collateral in favor of the Subordinated Secured Parties concurrently with such sale, disposition or other realization). (e) If any payment or distribution, whether consisting of money, property or securities, from any Realizations is collected or received by the Subordinated Secured Parties in respect of the Subordinated Secured Obligations in violation of Section 10(d), the Subordinated Secured Parties shall forthwith deliver the same to the Collateral Agent, in the form received, duly indorsed to the Collateral Agent, if required, to be applied to the payment or prepayment of the Senior Secured Obligations until the Senior Secured Obligations are paid in full. Until so delivered, such payment or distribution shall be held in trust by the Subordinated Secured Parties as the property of the Senior Secured Parties, segregated from other funds and property held by the Subordinated Secured Parties. (f) Prior to the Senior Subordinated Payout Date, the Junior Subordinated Secured Parties shall not (1) enforce or apply any security interest in all or any of the Collateral, (2) collect or receive any proceeds of any of the Collateral or otherwise enforce or apply any security interest in the proceeds of any of the Collateral; or (3) in any other manner interfere with the security interest granted in favor of the Senior Subordinated Secured Parties in any of the Collateral (or the proceeds thereof). In addition, the Junior Subordinated Secured Parties hereby (x) agree not to assert prior to the Senior Subordinated Payout Date any claim for marshalling; (y) consent to the collection, sale, disposition or other realization of or upon all or any of the Collateral by the Collateral Agent prior to the Senior Subordinated Payout Date free of any security interest therein in favor of the Senior Subordinated Secured Parties; and (z) at the sole cost and expense of the Pledgors, agree to execute after the Senior Payout Date but prior to the Senior Subordinated Payout Date all such releases and other documents that the 1996 Trustee may reasonably request in writing to facilitate the collection, sale, disposition or other realization of or upon any or all of the Collateral by the Collateral Agent (including, without limitation, the termination of any security interests in any of the Collateral in favor of the Junior Subordinated Secured Parties concurrently with such sale, disposition or other realization). (g) If any payment or distribution, whether consisting of money, property or securities, from any Realizations is collected or received by the Junior Subordinated Secured Parties after the Senior Payout Date in respect of the Junior Subordinated Secured Obligations in violation of Section 10(f), the Junior Subordinated Secured Parties shall forthwith deliver the same to the Collateral Agent, in the form received, duly indorsed to the Collateral Agent, if required, to be applied to the payment or prepayment of the Senior Subordinated Secured Obligations until the Senior Subordinated Secured Obligations are paid in full. Until so delivered, such payment or distribution shall be held in trust by the Junior Subordinated Secured Parties as the property of the Senior Subordinated Secured Parties, segregated from other funds and property held by the Junior Subordinated Secured Parties. 11. Release of Pledged Stock. The Collateral Agent agrees that it will ------------------------ not release or otherwise dispose of any of the Pledged Stock or other Collateral except (a) to the 1996 Trustee or the 1997 Trustee in accordance with the terms hereof, unless instructed by the applicable Trustee to the contrary, or (b) in the exercise of its remedies under the terms hereof or (c) to the respective Pledgor upon satisfaction of all Secured Obligations. 12. Obligations of the Collateral Agent. (a) Unless the Collateral Agent ----------------------------------- has theretofore received a written notice from each of the 1996 Trustee and the 1997 Trustee to the effect that the Senior Subordinated Secured Obligations and the Junior Subordinated Secured Obligations, respectively, have been paid in full, if the Collateral Agent shall have resigned as collateral agent hereunder, not later than the tenth business day following the Senior Payout Date, the Collateral Agent will deliver at the cost and expense of the Pledgors, directly to the successor collateral agent appointed in accordance with Section 15(h) or, if prior to such tenth business day the Collateral Agent shall not have received notification of the identity of such successor collateral agent, to the 1996 Trustee (or, if the Collateral Agent shall have received a written notice from the 1996 Trustee to the effect that the Senior Subordinated Secured Obligations have been paid in full, to the 1997 Trustee), all the certificates representing the Pledged Stock and all other documents and instruments evidencing or relating to the Collateral then remaining in the possession of the Collateral Agent, together with any necessary instruments of assignment or transfer pertaining thereto. Each Pledgor agrees to give written notice to each of the 1996 Trustee and the 1997 Trustee of the Senior Payout Date within three business days thereof, and, after receipt of such notice, the Senior Subordinated Secured Parties (unless the Senior Subordinated Payout Date has occurred) or (if the Senior Subordinated Payout Date has occurred) the Junior Subordinated Secured Parties agree to promptly give written notice to the Collateral Agent requesting delivery of the Pledged Stock and such other documents and instruments. In no event shall the Collateral Agent relinquish control over such certificates representing the Pledged Stock or any such other documents and instruments after the Senior Payout Date, except as set forth in this Section or Section 11(c). (b) Unless the 1996 Trustee has theretofore received a written notice from the 1997 Trustee to the effect that the Junior Subordinated Secured Obligations have been paid in full, if the 1996 Trustee shall have resigned as successor collateral agent hereunder, not later than the tenth business day following the Senior Subordinated Payout Date, the 1996 Trustee will deliver at the cost and expense of the Pledgors, directly to the successor collateral agent appointed in accordance with Section 15(h) or, if prior to such tenth business day the 1996 Trustee shall not have received notification of the identity of such successor collateral agent, to the 1997 Trustee, all the certificates representing the Pledged Stock and all other documents and instruments evidencing or relating to the Collateral then remaining in the possession of the 1996 Trustee, together with any necessary instruments of assignment or transfer pertaining thereto. Each Pledgor agrees to give written notice to the 1997 Trustee of the Senior Subordinated Payout Date within three business days thereof, and, after receipt of such notice, the Junior Subordinated Secured Parties agree to promptly give written notice to the 1996 Trustee requesting delivery of the Pledged Stock and such other documents and instruments. In no event shall the 1996 Trustee relinquish control over such certificates representing the Pledged Stock or any such other documents and instruments after the Senior Subordinated Payout Date, except as set forth in this Section or in Section 11(c). (c) In taking any action hereunder (including the giving of consents and waivers hereunder) prior to the Senior Payout Date, the Collateral Agent shall not be obligated to consider the interests of the Subordinated Secured Parties except as set forth in Section 12(a) or Section 21. In taking any action hereunder (including the giving of consents and waivers hereunder) prior to the Senior Subordinated Payout Date, the 1996 Trustee, or its designee, shall not be obligated to consider the interests of the Junior Subordinated Secured Parties except as set forth in Section 12(b) or Section 21. 13. Dispositions of Collateral. Notwithstanding any provision to the -------------------------- contrary contained in any agreement, document or instrument in favor of the Subordinated Secured Parties or to which any of the Subordinated Secured Parties is a party, the parties hereto agree as follows: (a) Upon the occurrence of any sale, lease, transfer or other disposition of any of the Collateral (a "Disposition"), as between the ----------- Senior Secured Parties and the Subordinated Secured Parties, until the Senior Payout Date, all Collateral, including all proceeds thereof and all prepayments or distributions in respect thereof, shall be distributed or applied or paid to the Administrative Agent, acting on behalf of the Senior Secured Parties, for application to the Senior Secured Obligations without obtaining any further consent or agreement of the Subordinated Secured Parties and in any manner as the Administrative Agent may determine, and the Subordinated Secured Parties shall be deemed to have consented to such Disposition and no further consent thereto or notice or accounting in respect thereof on the part of any such Person shall be required, and, until the Senior Payout Date, none of such Collateral shall be distributed or paid to (or retained by) the Subordinated Secured Parties for application to the Subordinated Secured Obligations, and the Subordinated Secured Parties shall not have any right to restrict or permit, or approve or disapprove, any Disposition of all or any portion or item of the Collateral. (b) Upon a Disposition, as between the Senior Subordinated Secured Parties and the Junior Subordinated Secured Parties, after the Senior Payout Date and until the Senior Subordinated Payout Date, all Collateral, including all proceeds thereof and all prepayments or distributions in respect thereof, shall be distributed or applied or paid to the 1996 Trustee, acting on behalf of the Senior Subordinated Secured Parties, for application to the Senior Subordinated Secured Obligations without obtaining any further consent or agreement of the Junior Subordinated Secured Parties and in any manner as the 1996 Trustee may determine, and the Junior Subordinated Secured Parties shall be deemed to have consented to such Disposition and no further consent thereto or notice or accounting in respect thereof on the part of any such Person shall be required, and until the Senior Subordinated Payout Date, none of such Collateral shall be distributed or paid to (or retained by) the Junior Subordinated Secured Parties for application to the Junior Subordinated Secured Obligations, and the Junior Subordinated Secured Parties shall not have any right to restrict or permit, or approve or disapprove, any Disposition of all or any portion or item of the Collateral. (c) If the Collateral Agent is in possession of any proceeds from any Disposition of any Collateral following the Senior Payout Date, the Collateral Agent shall deliver such remaining proceeds to: (x) the 1996 Trustee if any Senior Subordinated Secured Obligations shall be then outstanding (which each Pledgor hereby irrevocably consents to); (y) the 1997 Trustee if any Junior Subordinated Secured Obligations shall be then outstanding (which each Pledgor hereby irrevocably consents to) and the Collateral Agent has received a written notice from the 1996 Trustee to the effect that the Senior Subordinated Secured Obligations have been paid in full; and (z) each Pledgor or its successors or assigns, if the Collateral Agent has received a written notice from the 1996 Trustee and the 1997 Trustee to the effect that the Senior Subordinated Secured Obligations or the Junior Subordinated Secured Obligations, as the case may be, have been paid in full and the 1996 Trustee and the 1997 Trustee shall agree in writing, or to whomever may be lawfully entrusted to receive the same as a court of competent jurisdiction shall so direct. (d) The Senior Subordinated Secured Parties and the Junior Subordinated Secured Parties will, immediately upon the request of the Administrative Agent acting on behalf of the Lenders at any time prior to the Senior Payout Date, release or otherwise terminate and discharge their respective subordinated liens in any Collateral to the extent such Collateral is the subject of a Disposition, and will deliver to the Collateral Agent all documents and instruments reasonably deemed by the Collateral Agent to be necessary or appropriate in connection therewith. In the event that the Collateral Agent, acting on behalf of the Senior Secured Parties at any time prior to the Senior Payout Date, settles, adjusts or compromises any claim in respect of all or any portion or item of Collateral, including, without limitation, any settlement, adjustment or compromise made in connection with any bankruptcy, reorganization or insolvency proceeding by or against either Pledgor or a Subsidiary of either of them, or accepts or is required to accept substitute or replacement collateral in exchange for or in lieu of or in full or partial settlement of any Collateral, the Subordinated Secured Parties shall be bound by any such settlement, adjustment or compromise, and shall, immediately upon the request of the Collateral Agent, confirm their consent to the same and release any claim that the Subordinated Secured Parties might otherwise have in respect of such Collateral; provided that the Senior Subordinated Secured Parties shall be granted a lien and security interest in any such substitute or replacement Collateral on a second priority basis and the Junior Subordinated Secured Parties shall be granted a lien and security interest in any such substitute or replacement Collateral on a third priority basis, which liens and security interests shall constitute subordinated liens. (e) The Junior Subordinated Secured Parties will, immediately upon the request of the 1996 Trustee at any time after the Senior Payout Date but prior to the Senior Subordinated Payout Date, release or otherwise terminate and discharge their respective subordinated liens in any Collateral to the extent such Collateral is the subject of a Disposition, and will deliver to the Collateral Agent all documents and instruments reasonably deemed by the Collateral Agent to be necessary or appropriate in connection therewith. In the event that the Collateral Agent, acting on behalf of the Senior Subordinated Secured Parties at any time after the Senior Payout Date but prior to the Senior Subordinated Payout Date, settles, adjusts or compromises any claim in respect of all or any portion or item of Collateral, including, without limitation, any settlement, adjustment or compromise made in connection with any bankruptcy, reorganization or insolvency proceeding by or against either Pledgor or a Subsidiary of either of them, or accepts or is required to accept substitute or replacement collateral in exchange for or in lieu of or in full or partial settlement of any Collateral, the Junior Subordinated Secured Parties shall be bound by any such settlement, adjustment or compromise, and shall, immediately upon the request of the Collateral Agent, confirm their consent to the same and release any claim that the Junior Subordinated Secured Parties might otherwise have in respect of such Collateral; provided that the Junior Subordinated Secured Parties shall be granted a lien and security interest in any such substitute or replacement Collateral on a second priority basis, which lien and security interest shall constitute a subordinated lien and security interest. 14. Irrevocable Authorization and Instruction to Issuer. Each Pledgor --------------------------------------------------- hereby authorizes and instructs the Issuer to comply with any instruction received by it from the Collateral Agent in writing that (a) states that an Event of Default has occurred and is continuing and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from either Pledgor, and such Pledgor agrees that the Issuer shall be fully protected in so complying. 15. The Collateral Agent. (a) Appointment. Each Secured Party hereby -------------------- ----------- irrevocably designates and appoints the Collateral Agent as the agent of such Secured Party under this Agreement, and each such Secured Party irrevocably authorizes the Collateral Agent to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Collateral Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Collateral Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any other Secured Party, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Collateral Agent. (b) Delegation of Duties. The Collateral Agent may execute any of its -------------------- duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Collateral Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. (c) Exculpatory Provisions. None of the Collateral Agent or any of its ---------------------- officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (1) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for its or such Person's own gross negligence or willful misconduct) or (2) responsible in any manner to any of the Secured Parties for any recitals, statements, representations or warranties made by either Pledgor or any officer thereof contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by such Collateral Agent under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or for any failure of either Pledgor to perform its obligations hereunder. The Collateral Agent shall not be under any obligation to any other Secured Party to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of either Pledgor. (d) Reliance by Collateral Agent. The Collateral Agent shall be entitled ---------------------------- to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrowers), independent accountants and other experts selected by the Collateral Agent. The Collateral Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Collateral Agent. The Collateral Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of the Required Lenders (or, at any time after the Senior Payout Date but prior to the Senior Subordinated Payout Date, the 1996 Trustee or, at any time after the Senior Payout Date and the Senior Subordinated Payout Date, the 1997 Trustee), as it deems appropriate or it shall first be indemnified to its satisfaction by the Senior Secured Parties and/or the Subordinated Secured Parties against any and all liability and expense which may be incurred by it by reason of taking or continuing to take such action. The Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Lenders (or, at any time after the Senior Payout Date but prior to the Senior Subordinated Payout Date, the 1996 Trustee or, at any time after the Senior Payout Date and the Senior Subordinated Payout Date, the 1997 Trustee), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Secured Parties and all future holders of the Loans. (e) Notice of Default. The Collateral Agent shall not be deemed to have ----------------- knowledge or notice of the occurrence of any Default or Event of Default unless the Collateral Agent has received notice from a Lender (if the Senior Payout Date shall not have occurred), the 1996 Trustee (if the Senior Payout Date shall have occurred but the Senior Subordinated Payout Date shall not have occurred) or by the 1997 Trustee (if the Senior Payout Date and the Senior Subordinated Payout Date shall have occurred) or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Collateral Agent receives such a notice, the Collateral Agent shall give notice thereof to the Pledgors and the Senior Secured Parties (if the Senior Payout Date shall not have occurred), the Senior Subordinated Secured Parties (if the Senior Payout Date shall have occurred but the Senior Subordinated Payout Date shall not have occurred) or the Junior Subordinated Secured Parties (if the Senior Payout Date and the Senior Subordinated Payout Date shall have occurred). The Collateral Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (if the Senior Payout Date shall not have occurred) or by the 1996 Trustee (if the Senior Payout Date shall have occurred but the Senior Subordinated Payout Date shall not have occurred) or by the 1997 Trustee (if the Senior Payout Date and the Senior Subordinated Payout Date shall have occurred); provided that unless and -------- until the Collateral Agent shall have received such directions, the Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as they shall deem advisable in the best interests of the Senior Secured Parties (if the Senior Payout Date shall not have occurred), the Senior Subordinated Secured Parties (if the Senior Payout Date shall have occurred but the Senior Subordinated Payout Date shall not have occurred) or the Junior Subordinated Secured Parties (if the Senior Payout Date and the Senior Subordinated Payout Date shall have occurred). (f) Non-Reliance on Collateral Agent. Each other Secured Party expressly -------------------------------- acknowledges that none of the Collateral Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Collateral Agent hereinafter taken shall be deemed to constitute any representation or warranty by the Collateral Agent to any Secured Party. Except for notices, reports and other documents expressly required to be furnished to the Secured Parties by the Collateral Agent hereunder, the Collateral Agent shall not have any duty or responsibility to provide any other Secured Party with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of either Pledgor which may come into the possession of the Collateral Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. (g) Collateral Agent in Its Individual Capacity. The Collateral Agent and ------------------------------------------- its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with either Pledgor as though the Collateral Agent were not the Collateral Agent hereunder. (h) Successor Collateral Agent. The Collateral Agent may resign as -------------------------- Collateral Agent upon 10 days' notice to the Lenders. If the Collateral Agent shall resign as Collateral Agent under this Agreement, then the Required Lenders shall appoint from among the Lenders a successor Collateral Agent, which successor agent shall succeed to the rights, powers and duties of such Collateral Agent hereunder. Upon the Senior Payout Date, the Collateral Agent shall automatically be deemed to have resigned as Collateral Agent under this Agreement, and (if the Senior Subordinated Payout Date has not occurred) the 1996 Trustee shall appoint a successor collateral agent for the Subordinated Secured Parties within 10 days after its receipt of notice from the Collateral Agent of such resignation or, in the absence of such appointment, the 1996 Trustee shall automatically be appointed as successor collateral agent on the tenth day after its receipt of such notice, which successor collateral agent (whether it shall be the 1996 Trustee or any other Person) shall succeed to the rights, powers and duties of such Collateral Agent hereunder. After the Senior Payout Date and upon the Senior Subordinated Payout Date, the 1996 Trustee, or its designee, appointed in accordance with the preceding sentence, shall automatically be deemed to have resigned as successor Collateral Agent under this Agreement, and the 1997 Trustee shall appoint a successor collateral agent for the Junior Subordinated Secured Parties within 10 days after its receipt of notice from the Collateral Agent of such resignation or, in the absence of such appointment, the 1997 Trustee, or its designee, shall automatically be appointed as successor collateral agent on the tenth day after its receipt of such notice, which successor collateral agent shall succeed to the rights, powers and duties of such Collateral Agent hereunder. Effective upon any such appointment, the term "Collateral Agent" shall mean such successor agent, and such former Collateral Agent's rights, powers and duties as Collateral Agent shall be terminated, without any other or further act or deed on the part of such former Collateral Agent or any of the parties to this Agreement or any Secured Party. After any retiring Collateral Agent's resignation as Collateral Agent, the provisions of this Section 15 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent under this Agreement. Anything in this Agreement to the contrary notwithstanding, in the event of an automatic resignation of the Collateral Agent in the circumstances described in the third or fourth sentence of this paragraph, such resignation shall become effective upon the appointment of a successor collateral agent in accordance with the provisions of such third or fourth sentence, as the case may be, and, thereafter, the sole obligation of the Collateral Agent hereunder shall be to make delivery of the certificates representing the Pledged Stock to such successor collateral agent or, if the Collateral Agent shall not have received from the 1996 Trustee a written notice of the appointment of a successor collateral agent other than the 1996 Trustee, to the 1996 Trustee, or, if the Collateral Agent shall not have received from the 1997 Trustee a written notice of the appointment of a successor collateral agent other than the 1997 Trustee, to the 1997 Trustee, as the case may be. 16. Collateral Agent's Appointment as Attorney-in-Fact. (a) Each Pledgor -------------------------------------------------- hereby irrevocably constitutes and appoints the Collateral Agent and any officer or agent of the Collateral Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Pledgor and in the name of such Pledgor or in the Collateral Agent's own name, from time to time in the Collateral Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, including, without limitation, any financing statements, endorsements, assignments or other instruments of transfer. (b) Each Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in Section 16(a). All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released. 17. Duty of Collateral Agent. The Collateral Agent's sole duty with ------------------------ respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar securities and property for its own account, except that the Collateral Agent shall have no obligation to invest funds held in any Collateral Account and may hold the same as demand deposits. Neither the Collateral Agent, any Lender, the Trustees, any Holder nor any of their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of either Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 18. Execution of Financing Statements. Pursuant to Section 9-402 of the --------------------------------- Code, each Pledgor authorizes the Collateral Agent to file financing statements with respect to the Collateral without the signature of such Pledgor in such form and in such filing offices as the Collateral Agent reasonably determines appropriate to perfect the security interests of the Collateral Agent under this Agreement. A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement for filing in any jurisdiction. 19. Notices. All notices, requests and demands to or upon the Company, ------- either Pledgee or either Pledgor to be effective shall be in writing (or by telex, fax or similar electronic transfer confirmed in writing) and shall be deemed to have been duly given or made (1) when delivered by hand or (2) if given by mail, two days after being deposited in the mails by certified mail, return receipt requested, or (3) if by telex, fax or similar electronic transfer, when sent and receipt has been confirmed, addressed to such party at its address or transmission number for notices provided under its signature below. Any party hereto may change their addresses and transmission numbers for notices by notice in the manner provided in this Section. 20. 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 provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 21. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of ----------------------------------------------------- the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each Pledgor, the Collateral Agent and, if the Senior Payout Date shall not have occurred, the Administrative Agent or, if the Senior Payout Date shall have occurred but the Senior Subordinated Payout Date shall not have occurred, the 1996 Trustee or, if the Senior Payout Date and the Senior Subordinated Payout Date shall have occurred, the 1997 Trustee, provided that any provision of this Agreement may be -------- waived by the Collateral Agent and, if the Senior Payout Date shall not have occurred, the Administrative Agent or, if the Senior Payout Date shall have occurred but the Senior Subordinated Payout Date shall not have occurred, the 1996 Trustee or, if the Senior Payout Date and the Senior Subordinated Payout Date shall have occurred, the 1997 Trustee in a letter or agreement executed by the Collateral Agent or by telex or facsimile transmission from the Collateral Agent and, if the Senior Payout Date shall not have occurred, the Administrative Agent or, if the Senior Payout Date shall have occurred but the Senior Subordinated Payout Date shall not have occurred, the 1996 Trustee or, if the Senior Payout Date and the Senior Subordinated Payout Date shall have occurred, the 1997 Trustee and, provided, further, that no such waiver, amendment, -------- ------- supplement or other modification which materially and adversely affects: (x) any Senior Subordinated Secured Party shall be effective unless it shall have been consented to by the 1996 Trustee or (y) any Junior Subordinated Secured Party shall be effective unless it shall have been consented to by the 1997 Trustee. (b) Neither the Collateral Agent nor any Secured Party shall by any act (except by a written instrument pursuant to Section 21(a) hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Secured Party would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 22. Transfer of Pledged Stock to the Company. Notwithstanding anything in ---------------------------------------- this Agreement to the contrary, the Pledgor shall be entitled to transfer the Pledged Stock to the Company, provided that such transfer shall be made -------- expressly subject to the terms and conditions of this Agreement and that, simultaneously with such transfer, the Company shall expressly assume, pursuant to a written instrument in form and substance satisfactory to the Collateral Agent, the obligations of the Pledgors hereunder and, pursuant to the terms of such instrument, this Agreement shall be amended in a manner reasonably acceptable to the Administrative Agent (if the Senior Payout Date shall not have occurred), the 1996 Trustee (if the Senior Payout Date shall have occurred but the Senior Subordinated Payout Date shall not have occurred) or the 1997 Trustee (if the Senior Payout Date and the Senior Subordinated Payout Date shall have occurred) to reflect such transfer, including the confirmation and reaffirmation of the grant of first, second and third priority Liens to the Senior Secured Parties, Senior Subordinated Secured Parties and Junior Subordinated Secured Parties, respectively, with respect to the Pledged Stock and, provided, further, -------- ------- that no such amendment which materially and adversely affects: (x) any Senior Subordinated Secured Party shall be effective unless it shall have been consented to by the 1996 Trustee or (y) any Junior Subordinated Secured Party shall be effective unless it shall have been consented to by the 1997 Trustee. 23. Section Headings. The section headings used in this Agreement are for ---------------- convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 24. Trustees Not Responsible for Recitals, Etc. The recitals hereto shall ------------------------------------------- not be taken as those of the Trustees or either of them, and neither of the Trustees assumes any responsibility for their correctness. Neither of the Trustees makes any representations as to the title of the Pledgors to the Pledged Stock, or the title to, or validity or genuineness of, any Collateral at any time pledged and deposited with the Collateral Agent hereunder, or as to the validity or sufficiency of this Agreement. 25. Successors and Assigns. This Agreement shall be binding upon the ---------------------- successors and assigns of the Company and shall inure to the benefit of the Collateral Agent and the Secured Parties and their successors and assigns. 26. Governing Law. This Agreement shall be governed by, and construed and ------------- interpreted in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by their respective officers, thereunto duly authorized as of the date first above written. PLC COMMAND I, L.P., as Pledgor By PLC COMMAND I, INC., its general partner By: /s/ ------------------------------ Title: Vice President Address for Notices: PLC Command I, L.P. 631 Park Avenue King of Prussia, PA 19406 Attention: General Partner Fax: (610) 992-8394 PLC COMMAND II, L.P., as Pledgor By PLC COMMAND II, INC., its general partner By: /s/ ---------------------------- Title: Vice President Address for Notices: PLC Command II, L.P. 631 Park Avenue King of Prussia, PA 19406 Attention: General Partner Fax: (610) 992-8394 CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Collateral Agent and Administrative Agent By: /s/ _____________________________ Title: Director, CIBC Wood Gundy Securities Corp. Address for Notices: Canadian Imperial Bank of Commerce, New York Agency 425 Lexington Avenue New York, NY 10017 Attention: Aimee Evans Fax: (212) 856-3763 UNITED STATES TRUST COMPANY OF NEW YORK, as 1996 Trustee By: /s/ _____________________________ Title: Assistant Vice President Address for Notices: United States Trust Company of New York 114 West 47th Street 15th Floor New York, NY 10036-1532 Attention: Cynthia Chaney Fax: (212) 852-1625 THE BANK OF NEW YORK, as 1997 Trustee By: /s/ ____________________________ Title: Assistant Vice President Address for Notices: The Bank of New York 101 Barclay Street - 21W New York, New York 10286 Attention: Corporate Trust Department Fax: (212) 815-5915 EX-10.5 4 INDENTURE DATED JULY 7, 1997 ================================================================================ PIERCE LEAHY CORP., as Issuer, and The Bank of New York, as Trustee -------------------------------- INDENTURE Dated as of July 7, 1997 -------------------------------- $120,000,000 9 1/8% Senior Subordinated Notes due 2007 TABLE OF CONTENTS PAGE ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE............. 1 Section 1.1. Definitions.......................................... 1 Section 1.2. Other Definitions.................................... 26 Section 1.3. Incorporation by Reference of Trust Indenture Act.... 27 Section 1.4. Rules of Construction................................ 28 ARTICLE 2. THE NOTES.............................................. 28 Section 2.1. Dating; Incorporation of Form in Indenture........... 28 Section 2.2. Execution and Authentication......................... 29 Section 2.3. Registrar and Paying Agent........................... 30 Section 2.4. Paying Agent to Hold Money in Trust.................. 31 Section 2.5. Noteholder Lists..................................... 31 Section 2.6. Transfer and Exchange................................ 31 Section 2.7. Replacement Notes.................................... 32 Section 2.8. Outstanding Notes.................................... 33 Section 2.9. Temporary Notes...................................... 33 Section 2.10. Cancellation......................................... 34 Section 2.11. Defaulted Interest................................... 34 Section 2.12. Deposit of Moneys.................................... 35 Section 2.13. CUSIP Number......................................... 35 Section 2.14. Book-Entry Provisions for Global Notes............... 35 ARTICLE 3. REDEMPTION............................................. 37 Section 3.1. Notices to Trustee................................... 37 Section 3.2. Selection by Trustee of Notes to Be Redeemed......... 37 Section 3.3. Notice of Redemption................................. 38 Section 3.4. Effect of Notice of Redemption....................... 39 Section 3.5. Deposit of Redemption Price.......................... 39 Section 3.6. Notes Redeemed in Part............................... 40 Section 3.7. Optional Redemption.................................. 40 i ARTICLE 4. COVENANTS.............................................. 41 Section 4.1. Payment of Notes..................................... 41 Section 4.2. SEC Reports.......................................... 41 Section 4.3. Waiver of Stay, Extension or Usury Laws.............. 42 Section 4.4. Compliance Certificate............................... 42 Section 4.5. Taxes................................................ 43 Section 4.6. Limitation on Additional Indebtedness................ 43 Section 4.7. Limitation on Preferred Stock of Restricted Subsidiaries.............................. 44 Section 4.8. Limitation on Capital Stock of Restricted Subsidiaries.............................. 45 Section 4.9. Limitation on Restricted Payments.................... 45 Section 4.10. Limitation on Certain Asset Sales.................... 47 Section 4.11. Limitation on Transactions with Affiliates.......... 51 Section 4.12. Limitations on Liens................................. 52 Section 4.13. Limitations on Investments........................... 52 Section 4.14. Limitation on Creation of Subsidiaries............... 53 Section 4.15. Limitation on Other Senior Subordinated Debt.......... 53 Section 4.16. Limitation on Sale and Lease-Back Transactions........ 53 Section 4.17. Payments for Consent................................. 54 Section 4.18. Corporate Existence.................................. 54 Section 4.19. Change of Control.................................... 55 Section 4.20. Maintenance of Office or Agency...................... 58 Section 4.21. Maintenance of Properties and Insurance.............. 59 ARTICLE 5. SUCCESSOR CORPORATION.................................. 60 Section 5.1. Limitation on Consolidation, Merger and Sale of Assets. 60 Section 5.2. Successor Person Substituted......................... 61 ARTICLE 6. DEFAULTS AND REMEDIES.................................. 61 Section 6.1. Events of Default.................................... 61 Section 6.2. Acceleration......................................... 63 Section 6.3. Other Remedies....................................... 64 Section 6.4. Waiver of Past Defaults and Events of Default.............................................. 64 Section 6.5. Control by Majority.................................. 65 Section 6.6. Limitation on Suits.................................. 65 ii Section 6.7. Rights of Holders to Receive Payment................. 66 Section 6.8. Collection Suit by Trustee........................... 66 Section 6.9. Trustee May File Proofs of Claim..................... 67 Section 6.10. Priorities........................................... 67 Section 6.11. Undertaking for Costs................................ 68 Section 6.12. Restoration of Rights and Remedies................... 68 ARTICLE 7. TRUSTEE................................................ 69 Section 7.1. Duties of Trustee.................................... 69 Section 7.2. Rights of Trustee.................................... 70 Section 7.3. Individual Rights of Trustee......................... 71 Section 7.4. Trustee's Disclaimer................................. 71 Section 7.5. Notice of Defaults................................... 72 Section 7.6. Reports by Trustee to Holders........................ 72 Section 7.7. Compensation and Indemnity........................... 72 Section 7.8. Replacement of Trustee............................... 74 Section 7.9. Successor Trustee by Consolidation, Merger or Conversion................................. 75 Section 7.10. Eligibility; Disqualification........................ 75 Section 7.11. Preferential Collection of Claims Against Company...................................... 75 Section 7.12. Paying Agents........................................ 76 ARTICLE 8. AMENDMENTS, SUPPLEMENTS AND WAIVERS.................... 76 Section 8.1. Without Consent of Holders........................... 76 Section 8.2. With Consent of Holders.............................. 77 Section 8.3. Compliance with Trust Indenture Act.................. 78 Section 8.4. Revocation and Effect of Consents.................... 79 Section 8.5. Notation on or Exchange of Notes..................... 79 Section 8.6. Trustee to Sign Amendments, etc...................... 80 ARTICLE 9. DISCHARGE OF INDENTURE; DEFEA SANCE.................................................. 80 Section 9.1. Discharge of Indenture............................... 80 Section 9.2. Legal Defeasance..................................... 81 Section 9.3. Covenant Defeasance.................................. 82 Section 9.4. Conditions to Defeasance or Covenant Defeasance........................................... 82 Section 9.5. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions............................. 84 iii Section 9.6. Reinstatement....................................... 85 Section 9.7. Moneys Held by Paying Agent......................... 85 Section 9.8. Moneys Held in Trust................................ 86 ARTICLE 10. GUARANTEE OF NOTES.................................... 87 Section 10.1. Guarantee........................................... 87 Section 10.2. Execution and Delivery of Guarantees................ 88 Section 10.3. Limitation of Guarantee............................. 88 Section 10.4. Release of Guarantor................................ 89 Section 10.5. Guarantee Obligations Subordinated to Guarantor Senior Indebtedness.................... 89 Section 10.6. Payment Over of Proceeds upon Dissolution, etc., of a Guarantor................................ 90 Section 10.7. Suspension of Guarantee Obligations When Guarantor Senior Indebtedness in Default....... 92 Section 10.8. Subrogation to Rights of Holders of Guarantor Senior Indebtedness.................... 95 Section 10.9. Guarantee Subordination Provisions Solely to Define Relative Rights.................... 95 Section 10.10. Application of Certain Article 11 Provisions........ 96 Section 10.11. Rights of Trustee as a Holder of Guarantor Senior Indebtedness; Preservation of Trustee's Rights.................................... 97 ARTICLE 11. SUBORDINATION OF NOTES................................ 97 Section 11.1. Notes Subordinate to Senior Indebtedness............ 97 Section 11.2. Payment Over of Proceeds upon Dissolution, etc...... 98 Section 11.3. Suspension of Payment When Senior Indebtedness in Default.......................................... 100 Section 11.4. Trustee's Relation to Senior Indebtedness........... 102 Section 11.5. Subrogation to Rights of Holders of Senior Indebtedness................................. 102 Section 11.6. Provisions Solely to Define Relative Rights......... 103 Section 11.7. Trustee to Effectuate Subordination................. 104 Section 11.8. No Waiver of Subordination Provisions............... 105 Section 11.9. Notice to Trustee................................... 105 Section 11.10. Reliance on Judicial Order or Certificate of Liquidating Agent................................ 106 iv Section 11.11. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights...... 107 Section 11.12. Article Applicable to Paying Agents................. 107 Section 11.13. No Suspension of Remedies........................... 107 ARTICLE 12. SECURITY.............................................. 108 Section 12.1. Pledge Agreement.................................... 108 Section 12.2. Certificates and Opinions........................... 108 Section 12.3. Authorization of Actions to Be Taken by the Collateral Agent Under the Pledge Agreement..... 109 Section 12.4. Authorization of Receipt of Funds by the Trustee Under the Pledge Agreement.............. 109 Section 12.5. Termination of Security Interest.................... 110 ARTICLE 13. MISCELLANEOUS......................................... 110 Section 13.1. Trust Indenture Act Controls........................ 110 Section 13.2. Notices............................................. 110 Section 13.3. Communications by Holders with Other Holders........ 111 Section 13.4. Certificate and Opinion as to Conditions Precedent........................................... 112 Section 13.5. Statements Required in Certificate and Opinion...... 112 Section 13.6. When Treasury Notes Disregarded..................... 113 Section 13.7. Rules by Trustee and Agents......................... 113 Section 13.8. Business Days; Legal Holidays....................... 113 Section 13.9. Governing Law....................................... 114 Section 13.10. No Adverse Interpretation of Other Agreements....... 114 Section 13.11. No Recourse Against Others.......................... 114 Section 13.12. Successors.......................................... 115 Section 13.13. Multiple Counterparts............................... 115 Section 13.14. Table of Contents, Headings, etc.................... 115 Section 13.15. Separability........................................ 115 v CROSS-REFERENCE TABLE TIA Indenture Section Section - ------------------------- -------------- 310 (a)(1)............... 7.10 (a)(2)................ 7.10 (a)(3)................ N.A. (a)(4)................ N.A. (b)................... 7.8;13.2 (b)(1)................ 7.10 (b)(9)................ 7.10 (c)................... N.A. 311 (a).................. 7.11 (b)................... 7.11 (c)................... N.A. 312 (a).................. 2.5 (b)................... 13.3 (c)................... 13.3 313 (a).................. 7.6 (b)(1)................ 7.6 (b)(2)................ 7.6 (c)................... 13.2 (d)................... 7.6 314 (a).................. 4.2;4.4;13.2 (b)................... 12.2 (c)(1)................ 12.2;13.4;13.5 (c)(2)................ 12.2;13.4;13.5 (c)(3)................ N.A. (d)................... 12.2 (e)................... 12.3;13.5 (f)................... N.A. 315 (a).................. 7.1;7.2 (b)................... 7.5; 13.2 (c)................... 7.1 (d)................... 6.5;7.1;7.2 (e)................... 6.11 316 (a) (last sentence).. 13.6 (a)(1)(A)............. 6.5 (a)(1)(B)............. 6.4 (a)(2)................ 8.2 (b)................... 6.7 (c)................... 8.4 317 (a)(1)............... 6.8 vi (a)(2)................ 6.9 (b)................... 7.12 318 (a)................... 13.1 N.A. means Not Applicable - ------------------ NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. INDENTURE, dated as of July 7, 1997, between PIERCE LEAHY CORP., a Pennsylvania corporation, as Issuer (the "Company"), and The Bank of New York, a New York banking corporation, as Trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 9?% Senior Subordinated Notes due 2007 (the "Notes"). ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.1. Definitions. ----------- "Acquired Indebtedness" means Indebtedness of a Person (including an Unrestricted Subsidiary) existing at the time such Person becomes a Restricted Subsidiary or assumed in connection with the acquisition of assets from a Person. "Acquisition EBITDA" means, without duplication, (i) EBITDA for the last four fiscal quarters for which financial statements are available at the date of determination (the "Acquisition EBITDA Period") with respect to a business or Person which has been acquired by the Company or one of its Restricted Subsidiaries or which is the subject of a binding acquisition agreement requiring the calculation of EBITDA for purposes of Section 4.6 and, in each case, with respect to which financial results on a consolidated basis with the Company have not been made available for an entire fiscal quarter; plus (ii) in connection with any such acquisition, projected quantifiable improvements in operating results due to an established program of cost reductions (consistent with the cost reductions actually achieved by the Company in connection with prior acquisitions) adopted, in good faith, by the Company or one of its Restricted Subsidiaries through a Board Resolution certified by an Officers' Certificate filed with the Trustee (calculated on a pro forma basis for the Acquisition EBITDA Period as if the program had been implemented at the beginning of the Acquisition EBITDA Period), without giving effect to any operating losses of the acquired Person. Each such Officers' Certificate shall be signed by the Chief Financial Officer and another officer of the Company. The Trustee may rely on such Officers' Certificate (subject to the provisions of Section 7.1 of this Indenture). Acquisition EBITDA of a business shall be a fixed number determined as of the date the calculation of EBITDA for purposes of Section 4.6 is first required with respect to the acquisition of such business (the "Deter mination Date") and shall be utilized from the Determination Date through the date financial results are available for the first full fiscal quarter following the acquisition (following which the actual EBITDA of such business or Person shall be included in the EBITDA of the Company). For purposes of determining Acquisition EBITDA with respect to the acquisition of a particular business or Person, Acquisition EBITDA shall include not only the Acquisition EBITDA of such business or Person, but also the Acquisition EBITDA of any business previously acquired by the Company or the subject of a pending acquisition agreement to the extent that, as of the Determina tion Date, the financial results for such business or Person on a consolidated basis with the Company for a full fiscal quarter subsequent to its acquisition by the Company are not yet available. "Adjusted EBITDA" means for any Person, without duplication, the sum of (a) EBITDA of such Person and its Restricted Subsidiaries for the most recent fiscal quarter for which internal financial statements are available, multiplied by four and (b) Acquisition EBITDA. "Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of the amount by which (x) the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities (including, without limitation, any guarantees of Senior Indebtedness)), but excluding liabilities under the Guarantee, of such Guarantor at such date and (y) the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the proba ble liability of such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities (including, without limitation, any guarantees of Senior Indebtedness) and after giving effect to any collection from any Subsidiary of such Guarantor in 2 respect of the obligations of such Subsidiary under the Guarantee), excluding Indebtedness in respect of the Guarantee, as they become absolute and matured. "Affiliate" of any specified Person means any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling" "controlled by," and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. "Agent" means any Registrar, Paying Agent, co-registrar or agent for service of notices and demands. "Asset Sale" means the sale, transfer or other disposition (other than to the Company or any of its Restricted Subsidiaries) in any single transaction or series of related transactions involving assets with a fair market value in excess of $500,000 of (a) any Capital Stock of or other equity interest in any Restricted Subsidiary of the Company, (b) all or substantially all of the assets of the Company or of any Restricted Subsidiary thereof, (c) real property of the Company or a Restricted Subsidiary or (d) all or substantially all of the assets of any business property, or part thereof, owned by the Company or any Restricted Subsidiary thereof, or a division, line of business or comparable busi ness segment of the Company or any Restricted Subsidiary thereof; provided -------- that Asset Sales shall not include (i) sales, leases, conveyances, transfers or other dispositions to the Company or to a Restricted Subsidiary or to any other Person if after giving effect to such sale, lease, conveyance, transfer or other disposition such other Person becomes a Restricted Subsidiary, (ii) trans actions complying with Section 5.1 and (iii) transfers or other distributions of assets which constitute (1) Permitted Investments or (2) Restricted Payments made in compliance with Section 4.9. "Asset Sale Proceeds" means, with respect to 3 any Asset Sale, (i) cash received by the Company or any Restricted Subsidiary from such Asset Sale (including cash received as consideration for the assumption of liabilities incurred in connection with or in anticipation of such Asset Sale), after (a) provision for all income or other taxes measured by or resulting from such Asset Sale; (b) payment of all brokerage commissions, underwriting and other fees and expenses related to such Asset Sale, (c) provision for minority interest holders in any Restricted Subsidiary as a result of such Asset Sale, (d) payments made to retire Indebtedness secured by the assets subject to such Asset Sale and (e) deduction of appropriate amounts to be provided by the Company or a Restricted Subsidiary as a reserve, in accordance with GAAP, against any liabilities associated with the assets sold or disposed of in such Asset Sale and retained by the Company or a Restricted Subsidiary after such Asset Sale, including, without limitation, pension and other post- employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with the assets sold or disposed of in such Asset Sale, and (ii) promissory notes and other non-cash consideration received by the Company or any Restricted Subsidiary from such Asset Sale or other disposition upon the liquidation or conversion of such notes or non-cash consideration into cash. "Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction means, as of the time of determination, the greater of (i) the fair value of the property subject to such arrangement (as determined by the Board of Directors) and (ii) the present value (discounted at a rate of interest implicit in such transaction) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Lease- Back Transaction (including any period for which such lease has been extended). "Available Asset Sale Proceeds" means, with respect to any Asset Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in accordance with clause (iii)(a) or (iii)(b) of Section 4.10(a) and which have not been the basis for an Excess Proceeds Offer in accordance with clause (iii)(c) of Section 4.10(a). 4 "Board of Directors" means the board of directors of the Company or a Guarantor, as appropriate, or any committee authorized to act therefor. "Board Resolution" means a copy of a resolution certified pursuant to an Officers' Certificate to have been duly adopted by the Board of Directors of the Compa ny or a Guarantor, as appropriate, and to be in full force and effect, and delivered to the Trustee. "Capital Stock" means, with respect to any Person, any and all shares or other equivalents (however designated) of capital stock, partnership interests or any other participation, right or other interest in the nature of an equity interest in such Person or any op tion, warrant or other security convertible into any of the foregoing. "Capitalized Lease Obligations" means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP. "Change of Control" of the Company will be deemed to have occurred at such time as (i) any Person (including a Person's Affiliates and associates), other than a Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of more than 50% of the total voting power of the Company's Common Stock, (ii) any Person (including a Person's Affiliates and associates), other than a Permitted Holder, becomes the beneficial owner of more than 33 1/3% of the total voting power of the Company's Common Stock, and the Permitted Holders beneficially own, in the aggregate, a lesser percentage of the total voting power of the Common Stock of the Company than such other Person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company, (iii) there shall be consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which the Common Stock of the Company would be converted into cash, securities or other 5 property, other than a merger or consolidation of the Company in which the holders of the Common Stock of the Company outstanding immediately prior to the consolidation or merger hold, directly or indirectly, at least a majority of the Common Stock of the surviving corporation immediately after such consolidation or merger, or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company has been approved by a majority of the directors then still in office who either were directors at the begin ning of such period or whose election or recommendation for election was previously so approved) cease to constitute a majority of the Board of Directors of the Company. "Collateral" shall have the meaning assigned thereto in the Pledge Agreement. "Collateral Agent" shall have the meaning assigned thereto in the Pledge Agreement. "Common Stock" of any Person means all Capital Stock of such Person that is generally entitled to (i) vote in the election of directors of such Person or (ii) if such Person is not a corporation, vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management and policies of such Person. "Company" means the party named as such in the first paragraph of this Indenture until a successor replaces such party pursuant to Article 5 of this Indenture and thereafter means the successor. "Company Request" means any written request signed in the name of the Company by any two of the following: the Chief Executive Officer; the President; any Vice President; the Chief Financial Officer; the Treasurer; or the Secretary or any Assistant Secretary (but not both the Secretary and any Assistant Secretary) of the Company. "Consolidated Interest Expense" means, with respect to any Person, for any period, the aggregate amount of interest which, in conformity with GAAP, would 6 be set forth opposite the caption "interest expense" or any like caption on an income statement for such Person and its Subsidiaries on a consolidated basis for such period (including, but not limited to, Redeemable Dividends, whether paid or accrued, on Preferred Stock of a Subsidiary, imputed interest included in Capitalized Lease Obligations, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, the net costs associated with hedging obligations, the interest portion of any deferred payment obligation, amortization of discount or premium, if any, and all other non-cash interest expense (other than interest amortized to cost of sales)) plus, without duplication, all net capitalized interest for such period and all interest paid under any guarantee of Indebtedness (including a guarantee of principal, interest or any combination thereof) of any Person, plus the amount of all dividends or distributions paid on Disqualified Capital Stock (other than dividends paid or payable in shares of Capital Stock of the Company). "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided, however, that (a) the Net Income of any Person (the "other Person") in - -------- ------- which the Person in question or any of its Subsidiaries has less than a 99% interest (which interest does not cause the net income of such other Person to be consolidated into the net income of the Person in question in accordance with GAAP) shall be included only to the extent of the amount of dividends or distributions paid to the Person in question or the Subsidiary, (b) the Net Income of any Subsidiary of the Person in question, which Subsidiary is subject to any restriction or limitation on the payment of dividends or the making of other distributions (other than pursuant to the Notes or this Indenture) shall be excluded to the extent of such restriction or limitation (provided that if any such restriction or limitation by its terms takes effect upon the occurrence of a default or event of default, such exclusion shall become effective only upon the occurrence of such default or event of default which is continuing), (c)(i) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition and (ii) any 7 net gain (but not loss) resulting from an Asset Sale by the Person in question or any of its Subsidiaries other than in the ordinary course of business shall be excluded and (d) extraordinary, unusual and non-recurring gains and losses shall be excluded. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 101 Barclay Street-21W, New York, New York 10286. "Credit Facility" means the credit agreement or credit agreements in existence on the date hereof by and among the Company, any or all of the Restricted Subsid iaries and any one or more lenders from time to time parties thereto, as the same may be amended, extended, increased, renewed, restated, supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time, and any agreement or agreements governing Indebtedness incurred to refinance, replace, restructure or refund in whole or in part the borrowings and then maximum commitments under the Credit Facility or such agreement (whether with the original administrative agent and lenders or other agents and lenders or otherwise, and whether provided under the original Credit Facility or other credit agreements or otherwise). The Company shall promptly notify in writing by means of an Officers' Certificate the Trustee of any such refunding, replacement, restructuring or refinancing of the Credit Facility. "Default" means any event that is, or with the passing of time or giving of notice or both would be, an Event of Default. "Depository" means, with respect to the Notes issued in the form of one or more Global Notes, The Depository Trust Company or another Person designated as Depository by the Company, which Person must be a clearing agency registered under the Exchange Act. "Designated Senior Indebtedness," as to the Company or any Guarantor, as the case may be, means any 8 Senior Indebtedness (a) under the Credit Facility, or (b) which at the time of determination exceeds $15,000,000 in aggregate principal amount (or accreted value in the case of Indebtedness issued at a discount) outstanding or available under a committed facility and (x) unless such designation is prohibited by the Credit Facility, which is specifically designated in the instrument evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by such Person and (y) as to which the Trustee has been given written notice by means of an Officers' Certificate of such designation. "Disqualified Capital Stock" means any Capital Stock of the Company or a Restricted Subsidiary thereof which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeem able at the option of the holder thereof, in whole or in part, on or prior to the maturity date of the Notes, for cash or securities constituting Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock shall be deemed to include (i) any Preferred Stock of a Restricted Subsidiary of the Company and (ii) any Pre ferred Stock of the Company, with respect to either of which, under the terms of such Preferred Stock, by agreement or otherwise, such Restricted Subsidiary or the Company is obligated to pay current dividends or distributions in cash during the period prior to the maturity date of the Notes; provided, however, that Preferred Stock of the Company or any Restricted -------- ------- Subsidiary thereof that is issued with the benefit of provisions requiring a change of control offer to be made for such Preferred Stock in the event of a Change of Control of the Company or Restricted Subsidiary, which provisions have substantially the same effect as the provisions described in Section 4.19, shall not be deemed to be Disqualified Capital Stock solely by virtue of such provisions; and provided, further, that Capital Stock owned by the Company or a -------- ------- Wholly-Owned Restricted Subsidiary shall not constitute Disqualified Capital Stock. "EBITDA" means, for any Person, for any period, an amount equal to (a) the sum of (i) Consolidated Net Income for such period, plus (ii) the provision for taxes 9 for such period based on income or profits to the extent such income or profits were included in computing Consolidated Net Income and any provision for taxes utilized in computing net loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such period (but only including Redeemable Dividends in the calculation of such Consolidated Interest Expense to the extent that such Redeemable Dividends have not been excluded in the calculation of Consolidated Net Income), plus (iv) depreciation for such period on a consolidated basis, plus (v) amortization of intangibles and other deferred financing fees for such period on a consolidated basis, plus (vi) any other non- cash items reducing Consolidated Net Income for such period, plus (vii) Permitted Tax Distributions, except that with respect to the Company each of the foregoing items shall be determined on a consolidated basis with respect to the Company and its Restricted Subsidiaries only. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles consistently applied as in effect in the United States from time to time. "Guarantee" means, as the context may require, individually, a guarantee, or collectively, any and all guarantees, of the Obligations of the Company with respect to the Notes by each Guarantor, if any, pursuant to the terms of Article 10 hereof, substantially in the form set forth in Exhibit C. "Guarantor" means each Restricted Subsidiary of the Company that hereafter becomes a Guarantor pursuant to Section 4.14, and "Guarantors" means such entities, collectively. "Guarantor Senior Indebtedness," as to any Guarantor, means the principal of and premium, if any, and interest (including, without limitation, interest accruing or that would have accrued but for the filing of a bankruptcy, reorganization or other insolvency proceeding whether or not such interest constitutes an allowable claim in such proceeding) on, and any and all other fees, expense reimbursement obligations, indemnities and other 10 amounts due pursuant to the terms of all agreements, documents and instruments providing for, creating, securing or evidencing or otherwise entered into in connection with, (a) such Guarantor's direct incurrence of any Indebtedness or its guarantee of all Indebtedness of the Company or any Restricted Subsidiaries, in each case, owed to lenders under or in respect of the Credit Facility, (b) all obligations of such Guarantor with respect to any Interest Rate Agreement or any guarantee thereof, (c) all obligations of such Guarantor to reimburse any bank or other person in respect of amounts paid under letters of credit, acceptances or other similar instruments and all obligations of such Guarantor with respect to guarantees of such reimbursement obligations, (d) all other Indebtedness of such Guarantor which does not provide that it is to rank pari ---- passu with or subordinate to the Guarantees and (e) all deferrals, renewals, - ----- extensions, replacements, refundings, refinancings and restructurings of, and amendments, modifications and supplements to, any of the Guarantor Senior Indebtedness described above. Notwithstanding anything to the contrary in the forego ing, Guarantor Senior Indebtedness will not include (i) Indebtedness of such Guarantor to any of its Subsidiaries, (ii) Indebtedness represented by the Guarantees, (iii) any Indebtedness which by the express terms of the agreement or instrument creating, evidencing or governing the same is junior or subordinate in right of payment to any item of Guarantor Senior Indebtedness, (iv) any trade payable arising from the purchase of goods or materials or for services obtained in the ordinary course of business or (v) Indebtedness (other than that described in clause (a) above) incurred in violation of this Indenture. "Holder" or "Noteholder" means the Person in whose name a Note is registered on the Registrar's books. "incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording (other than previously recorded), as required pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "incurrence," "incurred," "incurrable," and "incurring" 11 shall have meanings correlative to the foregoing); provided that a -------- change in GAAP that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an incurrence of such Indebtedness. "Indebtedness" means (without duplication), with respect to any Person, any indebtedness at any time outstanding, secured or unsecured, contingent or otherwise, which is for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), or evidenced by bonds, notes, debentures or similar instruments or representing the balance deferred and unpaid of the purchase price of any property (excluding, without limitation, any balances that constitute accounts payable or trade payables, and other accrued liabilities arising in the ordinary course of business) if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and shall also include, to the extent not otherwise included (i) any Capitalized Lease Obligations, (ii) obligations secured by a Lien to which the property or assets owned or held by such Person is subject, whether or not the obligation or obligations secured thereby shall have been assumed (provided, however, that if such obligation or obligations -------- ------- shall not have been assumed, the amount of such Indebtedness shall be deemed to be the lesser of the principal amount of the obligation or the fair market value of the pledged property or assets), (iii) guarantees of items of other Persons which would be included within this definition for such other Persons (whether or not such items would appear upon the balance sheet of the guarantor, (iv) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (provided that, in the case of -------- any such letters of credit, the items for which such letters of credit provide credit support are those of other Persons which would be included within this definition for such other Persons), (v) in the case of the Company, Disqualified Capital Stock of the Company or any Restricted Subsidiary thereof, and (vi) obligations of any such Persons under any Interest Rate Agreement applicable to any of the foregoing if and to the extent such Interest Rate Agreement obligations would appear as a liability 12 upon a balance sheet of such Person prepared in accordance with GAAP). The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided (i) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the principal amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP and (ii) that Indebtedness shall not include any liability for Federal, state, local or other taxes. Notwithstanding any other provision of the foregoing definition, any trade payable arising from the purchase of goods or materials or for services obtained in the ordinary course of business or contingent obligations arising out of customary indemnification agreements with respect to the sale of assets or securities shall not be deemed to be "Indebtedness" of the Company or any Restricted Subsidiaries for purposes of this definition. Furthermore, guarantees of (or obligations with respect to letters of credit supporting) Indebtedness and Liens securing In debtedness otherwise included in the determination of such amount shall not also be included. "Indenture" means this Indenture as amended, restated or supplemented from time to time. "Interest Payment Date" means the stated maturity of an installment of interest on the Notes. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement designed to protect the party indicated therein against fluctuations in interest rates. "Investments" means, directly or indirectly, any advance, account receivable (other than an account receivable arising in the ordinary course of business or acquired as part of the assets acquired by the Company in connection with the acquisition of assets which is otherwise permitted by the terms of this Indenture), loan or capital contribution to (by means of transfers of proper- 13 ty to others, payments for property or services for the account or use of others or otherwise), the purchase of any stock, bonds, notes, debentures, partnership or joint venture interests or other securities of, the acquisition, by purchase or otherwise, of all or substantially all of the business or assets or stock or other evidence of beneficial ownership of, any Person or the making of any investment in any Person. Investments shall exclude (i) extensions of trade credit on commercially reasonable terms in accordance with normal trade practices and (ii) the repurchases or redemptions of securities of any Person by such Person. "Issue Date" means the date the Notes are first issued by the Company and authenticated by the Trustee under this Indenture. "Lien" means, with respect to any property or assets of any Person, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement, encumbrance, preference, priority, or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any Capitalized Lease Obligation, conditional sales, or other title retention agreement having substantially the same economic effect as any of the foregoing). "Maturity Date" means July 15, 2007. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Income" means, with respect to any Person for any period, the net income (loss) of such Person determined in accordance with GAAP minus Permitted Tax Distributions with respect to such period, and excluding any foreign currency translation gains or losses added or deducted, as applicable, in the computation of Net Income. "Net Proceeds" means (a) in the case of any sale of Capital Stock by the Company, the aggregate net proceeds received by the Company, after payment of expenses, commissions and the like incurred in connection 14 therewith, whether such proceeds are in cash or in property (valued at the fair market value thereof, as determined in good faith by the Board of Directors, at the time of receipt), (b) in the case of any exchange, exercise, conversion or surrender of outstanding securities of any kind for or into shares of Capital Stock of the Company which is not Disqualified Capital Stock, the net book value of such outstanding securities on the date of such exchange, exercise, conversion or surrender (plus any additional amount required to be paid by the holder to the Company upon such exchange, exercise, conversion or surrender, less any and all payments made to the holders, e.g., on account of fractional ---- shares and less all expenses incurred by the Company in connection therewith) and (c) in the case of any issuance of any Indebtedness by the Company or any Restricted Subsidiary, the aggregate net cash proceeds received by such Person after payment of expenses, commissions, underwriting discounts and the like incurred in connection therewith. "1996 Notes" means the 11 1/8% Senior Subordinated Notes of the Company due 2006. "Non-Payment Event of Default" means any event (other than a Payment Default) the occurrence of which entitles one or more Persons to accelerate the maturity of any Designated Senior Indebtedness. "Notes" means the securities that are issued under this Indenture, as amended, restated or supplement ed from time to time pursuant to this Indenture. "Obligations" means, with respect to any In debtedness, any principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other expenses payable under the documentation governing such Indebtedness. "Officer" means the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Controller or the Secretary of the Company or a Guarantor, or any other officer designated by the Board of Directors, as the case may be. "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chief Executive 15 Officer, the President or any Vice President and the Chief Financial Officer, the Controller or any Treasurer of such Person that shall comply with applicable provisions of this Indenture. "Opinion of Counsel" means a written opinion from legal counsel which counsel is reasonably acceptable to the Trustee. "Payment Default" means any default, whether or not any requirement for the giving of notice, the lapse of time or both, or any other condition to such default becoming an Event of Default has occurred, in the payment of principal of (or premium, if any) or interest on or any other amount payable in connection with Designated Senior Indebtedness. "Permitted Holders" means, collectively, Leo W. Pierce, Sr., his children or other lineal descendants (whether adoptive or biological), the spouses of any of the foregoing and any probate estate of any such individual and any trust, so long as one or more of the foregoing individuals is the principal beneficiary of such trust, and any other partnership, corporation or other entity all of the partners, shareholders, members or owners of which are any one or more of the foregoing. "Permitted Indebtedness" means: (i) Indebtedness of the Company or any Restricted Subsidiary arising under or in connection with the Credit Facility in an amount not to exceed $20 million above the amount that could be borrowed at the time of determination under the first paragraph of Section 4.6; (ii) Indebtedness of the Company's Canadian subsidiary (and related guarantees) under the Credit Facility in an aggregate amount at any one time outstanding not to exceed Cdn $30.3 million; (iii) Indebtedness under the 1996 Notes and the guarantees thereof; (iv) Indebtedness under the Notes and the Guarantees; 16 (v) Indebtedness not covered by any other clause of this definition which is outstanding on the date of this Indenture; (vi) Indebtedness of the Company to any Restricted Subsidiary and Indebtedness of any Re stricted Subsidiary to the Company or another Restricted Subsidiary; (vii) Purchase Money Indebtedness and Capital ized Lease Obligations incurred to acquire property in the ordinary course of business which Indebtedness and Capitalized Lease Obligations do not in the aggregate exceed 5% of the Company's consolidated total assets; (viii) Interest Rate Agreements; (ix) additional Indebtedness of the Company not to exceed $3,000,000 in principal amount outstanding at any time; and (x) Refinancing Indebtedness. "Permitted Investments" means, for any Person, Investments made on or after the date of this Indenture consisting of: (i) Investments by the Company, or by a Restricted Subsidiary thereof, in the Company or a Restricted Subsidiary; (ii) Temporary Cash Investments; (iii) Investments by the Company, or by a Restricted Subsidiary thereof, in a Person (or in all or substantially all of the business or assets of a business or a Person), if as a result of such Investment (a) such Person becomes a Restricted Subsidiary of the Company, (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary thereof or (c) such business or assets are owned by the Company or a Restricted Subsidiary; 17 (iv) reasonable and customary loans made to employees not to exceed $500,000 in the aggregate at any one time outstanding, plus any loans which may be required to be made under the Company's Nonqualified Stock Option Plan in an amount not to exceed $2,000,000; (v) an Investment that is made by the Company or a Restricted Subsidiary thereof in the form of any stock, bonds, notes, debentures, partnership or joint venture interests or other securities that are issued by a third party to the Company or Restricted Subsidiary solely as partial consideration for the consummation of an Asset Sale that is otherwise permitted by Section 4.10; (vi) accounts receivable of the Company and its Restricted Subsidiaries generated in the ordinary course of business; (vii) Investments existing on the Issue Date; and (viii) Investments for any purpose not to exceed $2,000,000. "Permitted Liens" means (i) Liens on property or assets of, or any shares of stock of or secured debt of, any Person or business existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time such Person is merged into or consolidated with the Company or any of its Restricted Subsidiaries or at the time such business is acquired by the Company or a Restricted Subsidiary, provided that such Liens are not incurred in -------- anticipation of such Person becoming a Restricted Subsidiary of the Company or merging into or consolidating with the Company or any of its Restricted Subsidiaries or such business being acquired by the Company or a Restricted Subsidiary, (ii) Liens securing Refinancing Indebtedness, provided that any such -------- Lien does not extend to or cover any Property, shares or debt other than the Property, shares or debt securing the Indebtedness so refunded, refinanced or extended, (iii) Liens in favor of the Company or any of its Restricted Subsidiaries, (iv) Liens securing industrial revenue 18 bonds, (v) Liens to secure Purchase Money Indebtedness that is otherwise permitted under this Indenture, provided that (a) any such Lien is created -------- solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including sales and excise taxes, installation and delivery charges and other direct costs of, and other direct expenses paid or charged in connection with, such purchase or construction) of such Property, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of such costs, and (c) such Lien does not extend to or cover any Property other than such item of Property and any improvements on such item, (vi) statutory liens or landlords', carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, (vii) other Liens securing obligations incurred in the ordinary course of business which obligations do not exceed $1,000,000 in the aggregate at any one time outstanding, (viii) Liens for taxes, assessments or govern mental charges that are being contested in good faith by appropriate proceedings, (ix) Liens securing Capitalized Lease Obligations permitted to be incurred under clause (v) of the definition of "Permitted Indebtedness," provided that such Lien does -------- not extend to any property other than that subject to the underlying lease, (x) Liens securing Designated Senior Indebtedness, (xi) easements or minor defects or irregularities in title and other similar charges or encumbrances on Property not interfering in any material respect with the Company's or any Restricted Subsidiary's use of such Property, (xii) Liens existing on the date of this Indenture, (xiii) pledges or deposits made in the ordinary course of business (a) in connection with (1) leases, performance bonds and similar bonds or (2) workers' compensation, unemployment insurance and other social security legislation or (b) securing the performance of surety bonds and appeal bonds required in the ordinary course of business or in connection with the enforcement of rights or claims of the Company or a Subsidiary thereof or (2) in connection with judgments that do not give rise an Event of Default and which do not exceed $3,000,000 in the aggregate, (xiv) Liens securing Interest Rate Agreements entered into with any lender under the Credit Facility or 19 any Affiliate thereof and any guarantees thereof and (xv) any extensions, substitutions, replacements or renewals of the foregoing. "Permitted Tax Distributions" means with respect to any period for which the Company is taxed as an S corporation or other pass-through entity for Federal income tax purposes, distributions to the holders of Capital Stock of the Company based on estimates of the highest amount of federal, state and local income tax per share of Capital Stock that any holder of Capital Stock of the Company would be required to pay as a result of the Company's being treated as a pass-through entity for income tax purposes. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government (including any agency or political subdivision thereof). "Pledge Agreement" means the Amended and Restated Pledge and Intercreditor Agreement in the form attached as Exhibit D, as the same may be amended, supplemented, restated or modified from time to time. "Preferred Stock" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to dividends, distributions or liquidation proceeds of such Person over the holders of other Capital Stock issued by such Person. "Property" of any Person means all types of real, personal, tangible, intangible or mixed property owned by such Person whether or not included in the most recent consolidated balance sheet of such Person and its Subsidiaries under GAAP. "Public Equity Offering" means a public offering by the Company of shares of its Capital Stock and any and all rights, warrants or options to acquire such Capital Stock. "Purchase Money Indebtedness" means any Indebtedness incurred in the ordinary course of business by a Person to finance the cost (including the cost of construction) of an item of Property, the principal amount 20 of which Indebtedness does not exceed the sum of (i) 100% of such cost and (ii) reasonable fees and expenses of such Person incurred in connection therewith. "Redeemable Dividend" means, for any dividend or distribution with regard to Disqualified Capital Stock, the quotient of the dividend or distribution divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Disqualified Capital Stock. "Redemption Date" when used with respect to any Note to be redeemed means the date fixed for such redemption pursuant to this Indenture. "Refinancing Indebtedness" means Indebtedness that refunds, refinances, renews, replaces or extends any Indebtedness of the Company outstanding on the Issue Date or other Indebtedness permitted to be incurred by the Company or its Restricted Subsidiaries pursuant to the terms of this Indenture, whether involving the same or any other lender or creditor or group of lenders or creditors, but only to the extent that (i) the Refinancing Indebtedness is subordinated to the Notes to at least the same extent as the Indebtedness being refunded, refinanced or extended, if at all, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness being refunded, refinanced or extended, or (b) after the maturity date of the Notes, (iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a weighted average life to maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the weighted average life to maturity of the portion of the Indebtedness being refunded, refinanced or extended that is scheduled to mature on or prior to the maturity date of the Notes, (iv) such Refinancing Indebtedness is in an aggregate principal amount that is equal to or less than the sum of (a) the aggregate principal amount then out standing under the Indebtedness being refunded, refinanced or extended, (b) the amount of accrued and unpaid interest, if any, and premiums owed, if any, not in excess of preexisting prepayment provisions on such Indebtedness being refunded, refinanced or extended and 21 (c) the amount of customary fees, expenses and costs related to the incurrence of such Refinancing Indebtedness, and (v) such Refinancing Indebtedness is incurred by the same Person that initially incurred the Indebtedness being refunded, refinanced or extended, except that the Company may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness of any Wholly-Owned Subsidiary of the Company. "Restricted Payment" means any of the following: (i) the declaration or payment of any dividend or any other distribution or payment on Capital Stock of the Company or any Restricted Subsidiary of the Company or any payment made to the direct or indirect holders (in their capacities as such) of Capital Stock of the Company or any Restricted Subsidiary of the Company (other than (x) dividends or distributions payable solely in Capital Stock (other than Disqualified Capital Stock) or in options, warrants or other rights to purchase Capital Stock (other than Disqualified Capital Stock), and (y) in the case of Restricted Subsidiaries of the Company, dividends or distributions payable to the Company or to a Wholly-Owned Subsidiary of the Company), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any of its Restricted Subsidiaries (other than Capital Stock owned by the Company or a Wholly-Owned Subsidiary of the Company, excluding Disqualified Capital Stock), (iii) the purchase, defeasance, repurchase, redemption or other acquisition or retirement for value, prior to any sched uled maturity, scheduled repayment or scheduled sinking fund payment of, or the making of any principal payment on any Indebtedness which is subordinated in right of payment to the Notes other than subordinated Indebtedness acquired in anticipation of satisfying a scheduled sinking fund obligation, principal installment or final maturity (in each case due within one year of the date of acquisition), (iv) the making of any Investment or guarantee of any Investment in any Person other than a Per mitted Investment, (v) any designation of a Restricted Subsidiary as an Unrestricted Subsidiary on the basis of the Investment by the Company therein and (vi) forgiveness of any Indebtedness of an Affiliate of the Company (other than a Restricted Subsidiary) to the Company or a Restricted Subsidiary. For purposes of determining the amount expended for Restricted Payments, cash distributed 22 or invested shall be valued at the face amount thereof and property other than cash shall be valued at its fair market value in the good faith determination of the Board of Directors. It is agreed that any payments made to Leo W. Pierce, Sr. or his spouse pursuant to a pension obligation of the Company in the annual amount of $96,000 shall not constitute a Restricted Payment. "Restricted Subsidiary" means a Subsidiary of the Company other than an Unrestricted Subsidiary and includes all of the Subsidiaries of the Company existing as of the Issue Date. The Board of Directors of the Company may designate any Unrestricted Subsidiary or any Person that is to become a Subsidiary as a Restricted Subsidiary if immediately after giving effect to such action (and treating any Acquired Indebtedness as having been incurred at the time of such action), the Company could have incurred at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.6. "Sale and Lease-Back Transaction" means any arrangement with any Person providing for the leasing by the Company or any Restricted Subsidiary of the Company of any real or tangible personal Property, which Property (i) has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in contemplation of such leasing and (ii) would constitute an Asset Sale if such property had been sold in an outright sale thereof. "S&P" means Standard & Poor's Ratings Group and its successors. "SEC" means the United States Securities and Exchange Commission as constituted from time to time or any successor performing substantially the same functions. "Securities Act" means the Securities Act of 1933, as amended. "Senior Indebtedness" means the principal of and premium, if any, and interest (including, without limitation, interest accruing or that would have accrued but for the filing of a bankruptcy, reorganization or 23 other insolvency proceeding whether or not such interest constitutes an allowable claim in such proceeding) on, and any and all other fees, expense reimbursement obligations and other amounts due pursuant to the terms of all agreements, documents and instruments providing for, creating, securing or evidencing or otherwise entered into in connection with (a) all Indebtedness of the Company owed to lenders under or in respect of the Credit Facility, (b) all obligations of the Company with respect to any Interest Rate Agreement, (c) all obligations of the Company to reimburse any bank or other person in respect of amounts paid under letters of credit, acceptances or other similar instruments, (d) all other Indebtedness of the Company which does not provide that it is to rank pari passu with or subordinate to the Notes and (e) all deferrals, ---- ----- renewals, extensions, replacements, refundings, refinancings and restructurings of, and amendments, modifications and supplements to, any of the Senior Indebtedness described above. Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness will not include (i) Indebtedness of the Company to any of its Subsidiaries, (ii) Indebtedness represented by the Notes and the Guarantees, (iii) Indebtedness represented by the 1996 Notes and the guarantees; (iv) any Indebtedness which by the express terms of the agreement or instrument creating, evidencing or governing the same is junior or subordinate in right of payment to any item of Senior Indebtedness, (v) any trade payable arising from the purchase of goods or materials or for services obtained in the ordinary course of business, or (vi) Indebtedness (other than that described in clause (a) above) incurred in violation of this Indenture. "Subsidiary" of any specified Person means any corporation, partnership, joint venture, association or other business entity, whether now existing or hereafter organized or acquired, (i) in the case of a corporation, of which more than 50% of the total voting power of the Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, officers or trustees thereof is held by such first-named Person or any of its Subsidiaries; or (ii) in the case of a partnership, joint venture, association or other business entity, with respect to which such first-named Person or any of its Subsidiaries has the power to direct or cause the direction of the management and policies of 24 such entity by contract or otherwise or if in accordance with GAAP such entity is consolidated with the first-named Person for financial statement purposes. "Temporary Cash Investments" means (i) Invest ments in marketable direct obligations issued or guaranteed by the United States of America, or of any governmental agency or political subdivision thereof, maturing within 365 days of the date of purchase; (ii) Investments in demand deposits or certificates of deposit issued by a bank organized under the laws of the United States of America or any state thereof or the District of Columbia, in each case having capital, surplus and undivided profits totaling more than $500,000,000 and rated at least A by S&P and A-2 by Moody's, maturing within 365 days of purchase; (iii) Investments not exceeding 365 days in duration in money market funds that invest substantially all of such funds' assets in the Investments described in clauses (i) and (ii) above; (iv) any security maturing not more than 180 days after the date of acquisition, backed by a stand-by or direct pay letter of credit issued by a bank meeting the qualifications described in clause (ii) above; or (v) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and existing under the laws of the United States of America or any state thereof or the District of Columbia with a rating, at the time as of which any investment therein is made, of "P-1" by Moody's or "A-1" by S&P. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of this Indenture (except as provided in Section 8.3 here of). "Trust Officer" when used with respect to the Trustee, means any officer or assistant officer of the Trustee assigned to the Corporate Trust Administration department or similar department performing corporate trust work of the Trustee or any successor to such department or, in the case of a successor-Trustee, any officer of such successor Trustee performing corporate trust functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to 25 whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Trustee" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means the successor. "Unrestricted Subsidiary" means (i) any Subsidiary of an Unrestricted Subsidiary and (ii) any Subsidiary of the Company which is classified after the Issue Date as an Unrestricted Subsidiary by a resolution adopted by the Board of Directors of the Company; provided that a Subsidiary organized or acquired --------- after the Issue Date may be so classified as an Unrestricted Subsidiary only if such classification is in compliance with the covenant set forth in Section 4.9 hereof. The Trustee shall be given prompt written notice by the Company of each resolution adopted by the Board of Directors of the Company under this provision, together with a copy of each such resolution adopted. "U.S. Government Obligations" means (i) securities that are direct obligations of the United States of America for the payment of which its full faith and credit are pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such -------- custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or a specific payment of principal or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt. 26 "Wholly-Owned Subsidiary" means any Restricted Subsidiary 99% or more of the outstanding Capital Stock (other than directors' qualifying shares) of which are owned, directly or indirectly, by the Company. Section 1.2. Other Definitions. ----------------- The definitions of the following terms may be found in the sections indicated as follows: Term Defined in Section - ---- ------------------ "Affiliate Transaction".............. 4.11 "Agent Members"...................... 2.14 "Bankruptcy Law"..................... 6.1 "Business Day"....................... 13.8 "Change of Control Offer"............ 4.19 "Change of Control Payment Date"..... 4.19 "Covenant Defeasance"................ 9.3 "Custodian".......................... 6.1 "Event of Default"................... 6.1 "Excess Proceeds Offer".............. 4.10 "Global Notes"....................... 2.1 "Guarantee Payment Blockage Date".... 10.7 "Guarantor Representative"........... 10.7 "Initial Blockage Period"............ 11.3 "Initial Guarantee Blockage Period".. 10.7 "Legal Defeasance"................... 9.2 "Legal Holiday"...................... 13.8 "Offer Period"....................... 4.10 "Paying Agent"....................... 2.3 "Payment Blockage Period"............ 11.3 "Physical Notes"..................... 2.1 "Purchase Date"...................... 4.10 "Registrar".......................... 2.3 "Reinvestment Date".................. 4.10 "Representative"..................... 11.3 Section 1.3. Incorporation by Reference of Trust Indenture Act. ----------------------------------- Whenever this Indenture refers to a provision of the TIA, the portion of such provision required to be incorporated herein in order for this Indenture to be qualified under the TIA is incorporated by reference in and made a part of this Indenture. The following TIA 27 terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Notes. "indenture securityholder" means a Noteholder. "indenture to be qualified" means this Inden ture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor on the indenture securities" means the Company, the Guarantors or any other obligor on the Notes. All other terms used in this Indenture that are defined by the TIA, defined in the TIA by reference to another statute or defined by SEC rule have the meanings therein assigned to them. Section 1.4. Rules of Construction. --------------------- Unless the context otherwise requires: (1) a term has the meaning assigned to it herein, whether defined expressly or by reference; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) words used herein implying any gender shall apply to every gender; and (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, 28 Section or Subdivision, unless expressly stated otherwise. ARTICLE 2. THE NOTES Section 2.1. Dating; Incorporation of Form in Indenture. ------------------------------------------ The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A which is incorporated in and made part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company may use "CUSIP" numbers in issuing the Notes. The Company shall approve the form of the Notes. Each Note shall be dated the date of its authentication. The terms and provisions contained in the form of the Notes annexed hereto as Exhibit A, shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. The Notes shall be issued in the form of one or more permanent global notes in registered form, substantially in the form set forth in Exhibit A ("Global Notes"), deposited with the Trustee, as custodian for the Depository, duly executed by the Company and authenticated by the Trustee as hereinafter provided and shall bear the legend set forth on Exhibit B. The aggregate princi pal amount of any Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. Section 2.2. Execution and Authentication. ---------------------------- The aggregate principal amount of Notes which may be authenticated and delivered under the Indenture is $120,000,000. 29 The Notes shall be executed on behalf of the Company by two Officers of the Company or an Officer and an Assistant Secretary of the Company. Such signatures may be either manual or facsimile. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Notes and may be in facsimile form. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note or at anytime thereafter, the Note shall be valid nevertheless. A Note shall not be valid until the Trustee manually signs the certificate of authentication on the Note. Such signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee or an authenticating agent shall authenticate Notes for original issue in the aggregate principal amount of $120,000,000 upon a Company Request. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.7 hereof. The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 and integral multiples thereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. Such authenticating agent shall have the same right as the Trustee in dealing with the Company or an Affiliate. Section 2.3. Registrar and Paying Agent. -------------------------- The Company shall appoint a registrar, which shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar"), and a paying agent, which shall maintain an office or agency located in the Borough of Manhattan, City of New York, State of New York where Notes may be presented for payment ("Paying Agent") and shall maintain 30 an office or agency where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. Neither the Company nor any Affiliate may act as Paying Agent. The Company may change any Paying Agent, Registrar or co-registrar without notice to any Noteholder. The Company shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or agent for service of notices and demands, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation pursuant to Section 7.7. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Notes. 31 Section 2.4. Paying Agent to Hold Money in Trust. ----------------------------------- On or before each due date of the principal and interest on any Notes, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal and interest so becoming due. Each Paying Agent shall hold in trust for the benefit of the Noteholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Notes (whether such money has been paid to it by the Company or any other obligor on the Notes), and the Company and the Paying Agent shall notify the Trustee of any default by the Company (or any other obligor on the Notes) in making any such payment. Money held in trust by the Paying Agent need not be segregated except as required by law and in no event shall the Paying Agent be liable for any interest on any money received by it hereunder. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and the Trustee, may at any time during the continuance of any Payment Default, upon written request to a Paying Agent, require such Paying Agent to forthwith pay to the Trustee all sums so held in trust by such Paying Agent together with a complete accounting of such sums. Upon doing so, the Paying Agent shall have no further liability for the money delivered to the Trustee. Section 2.5. Noteholder Lists. ---------------- The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each January 1 and July 1 in each year, and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders, including the aggregate principal amount of Notes held by each such Noteholder. Section 2.6. Transfer and Exchange. --------------------- When a Note is presented to the Registrar with a request to register the transfer thereof, the Registrar shall register the transfer as requested if the require- 32 ments of applicable law are met and, when Notes are presented to the Registrar with a request to exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar shall make the exchange as requested provided that every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar duly executed by the Holder thereof or his attorney, duly authorized in writing. To permit registration of transfers and exchanges, upon surrender of any Note for registration of transfer or exchange at the office or agency maintained pursuant to Section 2.3 hereof, the Company shall issue and execute and the Trustee shall authenticate and make available for delivery Notes at the Registrar's request in the name of the transferee or Holder, as the case may be, designated by the Registrar. Any exchange or transfer shall be without any service charge to the Noteholder, except that the Company may require payment by the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation to a transfer or exchange, but this provision shall not apply to any exchange pursuant to Section 2.9, 3.6 or 8.5 hereof. The Registrar shall not be required to register transfers of Notes or to exchange Notes for a period of 15 days before the day of mailing of the notice of redemption of any Notes to be redeemed. The Registrar shall not be required to exchange or register transfers of any Notes called or being called for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. Any Holder of the Global Note shall, by acceptance of such Global Note, agree that transfers of the beneficial interests in such Global Note may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Global Note shall be re quired to be reflected in a book entry. Neither the Trustee nor the Registrar shall have any duty to monitor the Company's compliance with or have any responsibility with respect to the Company's compliance with any Federal or state securities laws. Section 2.7. Replacement Notes. ----------------- 33 If a mutilated Note is surrendered to the Registrar or Trustee or if the Holder of a Note presents evidence to the satisfaction of the Company and the Trustee that the Note has been lost, destroyed or wrongfully taken and of the ownership thereof, the Company shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the New York Uniform Commercial Code as in effect on the date of this Indenture are met. An indemnity bond may be re quired by the Company or the Trustee that is sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced. The Company and the Trustee each may charge for its expenses (including reasonable attorneys' fees and expenses) in replacing a Note. Every replacement Note is an additional obligation of the Company. Section 2.8. Outstanding Notes. ----------------- Notes outstanding at any time are all Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, and those described in this Section 2.8 as not outstanding. If a Note is replaced pursuant to Section 2.7, it ceases to be outstanding until the Company and the Trustee receive proof satisfactory to each of them that the replaced Note is held by a bona fide purchaser. If a Paying Agent holds on a Redemption Date or Maturity Date money sufficient to pay the principal of, premium, if any, and all accrued interest on Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue. Subject to Section 13.6, a Note does not cease to be outstanding solely because the Company or an Affiliate holds the Note. Section 2.9. Temporary Notes. --------------- 34 Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form, and shall carry all rights, benefits and privileges, of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes presented to it. Section 2.10. Cancellation. ------------ The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee shall cancel and retain or, upon written request of the Company, return to the Company, in accordance with its normal practice, all Notes surrendered for transfer, exchange, payment or cancellation. Subject to Section 2.7 hereof, the Company may not issue new Notes to replace Notes in respect of which it has previously paid all principal, premium and interest accrued thereon, or delivered to the Trustee for cancellation. 35 Section 2.11. Defaulted Interest. ------------------ If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted amounts, plus (to the extent permitted by law) any interest payable on defaulted amounts pursuant to Section 4.1 hereof, to the persons who are Noteholders on a subsequent special record date. The Company shall fix the special record date and payment date in a manner satisfactory to the Trustee and provide the Trustee at least 20 days notice of the proposed amount of default interest to be paid and the special payment date. At least 15 days before the special record date, the Company shall mail or cause to be mailed to each Noteholder at his address as it appears on the Notes register maintained by the Registrar a notice that states the special record date, the payment date (which shall be not less than five nor more than ten days after the special record date), and the amount to be paid. In lieu of the foregoing procedures, the Company may pay defaulted interest in any other lawful manner satisfactory to the Trustee. Section 2.12. Deposit of Moneys. ----------------- Prior to 10:00 a.m., New York City time, on each Interest Payment Date and Maturity Date, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Trustee to remit payment to the Holders on such Interest Payment Date or Maturity Date, as the case may be. The principal and interest on Global Notes shall be payable to the Depository or its nominee, as the case may be, as the sole registered owner and the sole holder of the Global Notes represented thereby. The principal and interest on Physical Notes shall be payable at the office of the Paying Agent. Section 2.13. CUSIP Number. ------------ The Company in issuing the Notes may use a "CUSIP" number(s), and if so, the Trustee shall use the CUSIP number(s) in notices of redemption or exchange as a convenience to Holders, provided that any such notice may -------- 36 state that no representation is made as to the correctness or accuracy of the CUSIP number(s) printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Company will promptly notify in writing the Trustee of any such CUSIP number used by the Company in connection with the Notes and any change in such CUSIP number. Section 2.14. Book-Entry Provisions for Global Notes. -------------------------------------- (a) The Global Notes shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear the legend as set forth in Exhibit B. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Note, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) Transfers of Global Notes shall be limited to transfer in whole, but not in part, to the Depository, its successors or their respective nominees. Certificated Notes (the "Physical Notes") shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Notes if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for any Global Note and a successor depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depository to issue Physical Notes. 37 (c) In connection with any transfer or exchange of a portion of the beneficial interest in any Global Note to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, and the Trustee shall upon receipt of a written order from the Company authenticate and make available for delivery, one or more Physical Notes of like tenor and amount. (d) In connection with the transfer of Global Notes as an entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in writing in exchange for its beneficial interest in the Global Notes, an equal aggregate principal amount of Physical Notes of authorized denominations. (e) The Holder of any Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture, the Notes or the Guarantees. ARTICLE 3. REDEMPTION Section 3.1. Notices to Trustee. ------------------ If the Company elects to redeem Notes pursuant to Section 3.7 hereof, (i) at least 60 days prior to the Redemption Date in the case of a partial redemption, (ii) at least 45 days prior to the Redemption Date in the case of a total redemption or (iii) during such other period as the Trustee may agree to in writing, the Company shall notify the Trustee in writing of the Redemption Date, the principal amount of Notes to be redeemed and the redemption price, and deliver to the Trustee an Officers' Certificate 38 stating that such redemption will comply with the conditions contained in Section 3.7 hereof, as appropriate. Section 3.2. Selection by Trustee of Notes to Be Re deemed. --------------------------------------------- In the event that fewer than all of the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed, if the Notes are listed on a national securities exchange, in accordance with the rules of such exchange or, if the Notes are not so listed, on either a pro rata basis or by lot, or such other method as it shall deem fair and appropriate; provided, however, that if a -------- ------- partial redemption is made with the proceeds of a Public Equity Offering, selection of the Notes or portion thereof for redemption shall be made by the Trustee on a pro rata basis, unless such a method is prohibited by law or by the --- ---- rules of such national securities exchange. The Trustee shall promptly notify the Company of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed. The Trustee may select for redemption portions of the principal of the Notes that have denominations larger than $1,000. Notes and portions thereof the Trustee selects shall be redeemed in amounts of $1,000 or whole multiples of $1,000. For all purposes of this Indenture unless the context otherwise requires, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.3. Notice of Redemption. -------------------- At least 30 days, but no more than 60 days, before a Redemption Date, the Company shall mail, or cause to be mailed, a notice of redemption by first- class mail to each Holder of Notes to be redeemed at his or her last address as the same appears on the registry books maintained by the Registrar pursuant to Section 2.3 hereof. The notice shall identify the Notes to be redeemed (including the CUSIP numbers thereof) and shall state: 39 (1) the Redemption Date; (2) the redemption price; (3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the Redemption Date and upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued; (4) the name and address of the Paying Agent; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that unless the Company defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date; (7) the paragraph of Section 3.7 hereof pursuant to which the Notes called for redemption are being redeemed; and (8) the aggregate principal amount of Notes that are being redeemed. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's sole expense. 40 Section 3.4. Effect of Notice of Redemption. ------------------------------ Once the notice of redemption described in Section 3.3 is mailed, Notes called for redemption become due and payable on the Redemption Date and at the redemption price, including any premium, plus interest accrued to the Redemption Date. Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price, including any premium, plus interest accrued to the Redemption Date, provided that if the Redemption Date is after a regular -------- interest payment record date and on or prior to the Interest Payment Date, the accrued interest shall be payable to the Holder of the redeemed Notes registered on the relevant record date, and provided, further, that if a Redemption Date is -------- ------- a Legal Holiday, payment shall be made on the next succeeding Business Day and no interest shall accrue for the period from such Redemption Date to such succeeding Business Day. Section 3.5. Deposit of Redemption Price. --------------------------- On or prior to 10:00 A.M., New York City time, on each Redemption Date, the Company shall deposit with the Paying Agent in immediately available funds money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date other than Notes or portions thereof called for redemption on that date which have been delivered by the Company to the Trustee for cancellation. On and after any Redemption Date, if money sufficient to pay the redemption price of and accrued interest on Notes called for redemption shall have been made available in accordance with the preceding paragraph and payment thereof is not prohibited pursuant to the terms of this Indenture, the Notes called for redemption will cease to accrue interest and the only right of the Holders of such Notes will be to receive payment of the redemption price of and, subject to the first proviso in Section 3.4, accrued and unpaid interest on such Notes to the Redemption Date. If any Note called for redemption shall not be so paid, interest will be paid, from the Redemption Date until such redemption payment is made, on the unpaid principal of the Note and any interest not paid on such unpaid principal, in each case, at the rate 41 and in the manner provided in the Notes. Section 3.6. Notes Redeemed in Part. ---------------------- Upon surrender of a Note that is redeemed in part, the Trustee shall authenticate for a Holder a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.7. Optional Redemption. ------------------- (a) The Company, at its option, may redeem the Notes, in whole or in part, at any time on or after July 15, 2002 at the following redemption prices (expressed as a percentage of principal amount), together, in each case, with accrued and unpaid interest to the Redemption Date, if redeemed during the twelve-month period beginning on July 15 of each year listed below: Year Percentage ---- ---------- 2002 104.563% 2003 103.042% 2004 101.521% 2005 and thereafter 100.000% (b) Notwithstanding the foregoing, the Company, at its option, may redeem in the aggregate up to 35% of the original principal amount of Notes at any time and from time to time prior to July 15, 2000 at a redemption price equal to 109% of the aggregate principal amount so redeemed, plus accrued interest to the Redemption Date, with the Net Proceeds of one or more Public Equity Offerings; provided that at least $78,000,000 aggregate principal -------- amount of Notes originally issued remains outstanding immediately after the occurrence of any such redemption pursuant to a Public Equity Offering and that any such redemption occurs within 90 days following the closing of any such Public Equity Offering. 42 ARTICLE 4. COVENANTS Section 4.1. Payment of Notes. ---------------- The Company shall pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. An installment of principal or interest shall be considered paid on the date it is due if the Trustee or Paying Agent holds on that date money designated for and sufficient to pay such installment. The Company shall pay interest on overdue principal (including post- petition interest in a proceeding under any Bankruptcy Law) and overdue interest, to the extent lawful, at the rate specified in the Notes. Section 4.2. SEC Reports. ----------- (a) The Company will file with the SEC all information, documents and reports to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the Company is subject to such filing requirements, so long as the SEC will accept such filings. The Company (at its own expense) will file with the Trustee within 15 days after it files them with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company files with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Company shall also comply with the provisions of TIA (S) 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). (b) The Company will transmit to all Holders, 43 in the manner and to the extent provided in TIA Section 313(c), within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraph (a) of this Section as may be required by rules and regulations prescribed from time to time by the SEC. Section 4.3. Waiver of Stay, Extension or Usury Laws. --------------------------------------- The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead (as a defense or otherwise) or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, and/or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 4.4. Compliance Certificate. ---------------------- (a) The Company shall deliver to the Trustee, within 100 days after the end of each fiscal year and on or before 50 days after the end of the first, second and third quarters of each fiscal year, an Officers' Certificate (one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company) stating that a review of the activities of the Company and its Subsidiaries during such fiscal year or fiscal quarter, as the case may be, has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the 44 performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all or such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes are prohibited or, if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as (and to the extent) not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.2 above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements nothing has come to their attention which would lead them to believe that the Company has violated any provisions of this Article 4 or Article 5 of this Indenture or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly for any failure to obtain knowledge of any such violation. (c) The Company will, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.5. Taxes. ----- The Company shall, and shall cause each of its Subsidiaries to, pay prior to delinquency all material taxes, assessments, and governmental levies except as contested in good faith and by appropriate proceedings. Section 4.6. Limitation on Additional Indebtedness. ------------------------------------- 45 The Company will not, and will not permit any Restricted Subsidiary of the Company to, directly or indirectly, incur any Indebtedness (including Acquired Indebtedness) unless (a) after giving effect to the incurrence of such Indebtedness and the receipt and application of the proceeds thereof, the ratio of total Indebtedness of the Company and its Restricted Subsidiaries to the Company's Adjusted EBITDA is less than 6.0 to 1; provided, however, that if the -------- ------- Indebtedness which is the subject of a determination under this provision is Acquired Indebtedness, or Indebtedness incurred in connection with the simultaneous acquisition of any Person, business, property or assets, then such ratio shall be determined by giving effect (on a pro forma basis, as if the --- ----- transaction had occurred at the beginning of the four quarter period ending at the end of the last fiscal quarter of such Person or business for which financial statements are available) to the incurrence or assumption of such Acquired Indebtedness or such other Indebtedness by the Company; and (b) no Default or Event of Default shall have occurred and be continuing at the time or as a consequence of the incurrence of such Indebtedness. Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may incur Permitted Indebtedness; provided, that the Company will -------- not incur any Permitted Indebtedness, without meeting the Indebtedness incurrence provisions of the preceding paragraph, that ranks pari passu or ---- ----- junior in right of payment to the Notes and that has a maturity or mandatory sinking fund payment prior to the maturity of the Notes. Notwithstanding the two preceding paragraphs, the Company will not permit any of its foreign Subsidiaries to incur any subordinated Indebtedness. Section 4.7. Limitation on Preferred Stock of Restrict ed Subsidiaries. --------------------------------------------------------- The Company will not permit any Restricted Subsidiary to issue any Preferred Stock (except Preferred Stock to the Company or a Restricted Subsidiary) or permit any Person (other than the Company or a Subsidiary) to hold any such Preferred Stock unless the Company or such Restricted Subsidiary would be entitled to incur or assume Indebtedness under Section 4.6 hereof in 46 the aggregate principal amount equal to the aggregate liqui dation value of the Preferred Stock to be issued; provided, however, that any Restricted Subsidiary -------- ------- that guarantees the Notes pursuant to Section 4.14 shall be permitted to issue Preferred Stock that is not Disqualified Capital Stock. Section 4.8. Limitation on Capital Stock of Restricted Subsidiaries. ------------------------------------------------------ The Company will not (i) sell, pledge, hypothecate or otherwise convey or dispose of any Capital Stock of a Restricted Subsidiary (other than under the terms of the Credit Facility, under the terms of any Designated Senior Indebtedness or as permitted in Section 4.12 hereof) or (ii) permit any of its Restricted Subsidiaries to issue any Capital Stock, other than to the Company or a Wholly-Owned Subsidiary of the Company. The foregoing restrictions shall not apply to an Asset Sale made in compliance with Section 4.10 hereof or the issuance of Preferred Stock in compliance with Section 4.7 hereof. Section 4.9. Limitation on Restricted Payments. --------------------------------- The Company will not make, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless: (a) no Default or Event of Default shall have occurred and be continuing at the time of or immediately after giving effect to such Restricted Payment; (b) immediately after giving pro forma effect to such Restricted --- ----- Payment, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under Section 4.6 hereof; and (c) immediately after giving effect to such Restricted Payment, the aggregate of all Restricted Payments declared (except to the extent not made on the payment date) or made after the Issue Date does not exceed the sum of (1) 50% of the cumulative Consolidated Net Income of the Company subsequent to the Issue Date (or minus 100% of any cumulative deficit in Consolidated Net Income during such 47 period) and (2) 100% of the aggregate Net Proceeds and the fair market value of securities or other property received by the Company from the issue or sale, after the Issue Date, of Capital Stock (other than Disqualified Capital Stock or Capital Stock of the Company issued to any Subsidiary of the Company) of the Company or any Indebtedness or other securities of the Company convertible into or exercisable or exchangeable for Capital Stock (other than Dis qualified Capital Stock) of the Company which has been so converted or exercised or exchanged, as the case may be, and (3) $3,000,000. For purposes of determining under this clause (c) the amount expended for Restricted Payments, cash distributed shall be valued at the face amount thereof and property other than cash shall be valued at its fair market value. Notwithstanding the foregoing, the provisions of this Section 4.9 shall not prohibit (i) the payment of any distribution within 60 days after the date of declaration thereof, if at such date of declaration such payment would comply with the provisions of this Indenture, (ii) the retirement of any shares of Capital Stock of the Company or subordinated Indebtedness by conversion into, or by or in exchange for, shares of Capital Stock (other than Disqualified Capital Stock), or out of, the Net Proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of other shares of Capital Stock of the Company (other than Disqualified Capital Stock), (iii) the redemption or retirement of Indebtedness of the Company subordinated to the Notes in exchange for, by conversion into, or out of the Net Proceeds of, a substantially concurrent sale or incurrence of Indebtedness (other than any Indebtedness owed to a Subsidiary) of the Company that is contractually subordinated in right of payment to the Notes to at least the same extent as the subordinated Indebtedness being redeemed or retired, (iv) the retirement of any shares of Disqualified Capital Stock by conversion into, or by exchange for, shares of Disqualified Capital Stock, or out of the Net Proceeds of the substantially concur rent sale (other than to a Subsidiary of the Company) of other shares of Disqualified Capital Stock, (v) Permitted Tax Distributions, (vi) additional payments to employees of the Company for repurchases of, 48 stock or repurchases pursuant to the Company's Nonqualified Stock Option Plan; provided, however, that the aggregate amount of all such payments under this - -------- ------- clause (vi) does not exceed $2,000,000 in the aggregate, exclusive of amounts funded by insurance proceeds; and provided, further, that with respect to clause -------- ------- (vi) (other than with respect to payments funded by insurance proceeds) no Default or Event of Default shall have occurred and be continuing at the time of any such distribution or payment or will occur immediately after giving effect to any such distribution or payment; and provided, further, that, in determining -------- ------- the aggregate amount of all Restricted Payments made subsequent to the Issue Date, all distributions or payments made pursuant to clause (vi) (exclusive of insurance proceeds) shall be included. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.9 were computed, which calculations may be based upon the Company's latest available financial statements, and that no Default or Event of Default exists and is continuing and no Default or Event of Default will occur immediately after giving effect to any Restricted Payments. 49 Section 4.10. Limitation on Certain Asset Sales. --------------------------------- (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or its Restricted Subsidiaries, as the case may be, receives consideration at the time of such sale or other disposition at least equal to the fair market value thereof (as determined for Asset Sales other than eminent domain, condemnation or similar government proceedings in good faith by the Company's board of directors, and evidenced by a board resolution); (ii) not less than 85% of the consideration received by the Company or its Subsidiaries, as the case may be, is in the form of cash or Temporary Cash Investments; and (iii) the Asset Sale Proceeds received by the Company or such Restricted Subsidiary are applied (a) first, to the extent the Company elects, or is required, to prepay, repay or purchase debt under any then existing Senior Indebtedness of the Company or any Restricted Subsidiary within 180 days following the receipt of the Asset Sale Proceeds from any Asset Sale; (b) second, to the extent of the balance of Asset Sale Proceeds after application as described above, to the extent the Company elects, to an investment in assets (including Capital Stock or other securities purchased in connection with the acquisition of Capital Stock or property of another Person) used or useful in businesses similar or ancillary to the business of the Company or Restricted Subsidiary as conducted at the time of such Asset Sale, provided that such investment occurs or the Company or a Restricted Subsidiary enters into contractual commitments to make such investment, subject only to customary conditions (other than the obtaining of financing), on or prior to the 181st day following receipt of such Asset Sale Pro ceeds (the "Reinvestment Date") and Asset Sale Proceeds contractually committed are so applied within 270 days following the receipt of such Asset Sale Proceeds; and (c) third, if on the Reinvestment Date with respect to any Asset Sale, the Available Asset Sale Proceeds exceed $10 million, the Company shall apply an amount equal to such Available Asset Sale Proceeds to an offer to repurchase the Notes, or any future Indebtedness ranking pari passu with the Notes, which Indebtedness contains similar provisions requiring the Company to repurchase such Indebtedness at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase (an "Excess Proceeds Offer"); provided, however, that prior to making 50 any such Excess Proceeds Offer, the Company may, to the extent required pursuant to the terms of Indebtedness outstanding as of the Issue Date, offer to use such Available Asset Sale Proceeds to repurchase and use all or a portion of such Available Asset Sale Proceeds to repurchase such Indebtedness. If an Excess Proceeds Offer is not fully subscribed, the Company may retain the portion of the Available Asset Sale Proceeds not required to repurchase Notes for general corporate purposes. If the aggregate principal amount of Notes tendered pursuant to such Excess Proceeds Offer is more than the amount of the Available Asset Sale Proceeds, the Notes tendered will be repurchased on a pro rata basis or by such other method as the Trustee shall deem fair and appropriate. (b) If the Company is required to make an Excess Proceeds Offer, the Company shall mail, within 30 days following the Reinvestment Date (or within 120 days following the Reinvestment Date if the Company is required to make an offer to purchase Indebtedness (other than the Notes) outstanding as of the Issue Date), a notice to the Holders stating, among other things: (1) that such Holders have the right to require the Company to apply the Available Asset Sale Proceeds to repurchase such Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase; (2) the purchase date (the "Purchase Date"), which shall be no earlier than 30 days and not later than 60 days from the date such notice is mailed; (3) the instructions, deter mined by the Company, that each Holder must follow in order to have such Notes repurchased; and (4) the calculations used in determining the amount of Available Asset Sale Proceeds to be applied to the repurchase of such Notes. The Excess Proceeds Offer shall remain open for a period of 20 Business Days following its commencement (the "Offer Period"). The notice, which shall govern the terms of the Excess Proceeds Offer, shall state: (1) that the Excess Proceeds Offer is being made pursuant to this Section 4.10 and the length of time the Excess Proceeds Offer will remain open; (2) the purchase price and the Purchase Date; (3) that any Note not tendered or accepted for 51 payment will not be purchased and will continue to accrue interest; (4) that any Note accepted for payment pursuant to the Excess Proceeds Offer shall cease to accrue interest on and after the Purchase Date so long as payment thereof is not prohibited pursuant to the terms of the Indenture; (5) that Holders electing to have a Note purchased pursuant to any Excess Proceeds Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three Business Days before the Purchase Date; (6) that Holders will be entitled to withdraw their election if the Company, depositary or Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have the Note purchased; (7) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Available Asset Sale Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $l,000, or integral multiples thereof, shall be purchased) or by such other method as the Trustee shall deem fair and appropriate; and (8) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis or by such other method as the Trustee shall 52 deem fair and appropriate to the extent necessary, Notes or portions thereof tendered pursuant to the Excess Proceeds Offer, and deposit with the Paying Agent U.S. legal tender sufficient to pay the purchase price plus accrued interest, if any, on the Notes to be purchased and deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 4.10. The Paying Agent shall promptly (but in any case not later than 5 days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Note tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee shall authenticate and mail or make available for delivery such new Note to such Holder equal in principal amount to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Excess Proceeds Offer on the Purchase Date; provided, however, -------- ------- that prior to making any such Excess Proceeds Offer, the Company may, to the extent required pursuant to the terms of Indebtedness outstanding as of the Issue Date, offer to use such Available Asset Sale Proceeds to repurchase and use all or a portion of such Available Asset Sale Proceeds to repurchase such Indebtedness. If an Excess Proceeds Offer is not fully subscribed, the Company may retain the portion of the Available Asset Sale Proceeds not required to repurchase Notes for general corporate purposes. Section 4.11. Limitation on Transactions with Affiliates. ------------------------------------------ (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate (including entities in which the Company or any of its Restricted Subsidiaries own a minority interest) or holder of 10% or more of the Company's Common Stock (an "Affiliate Transaction") or extend, renew, waive or otherwise modify the terms of any Affiliate Transaction entered into prior to the Issue 53 Date unless (i) such Affiliate Transaction is between or among the Company and its Wholly-Owned Subsidiaries; (ii) such Affiliate Transaction is solely between or among Wholly-Owned Subsidiaries of the Company; or (iii) the terms of such Affiliate Transaction are fair and reasonable to the Company or such Restricted Subsidiary, as the case may be, and the terms of such Affiliate Transaction are at least as favorable as the terms which could be obtained by the Company or such Restricted Subsidiary, as the case may be, in a comparable transaction made on an arm's-length basis between unaffiliated parties; provided, however, that -------- ------- the Company and its Restricted Subsidiaries may renew any then existing Affiliate Transaction through either a renewal option or upon expiration of an arrangement on substantially similar terms to those in effect immediately preceding such expiration. In any Affiliate Transaction involving an amount or having a value in excess of $1 million which is not permitted under clause (i) or (ii) above, the Company must obtain a resolution of the Board of Directors certifying that such Affiliate Transaction complies with clause (iii) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors. In transactions with a value in excess of $3 million which are not permitted under clause (i) or (ii) above, the Company must obtain a written opinion as to the fairness from a financial point of view of such a transaction from an independent investment banking firm of national standing or real estate firm of national standing (as the case may be). (b) The limitations set forth in Section 4.11(a) will not apply to (i) any Restricted Payment that is not prohibited by Section 4.9 hereof, (ii) any trans action, approved by the Board of Directors of the Company in good faith, with an officer, director, employee or consultant of the Company or of any Subsidiary in his or her capacity as an officer, director, employee or consultant entered into in the ordinary course of business, including compensation, indemnity and employee benefit arrangements with any officer, director, employee or consultant of the Company or of any Subsidiary, or (iii) customary investment banking, underwriting, placement agent or financial advisor fees paid in connection with services rendered to the Company or any Subsidiary. 54 Section 4.12. Limitations on Liens. -------------------- The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur or otherwise cause or suffer to exist or become effective any Liens of any kind (other than Permitted Liens) upon any property or asset of the Company or any Restricted Subsidiary or any shares of stock or debt of any Restricted Subsidiary which owns property or assets, now owned or hereafter acquired, in any case which secures Indebtedness pari passu with or ---- ----- subordinated to the Notes unless (i) if such Lien secures Indebtedness which is pari passu with the Notes, then the Notes are secured on an equal and ratable or - ---- ----- senior basis with the obligations so secured until such time as such obligation is no longer secured by a Lien or (ii) if such Lien secures Indebtedness which is subordinated to the Notes, any such Lien shall be subordinated to the Lien granted to the Holders of the Notes in the same collateral to the same extent as such subordinated Indebtedness is subordinated to the Notes. Section 4.13. Limitations on Investments. -------------------------- The Company will not, and will not permit any of its Restricted Subsidiaries to, make any Investment other than (i) a Permitted Investment or (ii) an Investment that is made as a Restricted Payment in compliance with Section 4.9 hereof, after the Issue Date. Section 4.14. Limitation on Creation of Subsidiaries. -------------------------------------- The Company shall not create or acquire, nor permit any of its Restricted Subsidiaries to create or acquire, any Subsidiary other than (i) a Restricted Subsidiary existing as of the date of this Indenture, (ii) a Restricted Subsidiary that is acquired or created after the date of this Indenture, or (iii) an Unrestricted Subsidiary; provided, however, that each -------- ------- Restricted Subsidiary organized under the laws of the United States or any State thereof or the District of Columbia acquired or created pursuant to clause (ii) shall, at the time it has either assets or shareholder's equity in excess of $5,000, execute a guarantee, in the form attached as Exhibit C to this Indenture and reasonably satisfactory in form and substance to the Trustee (and with such docu- 55 mentation relating thereto as the Trustee shall require, including, without limitation, a supplement or amendment to this Indenture and an Opinion of Counsel as to the enforceability of such Guarantee). Section 4.15. Limitation on Other Senior Subordinated Debt. -------------------------------------------- The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, incur, contingently or otherwise, any Indebtedness (other than the Notes and the Guarantees, as the case may be) that is both (i) subordinate in right of payment to any Senior Indebtedness of the Company or its Restricted Subsidiaries, as the case may be, and (ii) senior in right of payment to the Notes and the Guarantees, as the case may be. For purposes of this Section 4.15, Indebtedness is deemed to be senior in right of payment to the Notes and the Guarantees, as the case may be, if it is not explicitly subordinate in right of payment to Senior Indebtedness at least to the same extent as the Notes and the Guarantees, as the case may be, are subordinate to Senior Indebtedness. Section 4.16. Limitation on Sale and Lease-Back Transactions. ---------------------------------------------- The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction unless (i) the consideration received in such Sale and Lease-Back Transaction is at least equal to the fair market value of the property sold, as determined by a Board Resolution, and (ii) the Company could incur the Attributable Indebtedness in respect of such Sale and Lease-Back Transaction in compliance with Section 4.6. Section 4.17. Payments for Consent. -------------------- Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid to all Holders of the Notes which so consent, 56 waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. Section 4.18. Corporate Existence. ------------------- Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, and the corporate, partnership or other existence of each Restricted Subsidiary, in accordance with the respective organizational documents (as the same may be amended from time to time) of each Restricted Subsidiary and the rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; provided, however, that the Company shall not be -------- ------- required to preserve any such right, license or fran chise, or the corporate, partnership or other existence of any of its Restricted Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders. Section 4.19. Change of Control. ----------------- (a) Within 30 days of the occurrence of a Change of Control, the Company shall notify the Trustee in writing of such occurrence and shall make an offer to purchase (the "Change of Control Offer") the outstanding Notes at a purchase price equal to 101% of the principal amount thereof plus any accrued and unpaid interest thereon to the Change of Control Payment Date (as hereinafter defined) (such applicable purchase price being hereinafter referred to as the "Change of Control Pur chase Price") in accordance with the procedures set forth in this Section 4.19. If the Credit Facility is in effect, or any amounts are owing thereunder or in respect thereof, at the time of the occurrence of a Change of Control, prior to the mailing of the notice to Holders described in paragraph (b) below, but in any event within 30 days following any Change of Control, the Company covenants to (i) repay in full all obligations under or in respect of 57 the Credit Facility or offer to repay in full all obligations under or in respect of the Credit Facility and repay the obligations under or in respect of the Credit Facility of each lender who has accepted such offer or (ii) obtain the requisite consent under Credit Facility to permit the repurchase of the Notes pursuant to this Section 4.19. The Company must first comply with the covenant described in the preceding sentence before it shall be required to purchase Notes in the event of a Change of Control; provided that the Company's --------- failure to comply with the covenant described in the preceding sentence constitutes an Event of Default described in clause (3) under Section 6.1 hereof if not cured within 60 days after the notice required by such clause. (b) Within 30 days of the occurrence of a Change of Control, the Company also shall (i) cause a notice of the Change of Control Offer to be sent at least once to the Dow Jones News Service or similar business news service in the United States and (ii) send by first-class mail, postage prepaid, to the Trustee and to each Holder of the Notes, at the address appearing in the register maintained by the Registrar of the Notes, a notice stating: (i) that the Change of Control Offer is being made pursuant to this Section 4.19 and that all Notes tendered will be accepted for payment, and otherwise subject to the terms and conditions set forth herein; (ii) the Change of Control Purchase Price and the purchase date (which shall be a Business Day no earlier than 20 Business Days and no later than 60 Business Days from the date such notice is mailed (the "Change of Control Payment Date")); (iii) that any Note not tendered will not be purchased and will continue to accrue interest; (iv) that, unless the Company defaults in the payment of the Change of Control Purchase Price, any Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; 58 (v) that Holders accepting the offer to have their Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day preceding the Change of Control Payment Date; (vi) that Holders will be entitled to withdraw their acceptance if the Paying Agent receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased; (vii) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, provided that each Note purchased and each such new -------- Note issued shall be in an original principal amount in denominations of $1,000 and integral multiples thereof; (viii) any other procedures that a Holder must follow to accept a Change of Control Offer or effect withdrawal of such acceptance; and (ix) the name and address of the Paying Agent. On the Change of Control Payment Date, the Company shall, to the extent lawful, (i) accept for payment Notes or portions thereof or beneficial interests under a Global Note properly tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the Change of Control Purchase Price of all Notes or portions thereof or beneficial interests so tendered and (iii) deliver or cause to be delivered to the Trustee Notes so accepted together with an Officers' Certificate stating the Notes or portions thereof tendered to the Company. The Paying Agent shall promptly (1) mail to each holder of Notes so ac- 59 cepted and (2) cause to be credited to the respective accounts of the Holders under a Global Note of beneficial interest so accepted payment in an amount equal to the Change of Control Purchase Price for such Notes, and the Company shall execute and issue, and the Trustee shall promptly authenticate and mail to such holder, a new Note equal in principal amount to any unpurchased portion of the Notes surrendered and shall issue a Global Note equal in principal amount to any unpurchased portion of benefi cial interest so surrendered; provided that -------- each such new Note shall be issued in an original principal amount in denominations of $1,000 and integral multiples thereof. (c) (i) If the Company or any Subsidiary thereof has issued any outstanding (A) Indebtedness that is subordinated in right of payment to the Notes or (B) Preferred Stock, and the Company or such Subsidiary is required to make a change of control offer or to make a distribution with respect to such subordinated Indebtedness or Preferred Stock in the event of a Change of Control, the Company shall not consummate any such offer or distribution with respect to such subordinated Indebtedness or Preferred Stock until such time as the Company shall have paid the Change of Control Purchase Price in full to the holders of Notes that have accepted the Company's Change of Control Offer and shall otherwise have consummated the Change of Control Offer made to holders of the Notes and (ii) the Company will not issue Indebtedness that is subordinated in right of payment to the Notes or Preferred Stock with change of control provisions requiring the payment of such Indebtedness or Preferred Stock prior to the payment of the Notes in the event of a Change of Control under this Indenture. In the event that a Change of Control occurs and the Holders of Notes exercise their right to require the Company to purchase Notes, if such purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act at that time, the Company will comply with the requirements of Rule 14e-1 as then in effect with respect to such repurchase. Section 4.20. Maintenance of Office or Agency. ------------------------------- The Company shall maintain an office or agency where Notes may be surrendered for registration or trans- 60 fer or exchange or for presentation for payment and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee as set forth in Section 13.2. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company shall give prompt written notice to the Trustee of such designation or rescission and of any change in the location of any such other office or agency. The Company hereby initially designates the Corporate Trust Office of the Trustee set forth in Section 13.2 as such office of the Company. 61 Section 4.21. Maintenance of Properties and Insurance. --------------------------------------- (a) The Company shall cause all material properties used or useful to the conduct of its business or the business of any of its Subsidiaries to be maintained and kept in good condition, repair and working order (reasonable wear and tear excepted) and supplied with all equipment deemed necessary in the good faith judgment of the Officers of the Company and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in its judgment may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times unless the failure to so maintain such properties (together with all other such failures) would not have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries, taken as a whole; provided, however, that nothing in this Section 4.21 shall prevent the Company - -------- ------- or any Subsidiary from discontinuing the operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is in the good faith judgment of the Board of Directors of the Company or the Subsidiary concerned, as the case may be, desirable in the conduct of the business of the Company or such Subsidiary, as the case may be, and is not adverse in any material respect to the Holders. (b) The Company shall provide or cause to be provided, for itself and each of its Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the reasonable, good faith opinion of the Company are adequate and appropriate for the conduct of the business of the Company and such Subsidiaries in a prudent manner, with reputable insurers or with the government of the United States of America or an agency or instrumentality thereof, in such amounts, with such deductibles, and by such methods as shall be customary, in the good faith judgment of the Company, for corporations similarly situated in the industry, unless the failure to provide such insurance (together with all other such failures) would not have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries, taken as a 62 whole. ARTICLE 5. SUCCESSOR CORPORATION Section 5.1. Limitation on Consolidation, Merger and Sale of Assets. ---------------------------- (a) The Company will not and will not permit any Guarantor to consolidate with, merge with or into, or transfer all or substantially all of its assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions), to any Person unless: (i) the Company or the Guarantor, as the case may be, shall be the continuing Person, or the Person (if other than the Company or the Guarantor) formed by such consolidation or into which the Company or the Guarantor, as the case may be, is merged or to which the properties and assets of the Company or the Guarantor, as the case may be, are transferred shall be a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company or the Guarantor, as the case may be, under the Notes and this Indenture, and the obligations under this Indenture shall remain in full force and effect; (ii) immediately before and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (iii) immediately after giving effect to such transaction on a pro forma basis the Company or such Person could incur at least $1.00 additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.6 hereof, provided, however, that a Guarantor may merge into the Company or another - -------- ------- Guarantor without complying with this clause (iii). (b) In connection with any consolidation, merger or transfer of assets contemplated by this Section 5.1, the Company shall deliver or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, 63 merger or transfer and the supplemental indenture in respect thereto comply with this Section 5.1 and that all conditions precedent herein provided for relating to such transaction or transactions have been complied with. Section 5.2. Successor Person Substituted. ---------------------------- Upon any consolidation or merger, or any transfer of all or substantially all of the assets of the Company or any Guarantor in accordance with Section 5.1 above, the successor corporation formed by such consol idation or into which the Company is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor under this Indenture with the same effect as if such successor corporation had been named as the Company or such Guarantor herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Notes. ARTICLE 6. DEFAULTS AND REMEDIES Section 6.1. Events of Default. ----------------- An "Event of Default" occurs if (1) there is a default in the payment of any principal of, or premium, if any, on the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise, whether or not such payment is prohibited by the provisions of Article 11 hereof; (2) there is a default in the payment of any interest on any Note when the same becomes due and payable and the Default continues for a period of 30 days, whether or not such payment is prohibited by the provisions of Article 11 hereof; (3) the Company or any Guarantor defaults in the observance or performance of any other covenant in the Notes or this Indenture for 60 days after 64 written notice from the Trustee to the Company or written notice from the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding to the Company and the Trustee; (4) there is a default in the payment at final maturity of principal in an aggregate amount of $3,000,000 or more with respect to any Indebtedness of the Company or any Restricted Subsidiary thereof which default shall not be cured, waived or postponed pursuant to an agreement with the holders of such Indebtedness within 60 days after written notice, or the acceleration of any such Indebtedness aggregating $3,000,000 or more which acceleration shall not be rescinded or annulled within 20 days after written notice to the Company of such Default by the Trustee or to the Company and the Trustee by any Holder; (5) a court of competent jurisdiction enters a final judgment or judgments which can no longer be appealed for the payment of money in excess of $3,000,000 (which are not paid or covered by third party insurance by financially sound insurers that have not disclaimed coverage) against the Company or any Restricted Subsidiary thereof and such judgment remains undischarged, for a period of 60 consecutive days during which a stay of enforcement of such judgment shall not be in effect; (6) the Company or any Restricted Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors, or 65 (E) generally is not paying its debts as they become due; or (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Restricted Subsidiary in an involuntary case, (B) appoints a Custodian of the Company or any Restricted Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary, or (C) orders the liquidation of the Company or any Restricted Subsidiary, and, in each case, the order or decree remains unstayed and in effect for 60 consecutive days. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Subject to the provisions of Sections 7.1 and 7.2, the Trustee shall not be charged with knowledge of any Default or Event of Default unless written notice thereof shall have been given to a Trust Officer at the Corporate Trust Office by the Company or any other Person. 66 Section 6.2. Acceleration. ------------ If an Event of Default (other than an Event of Default arising under Section 6.1(6) or (7) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding by written notice to the Company and the Trustee, may declare to be immediately due and payable the entire principal amount of all the Notes then outstanding plus premium, if any, and accrued but unpaid interest to the date of acceleration and (i) such amounts shall become immediately due and payable or (ii) if there are any amounts outstanding under or in respect of the Credit Facility, such amounts shall become due and payable upon the first to occur of an acceleration of amounts outstanding under or in respect of the Credit Facility or five Business Days after receipt by the Company and the Representative of notice of the acceleration of the Notes; provided, however, that after such acceleration but -------- ------- before a judgment or decree based on such acceleration is obtained by the Trustee, the Holders of a majority in aggregate principal amount of the outstanding Notes may rescind and annul such acceleration and its consequences if all existing Events of Default, other than the nonpayment of accelerated principal, premium, if any, or interest that has become due solely because of the acceleration, have been cured or waived and if the rescission would not conflict with any judgment or decree. No such rescission shall affect any subsequent Default or impair any right consequent there to. In case an Event of Default specified in Section 6.1 (6) or (7) with respect to the Company occurs, the principal, premium, if any, and interest amount with respect to all of the Notes shall be due and payable immediately without any declaration or other act on the part of the Trustee or the Holders of the Notes. Section 6.3. Other Remedies. -------------- If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, or premium, if any, and interest on the Notes or to enforce the performance of any provision of 67 the Notes or this Indenture and may take any necessary action requested of it as Trustee to settle, compromise, adjust or otherwise conclude any proceedings to which it is a party. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. Section 6.4. Waiver of Past Defaults and Events of Default. --------------------------- Subject to Sections 6.2, 6.7 and 8.2 hereof, the Holders of a majority in principal amount of the Notes then outstanding have the right to waive any existing Default or Event of Default or compliance with any provision of this Indenture or the Notes. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. Section 6.5. Control by Majority. ------------------- The Holders of a majority in principal amount of the Notes then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee by this Indenture. The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines may be unduly prejudicial to the rights of another Noteholder not taking part in such direction, and the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, determines that the action so directed may not lawfully be taken or if the Trustee in good faith shall, by a Trust Officer, determine that the proceedings so directed may involve it in personal liability; provided that the -------- 68 Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 6.6. Limitation on Suits. ------------------- Subject to Section 6.7 below, a Noteholder may not institute any proceeding or pursue any remedy with respect to this Indenture or the Notes unless: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in aggregate principal amount of the Notes then outstanding make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer, and if requested, provide to the Trustee indemnity reasonably satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60 day period by the Holders of a majority in aggregate principal amount of the Notes then outstanding. A Noteholder may not use this Indenture to prejudice the rights of another Noteholder or to obtain a preference or priority over another Noteholder. Section 6.7. Rights of Holders to Receive Payment. ------------------------------------ Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal of, or premium, if any, and interest of the Note on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, is absolute and unconditional and shall not be impaired or 69 affected without the consent of the Holder. Section 6.8. Collection Suit by Trustee. -------------------------- If an Event of Default in payment of principal, premium or interest specified in Section 6.1(1) or (2) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or the Guarantors (or any other obligor on the Notes) for the whole amount of unpaid principal and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate then borne by the Notes, and such further amounts as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, including all sums due and owing to the Trustee pursuant to Section 7.7. Section 6.9. Trustee May File Proofs of Claim. -------------------------------- The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Noteholders allowed in any judicial proceedings relative to the Company or the Guarantors (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same after deduction of its reasonable charges and expenses to the extent that any such charges and expenses are not paid out of the estate in any such proceedings and any custodian in any such judicial proceeding is hereby authorized by each Noteholder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Noteholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof. 70 Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan or reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceedings. Section 6.10. Priorities. ---------- If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.7 hereof; SECOND: to Noteholders for amounts due and unpaid on the Notes for principal, premium, if any, and interest as to each, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes; and THIRD: to the Company or, to the extent the Trustee collects any amount from any Guarantor, to such Guarantor. The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section 6.10. The Trustee shall give the Company prior notice of any such record date and payment date; provided, however, that --------- ------- the failure to give any such notice shall not affect the establishment of such record date or payment date or any payment to Noteholders pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. --------------------- In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' 71 fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 hereof or a suit by Holders of more than 10% in principal amount of the Notes then outstanding. Section 6.12. Restoration of Rights and Remedies. ---------------------------------- If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE 7. TRUSTEE Section 7.1. Duties of Trustee. ----------------- (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent man would exercise or use under the same circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (1) The Trustee need perform only those duties that are specifically set forth in this Indenture and no others and no implied covenants or obligations shall be read into this Indenture against the Trustee. (2) In the absence of bad faith on its part, 72 the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.1. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Sections 6.2 and 6.5 hereof. (4) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, paragraphs (a), (b), (c), (e) and (f) of this Section 7.1 shall govern every provision of this Indenture that in any way relates to the Trustee. 73 (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity reasonably satisfactory to it against any loss, liability, expense or fee. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company or any Guarantor. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by the law. Section 7.2. Rights of Trustee. ----------------- Subject to Section 7.1 hereof: (1) The Trustee may rely on and shall be protected in acting or refraining from acting upon any document reasonably believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (2) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, or both, which shall conform to the provisions of Section 13.5 hereof. The Trustee shall be protected and shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (3) The Trustee may act through agents and attorneys and shall not be responsible for the misconduct or negligence of any agent or attorney (other than the negligence or willful misconduct of an agent who is an employee of the Trustee) appointed by it with due care. (4) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers; provided that the Trustee's conduct does not -------- constitute negligence or bad faith. (5) The Trustee may consult with counsel of its selection, and the advice or opinion of such 74 counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. Section 7.3. Individual Rights of Trustee. ---------------------------- The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may make loans to, accept deposits from, perform services for or otherwise deal with the Company or any Guarantor, or any Affiliates thereof, with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. The Trustee, however, shall be subject to Sections 7.10 and 7.11 hereof. Section 7.4. Trustee's Disclaimer. -------------------- The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the sale of Notes or any money paid to the Company pursuant to the terms of this Indenture and it shall not be responsible for any statement in the Notes or any document used in connection with the sale of the Notes other than its certificate of authentication. Section 7.5. Notice of Defaults. ------------------ If a Default occurs and is continuing and if it is actually known to the Trustee, the Trustee shall mail to each Noteholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of the principal of, or premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as the board of directors of the Trustee, the executive committee or any trust committee of such board and/or its Trust Officers in good faith determine(s) that withholding the notice is in the interests of the Noteholders. Section 7.6. Reports by Trustee to Holders. ----------------------------- If required by TIA (S) 313(a), within 60 days after March 1 of any year, commencing March 1, 1998, the 75 Trustee shall mail to each Noteholder a brief report dated as of such March 1 that complies with TIA (S) 313(a); provided that no such report need be -------- transmitted if no such events listed in TIA (S) 313(a) have occurred within such period. The Trustee also shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA (S) 313(c) and TIA (S) 313(d). A copy of each report at the time of its mailing to Noteholders shall be filed with the SEC and each stock exchange on which the Notes are listed. The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. Section 7.7. Compensation and Indemnity. -------------------------- The Company and the Guarantors shall pay to the Trustee from time to time such reasonable compensation as shall be agreed in writing between the Company and the Trustee for its services hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust). The Company and the Guarantors shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it in connection with its duties under this Indenture, including the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company and the Guarantors shall indemnify each of the Trustee and any predecessor Trustee for, and hold it harmless against, any and all loss, damage, claim, liability, reasonable expense (including but not limited to reasonable attorneys' fees and expenses) or taxes (other than taxes based on the income of the Trustee) incurred by it in connection with the acceptance or performance of its duties under this Indenture including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder (including, without limitation, settlement costs). The Trustee shall notify the Company and the Guarantors in writing promptly of any claim asserted against the Trustee for which it may seek indemnity. However, the failure by the Trustee to so notify the 76 Company and the Guarantors shall not relieve the Company or the Guarantors of their obligations hereunder. Notwithstanding the foregoing, the Company and the Guarantors need not reimburse the Trustee for any expense or indemnify it against any loss or liability incurred by the Trustee through its negligence or bad faith. To secure the payment obligations of the Company and the Guarantors in this Section 7.7, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee in its capacity as such, except such money or property held in trust to pay principal of and interest on particular Notes. The obligations of the Company and the Guarantors under this Section 7.7 to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall be joint and several liabilities of the Company and each of the Guarantors and shall survive the satisfaction and discharge of this Indenture, including the termination or rejection hereof in any bankruptcy proceeding to the extent permitted by law. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.1(6) or (7) hereof occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. For purposes of this Section 7.7, the term "Trustee" shall include any trustee appointed pursuant to Article 9. Section 7.8. Replacement of Trustee. ---------------------- The Trustee may resign by so notifying the Company and the Guarantors in writing, such resignation to become effective upon the appointment of a successor Trustee. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by notifying the removed Trustee in writing and may appoint a successor Trustee with the Company's written consent which consent shall not be unreasonably withheld. The Company may remove the Trustee at its election if: (1) the Trustee fails to comply with Section 7.10 77 hereof; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof, any Noteholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately following such delivery, the retiring Trustee shall, subject to its rights under Section 7.7 hereof, transfer all property held by it as Trustee to the successor Trustee, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Noteholder. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 hereof shall continue for the benefit of the retiring Trustee. Section 7.9. Successor Trustee by Consolidation, Merger or Conversion. -------------------- If the Trustee consolidates with, merges or 78 converts into, or transfers all or substantially all of its corporate trust assets to, another corporation or national banking association, subject to Section 7.10 hereof, the successor corporation or national banking association without any further act shall be the successor Trustee. Section 7.10. Eligibility; Disqualification. ----------------------------- This Indenture shall always have a Trustee who satisfies the requirements of TIA (S) 310(a)(1) and (2) in every respect. The Trustee shall have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with (S) TIA (S) 310(b), including the provision in (S) 310(b)(1); provided that -------- there shall be excluded from the operation of TIA (S) 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company or the Guarantors are outstanding if the requirements for exclusion set forth in TIA (S) 310(b)(1) are met. Section 7.11. Preferential Collection of Claims Against Company. ---------------------- The Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated therein. Section 7.12. Paying Agents. ------------- The Company shall cause each Paying Agent other than the Trustee to execute and deliver to it and the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 7.12: (A) that it will hold all sums held by it as agent for the payment of principal of, or premium, if any, or interest on, the Notes (whether such sums have been paid to it by the Company or by any obligor on the Notes) in trust for the benefit of Holders 79 of the Notes or the Trustee; (B) that it will at any time during the continuance of any Event of Default, upon written request from the Trustee, deliver to the Trustee all sums so held in trust by it together with a full accounting thereof; and (C) that it will give the Trustee written notice within three (3) Business Days of any failure of the Company (or by any obligor on the Notes) in the payment of any installment of the principal of, premium, if any, or interest on, the Notes when the same shall be due and payable. ARTICLE 8. AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 8.1. Without Consent of Holders. -------------------------- The Company and the Guarantors, if any, when authorized by a Board Resolution of each of them, and the Trustee may modify, waive, amend, restate or supplement this Indenture, the Pledge Agreement or the Notes without notice to or consent of any Noteholder: (1) to comply with Section 5.1 hereof; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; (3) to comply with any requirements of the SEC under the TIA; (4) to cure any ambiguity, defect or inconsistency, or to make any other change that does not materially and adversely affect the rights of any Noteholder; or (5) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Notes. The Trustee is hereby authorized to join with the Company and the Guarantors, if any, in the execution 80 of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects its own rights, duties or immunities under this Indenture. Section 8.2. With Consent of Holders. ----------------------- The Company, the Guarantors, if any, and the Trustee may modify, amend, waive or supplement this Indenture, the Pledge Agreement or the Notes with the written consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Notes without notice to any Noteholder. The Holders of not less than a majority in aggregate principal amount of the outstanding Notes may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes without notice to any Noteholder. Subject to Section 8.4, without the consent of each Noteholder affected, however, an amendment, supplement or waiver, including a waiver pursuant to Section 6.4, may not: (1) reduce the amount of Notes whose Holders must consent to an amendment, modification, supplement or waiver to this Indenture, the Pledge Agreement or the Notes; (2) reduce the rate of or change the time for payment of interest on any Note; (3) reduce the principal of or premium on or change the stated maturity of any Note (4) make any Note payable in money other than that stated in the Note or change the place of payment from New York, New York; (5) change the amount or time of any payment required by the Notes or reduce the premium payable upon any redemption of the Notes in accordance with Section 3.7 hereof, or change the time before which no such redemption may be made; 81 (6) waive a default in the payment of the principal of, or interest on, or redemption payment with respect to, any Note (including any obligation to make a Change of Control Offer or, after the Company's obligation to purchase Notes arises thereunder, an Excess Proceeds Offer or modify any of the provisions or definitions with respect to such offers); (7) make any changes in Sections 6.4 or 6.7 hereof or this sentence of Section 8.2; or (8) affect the ranking of the Notes in a manner adverse to the Holders. After a modification, amendment, supplement or waiver under this Section 8.2 becomes effective, the Company shall mail to the Holders a notice briefly describing the modification, amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such modification, amendment, supplement or waiver. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, modification, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. Section 8.3. Compliance with Trust Indenture Act. ----------------------------------- Every amendment to or supplement of this Indenture or the Notes shall comply with the TIA as then in effect. 82 Section 8.4. Revocation and Effect of Consents. --------------------------------- Until a modification, amendment, supplement, waiver or other action becomes effective, a consent to it by a Holder of a Note is a continuing consent conclusive and binding upon such Holder and every subsequent Holder of the same Note or portion thereof, and of any Note issued upon the transfer thereof or in exchange therefor or in place thereof, even if notation of the consent is not made on any such Note. Any such Holder or subsequent Holder, however, may revoke the consent as to his Note or portion of a Note, if the Trustee receives the notice of revocation before the date the modification, amendment, supplement, waiver or other action becomes effective. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any modification, amendment, supplement, or waiver. If a record date is fixed, then, notwithstanding the preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only such Persons, shall be entitled to consent to such modification, amendment, supplement, or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date unless the consent of the requisite number of Holders has been obtained. After a modification, amendment, supplement, waiver or other action becomes effective, it shall bind every Noteholder, unless it makes a change described in any of clauses (1) through (8) of Section 8.2 hereof. In that case, the modification, amendment, supplement, waiver or other action shall bind each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note. Section 8.5. Notation on or Exchange of Notes. -------------------------------- If a modification, amendment, supplement or waiver changes the terms of a Note, the Trustee may request the Holder of the Note to deliver it to the 83 Trustee. In such case, the Trustee shall place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate and make available for delivery a new security that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such modification, amendment, supplement or waiver. Section 8.6. Trustee to Sign Amendments, etc. -------------------------------- The Trustee shall sign any modification, amendment, supplement or waiver authorized pursuant to this Article 8 if the modification, amendment, supplement or waiver does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such modification, amendment, supplement or waiver, the Trustee shall be entitled to receive and, subject to Section 7.1 hereof, shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating that such modification, amendment, supplement or waiver is authorized or permitted by this Indenture and such supplemental indenture constitutes the legal, valid and binding obligation of the Company and the Guarantors enforceable against each of them in accordance with its terms (subject to customary exceptions). The Company or any Guarantor may not sign a modification, amendment or supplement until the Board of Directors of the Company or such Guarantor, as appropriate, approves it. ARTICLE 9. DISCHARGE OF INDENTURE; DEFEASANCE Section 9.1. Discharge of Indenture. ---------------------- The Company and the Guarantors, if any, may terminate their obligations under the Notes, the Guarantees, if any, and this Indenture, except the obligations referred to in the last paragraph of this Section 9.1, if 84 there shall have been cancelled by the Trustee or delivered to the Trustee for cancellation all Notes thereto fore authenticated and delivered (other than any Notes that are asserted to have been destroyed, lost or stolen and that shall have been replaced as provided in Section 2.7 hereof) and the Company has paid all sums payable by it hereunder or deposited all required sums with the Trustee. After such delivery the Trustee upon request shall acknowledge in writing the discharge of the Company's and the Guarantors' obligations under the Notes, the Guarantees and this Indenture except for those surviving obligations specified below. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company in Sections 2.7, 7.7, 9.5, 9.6 and 9.8 hereof shall survive. Section 9.2. Legal Defeasance. ---------------- The Company may at its option, by Board Resolution, be discharged from its obligations with respect to the Notes and the Guarantors, if any, discharged from their obligations under the Guarantees, if any, on the date the conditions set forth in Section 9.4 below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Notes and to have satisfied all its other obligations under such Notes and this Indenture insofar as such Notes are concerned (and the Trustee, at the expense of the Company, shall, subject to Section 9.6 hereof, execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of outstanding Notes to receive solely from the trust funds described in Section 9.4 hereof and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (B) the Company's obligations with respect to such Notes under Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.8 and 4.20 hereof, (C) the rights, powers, trusts, duties, and immunities of the Trustee hereunder (including claims of, or payments to, the Trustee under or pursuant to Section 85 7.7 hereof) and (D) this Article 9. Subject to compliance with this Article 9, the Company may exercise its option under this Section 9.2 with respect to the Notes notwithstanding the prior exercise of its option under Section 9.3 below with respect to the Notes. Section 9.3. Covenant Defeasance. ------------------- At the option of the Company, pursuant to a Board Resolution, the Company and the Guarantors, if any, shall be released from their respective obligations under Sections 4.2 through 4.19 hereof, inclusive, and clause (a) (iii) of Section 5.1 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 9.4 hereof are satisfied (hereinafter, "Covenant Defeasance") and the Notes shall thereafter be deemed to not be outstanding for purposes of any direction, waiver, consent, declaration or act of the Holders (and the consequences thereof) in connection with such covenants but shall continue to be outstanding for all other purposes hereunder. For this purpose, such Covenant Defeasance means that the Company and the Guarantors, if any, may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such specified Section or portion thereof, whether directly or indirectly by reason of any reference elsewhere herein to any such specified Section or portion thereof or by reason of any reference in any such specified Section or portion thereof to any other provision herein or in any other document, but the remainder of this Indenture and the Notes shall be unaffected thereby. 86 Section 9.4. Conditions to Defeasance or Covenant Defeasance. ------------------------------------ The following shall be the conditions to application of Section 9.2 or Section 9.3 hereof to the outstanding Notes: (1) the Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10 hereof who shall agree to comply with the provisions of this Article 9 applicable to it) as funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Notes, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally-recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of, premium, if any, and accrued interest on the outstanding Notes at the maturity date of such principal, premium, if any, or interest, or on dates for payment and redemption of such principal, premium, if any, and interest selected in accordance with the terms of this Indenture and of the Notes; (2) no Event of Default or Default with respect to the Notes shall have occurred and be continuing on the date of such deposit, or shall have occurred and be continuing at any time during the period ending on the 91st day after the date of such deposit or, if longer, ending on the day following the expiration of the longest preference period under any Bankruptcy Law applicable to the Company in respect of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (3) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or consti- 87 tute default under any other agreement or instrument to which the Company is a party or by which it is bound; (4) the Company shall have delivered to the Trustee an Opinion of Counsel stating that, as a result of such Legal Defeasance or Covenant Defeasance, neither the trust nor the Trustee will be required to register as an investment company under the Investment Company Act of 1940, as amended; (5) in the case of an election under Section 9.2 above, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling to the effect that or (ii) there has been a change in any applicable Federal income tax law with the effect that, and such opinion shall confirm that, the Holders of the outstanding Notes or persons in their positions will not recognize income, gain or loss for Federal income tax purposes solely as a result of such Legal Defeasance and will be subject to Federal income tax on the same amounts, in the same manner, including as a result of prepayment, and at the same times as would have been the case if such Legal Defeasance had not occurred; (6) in the case of an election under Section 9.3 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (7) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Legal Defeasance under Section 9.2 above or the Covenant Defeasance under Section 9.3 hereof (as the case may be) have been complied with; and (8) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit under clause (1) was not made by the Company with the intent of 88 defeating, hindering, delaying or defrauding any creditors of the Company or others. Section 9.5. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. ----------------------------------------- All money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to Section 9.4 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent as the Trustee may determine, to the Holders of such Notes, of all sums due and to become due thereon in respect of principal, premium, if any, and accrued interest, but such money need not be segregated from other funds except to the extent required by law. The Trustee shall be under no duty to invest such money or U.S. Government Obligations. The Company and the Guarantors shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 9.4 hereof or the principal, premium, if any, and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 9 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 9.4 hereof which, in the opinion of a nationally-recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 9.6. Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 9.1, 9.2 or 9.3 hereof by reason of 89 any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the obligations of the Company and any Guarantor under this Indenture, the Notes and the Guarantees, if any, shall be revived and reinstated as though no deposit had occurred pursuant to this Article 9 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 9.1 hereof; provided, however, -------- ------- that if the Company or any Guarantors have made any payment of, principal of, premium, if any, or accrued interest on any Notes because of the reinstatement of their obligations, the Company or such Guarantors, as the case may be, shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. Section 9.7. Moneys Held by Paying Agent. --------------------------- In connection with the satisfaction and discharge of this Indenture, all moneys then held by any Paying Agent under the provisions of this Indenture shall, upon demand of the Company, be paid to the Trustee, or if sufficient moneys have been deposited pursuant to Section 9.4 hereof, to the Company (or, if such moneys had been deposited by any Guarantors, to such Guarantors), and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. Section 9.8. Moneys Held in Trust. -------------------- Any moneys deposited with the Trustee or any Paying Agent or then held by the Company or any Guarantors in trust for the payment of the principal of, or premium, if any, or interest on any Note that are not applied but remain unclaimed by the Holder of such Note for two years after the date upon which the principal of, or premium, if any, or interest on such Note shall have respectively become due and payable shall be paid to the Company or, if appropriate, the Guarantors, upon Company Request, or if such moneys are then held by the Company or any Guarantors in trust, such moneys shall be released from such trust; and all liability of the Trustee or such Paying Agent with respect to such trust money shall thereupon cease; provided, however, that the -------- ------- Trustee or 90 any such Paying Agent, before being required to make any such repayment, may, at the expense of the Company and the Guarantors, if any, either mail to each Noteholder affected, at the address shown in the register of the Notes maintained by the Registrar pursuant to Section 2.3 hereof, or cause to be published once a week for two successive weeks, in a newspaper published in the English language, customarily published each Business Day and of general circulation in The City of New York, New York, a notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such mailing or publication, any unclaimed balance of such moneys then remaining will be repaid to the Company. After payment to the Company or the Guarantors, if any, or the release of any money held in trust by the Company or any Guarantors, as the case may be, Noteholders entitled to the money must look only to the Company and any Guarantors for payment as general creditors unless applicable abandoned property law designates another person. 91 ARTICLE 10. GUARANTEE OF NOTES Section 10.1. Guarantee. --------- Subject to the provisions of this Article 10, each Guarantor, by execution of the Guarantee, will jointly and severally unconditionally guarantee to each Holder and to the Trustee, on behalf of the Holders, (i) the due and punctual payment of the principal of, and premium, if any, and interest on each Note, when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal of, and premium, if any, and interest on the Notes, to the extent lawful, and the due and punctual performance of all other Obligations of the Company to the Holders or the Trustee all in accordance with the terms of such Note and this Indenture, and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other Obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at stated maturity, by acceleration or otherwise. Each Guarantor, by execution of the Guarantee, will agree that its obligations thereunder and hereunder shall be absolute and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or unenforceability of any such Note or this Indenture, any failure to enforce the provisions of any such Note or this Indenture, any waiver, modification or indulgence granted to the Company with respect thereto by the Holder of such Note or the Trustee, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or such Guarantor. Each Guarantor, by execution of the Guarantee, will waive diligence, presentment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to any such Note or the Indebtedness evidenced thereby and all demands whatsoever, and will covenant that the Guarantee will not be discharged as to any such Note except by 92 payment in full of the principal thereof, premium if any, and interest thereon and as provided in Section 9.1 hereof. Each Guarantor, by execution of the Guarantee, will further agree that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the Obligations guaranteed by the Guarantee may be accelerated as provided in Article 6 hereof for the purposes of the Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed thereby, and (ii) in the event of any declaration of acceleration of such Obligations as provided in Article 6 hereof, such Obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of the Guarantee. In addition, without limiting the foregoing provisions, upon the effectiveness of an acceleration under Article 6 hereof, the Trustee shall promptly make a demand for payment on the Notes under the Guarantee provided for in this Article 10 and not discharged. Failure to make such demand shall not affect the validity or enforceability of the Guarantee upon any Guarantor. A Guarantee shall not be valid or become obligatory for any purpose with respect to a Note unless the certificate of authentication on such Note shall have been signed by or on behalf of the Trustee. Section 10.2. Execution and Delivery of Guarantees. ------------------------------------ A Guarantee shall be executed on behalf of a Guarantor by the manual or facsimile signature of an Officer of such Guarantor. A guarantee need not be affixed to a Note, and the validity and enforceability of any Guarantee shall not be affected by the fact that it is not so affixed. If an Officer of a Guarantor whose signature is on the Guarantee no longer holds that office, such Guarantee shall be valid nevertheless. Section 10.3. Limitation of Guarantee. ----------------------- The obligations of each Guarantor will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of 93 such Guarantor (including, without limitation, any guarantees of Senior Indebtedness) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under this Indenture, result in the obligations of such Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under Federal or state law. Each Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a contribution from each other Guarantor in a pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor. Section 10.4. Release of Guarantor. -------------------- A Guarantor shall be released from all of its obligations under its Guarantee if: (i) the Guarantor has sold all or substantially all of its assets or the Company and its Restricted Subsidiaries have sold all of the Capital Stock of the Guarantor owned by them, in each case in a transaction in compliance with Sections 4.10 and 5.1 hereof to the extent applicable; or (ii) the Guarantor merges with or into or consolidates with, or transfers all or substantially all of its assets to, the Company or another Guarantor in a transaction in compliance with Section 5.1 hereof; and in each such case, the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to such transactions have been complied with. Section 10.5. Guarantee Obligations Subordinated to Guarantor Senior Indebtedness. ------------ Each Guarantor, by execution of the Guarantee, will covenant and agree, and each Holder of Notes, by its acceptance thereof, likewise covenants and agrees, that to the extent and in the manner hereinafter set forth in this Article 10, the Indebtedness represented by the 94 Guarantee and the payment of any Obligations pursuant to the Guarantee by such Guarantor are hereby expressly made subordinate and subject in right of payment as provided in this Article 10 to the prior indefeasible payment and satisfaction in full in cash or, as acceptable to the holders of Guarantor Senior Indebtedness of such Guarantor, in any other manner, of all existing and future Guarantor Senior Indebtedness of such Guarantor. This Section 10.5 and the following Sections 10.6 through 10.11 shall constitute a continuing offer to all Persons who, in reliance upon such provisions, become holders of or continue to hold Guarantor Senior Indebtedness of any Guarantor; and such provisions are made for the benefit of the holders of Guarantor Senior Indebtedness of each Guarantor; and such holders are made obligees hereunder and they or each of them may enforce such provisions. Section 10.6. Payment Over of Proceeds upon Dissolution, etc., of a Guarantor. --------------------------------------------------------------- In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to any Guarantor or to its creditors, as such, or to its assets, whether voluntary or involuntary, or (b) any liquidation, dissolution or other winding-up of any Guarantor, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (c) any general assignment for the benefit of creditors or any other marshaling of assets or liabilities of any Guarantor, then and in any such event: (1) the holders of all Guarantor Senior Indebtedness of such Guarantor shall be entitled to receive payment and satisfaction in full in cash or, as acceptable to the holders of such Guarantor Senior Indebtedness, in any other manner, of all amounts due on or in respect of all such Guarantor Senior Indebtedness, before the Holders of the Notes are entitled to receive or retain, pursuant to the Guarantee of such Guarantor, any payment or distribution of any kind or character by such Guarantor on account of any of its Obligations on its Guarantee; and 95 (2) any payment or distribution of assets of such Guarantor of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the subordination provisions of this Article 10 shall be paid by the liquidating trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Guarantor Senior Indebted ness of such Guarantor or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Guarantor Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of such Guarantor Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash or, as acceptable to the holders of such Guarantor Senior Indebtedness of such Guarantor, in any other manner, of all such Guarantor Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Guarantor Senior Indebtedness; and (3) in the event that, notwithstanding the foregoing provisions of this Section 10.6, the Trustee or the Holder of any Note shall have received any payment or distribution of assets of such Guarantor of any kind or character, whether in cash, property or securities, including, without limitation, by way of set-off or otherwise, in respect of any of its Obligations on its Guarantee before all Guarantor Senior Indebtedness of such Guarantor is paid and satisfied in full in cash or such payment and satisfaction thereof in cash is provided for, then and in such event such payment or distribution upon written notice to the Trustee or the Holder of such Note, as the case may be, shall be held by the Trustee or the Holder of such Note, as the case may be, in trust for the benefit of the holders of such Guarantor or Senior Indebtedness and shall be immediately paid over or delivered forthwith to the liquidating trustee or agent or other Person making payment or distribution of assets of such Guarantor 96 for application to the payment of all such Guarantor Senior Indebtedness remaining unpaid, to the extent necessary to pay all of such Guarantor Senior Indebtedness in full in cash or, as acceptable to the holders of such Guarantor Senior Indebtedness, any other manner, after giving effect to any concurrent payment or distribution to or for the holders of such Guarantor Senior Indebtedness. The consolidation of a Guarantor with, or the merger of a Guarantor with or into, another Person or the liquidation or dissolution of a Guarantor following the transfer of all of its assets (as an entirety or substantially as an entirety) to another Person upon the terms and conditions set forth in Article 5 hereof shall not be deemed a dissolution, winding-up, liquidation, reorganization, assignment for the benefit of creditors or marshaling of assets and liabilities of such Guarantor for the purposes of this Article 10 if the Person formed by such consolidation or the surviving entity of such merger or the Person which acquires by transfer such assets (as an entirety or substantially as an entirety) shall, as a part of such consolidation, merger or transfer comply with the conditions set forth in such Article 5 hereof. Section 10.7. Suspension of Guarantee Obligations When Guarantor Senior Indebtedness in Default. --------------------------------------------------------- (a) Unless Section 10.6 hereof shall be applicable, after the occurrence of a Payment Default, no payment or distribution of any assets or securities of a Guarantor (or any Restricted Subsidiary or Subsidiary of such Guarantor) of any kind or character (including, without limitation, cash, property and any payment or distribution which may be payable or deliverable by reason of the payment of any other Indebtedness of such Guarantor being subordinated to its Obligations on its Guarantee) may be made by or on behalf of such Guarantor (or any Restricted Subsidiary or Subsidiary of such Guarantor), including, without limitation, by way of set-off or otherwise, for or on account of its Obligations on its Guarantee, and neither the Trustee nor any holder or owner of any Notes shall take or receive from any Guarantor (or any Restricted Subsidiary or Subsidiary of such Guarantor), directly or indirectly in any manner, payment 97 in respect of all or any portion of its Obligations on its Guarantee following the delivery by the representative of the holders of Guarantor Senior Indebtedness (the "Guarantor Representative") to the Trustee of written notice of (i) the occurrence of a Payment Default on Designated Senior Indebtedness which constitutes Guaran tor Senior Indebtedness or (ii) the occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness which constitutes Guarantor Senior Indebtedness and the acceleration of the maturity of such Designated Senior Indebtedness in accordance with its terms, and in any such event, such prohibition shall continue until such Payment Default is cured, waived in writing or ceases to exist or such acceleration has been rescinded or otherwise cured. At such time as the prohibition set forth in the preceding sentence shall no longer be in effect, subject to the provisions of the following paragraph (b), such Guarantor shall resume making any and all required payments in respect of its Obligations under its Guarantee. (b) Unless Section 10.6 hereof shall be applicable, upon the occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness which constitutes Guarantor Senior Indebtedness of any Guarantor, no payment or distribution of any assets or securities of such Guarantor of any kind or character (including, without limitation, cash, property and any payment or distribution which may be payable or deliverable by reason of the payment of any other Indebtedness of such Guarantor being subordinated to its Obligations on its Guarantee) shall be made by such Guarantor, including, without limitation, by way of set-off or otherwise, for or on account of any of its Obligations on its Guarantee, and neither the Trustee nor any holder or owner of any Notes shall take or receive from any Guarantor (or any Restricted Subsidiary or Subsidiary of such Guarantor), directly or indirectly in any manner, payment in respect of all or any portion of its Obligations on its Guarantee for a period (a "Guarantee Payment Blockage Period") commencing on the date of receipt by the Trustee of written notice from the Guarantor Representative of such Non-Payment Event of Default, unless and until (subject to any blockage of payments that may then be in effect under the preceding paragraph (a)) the earliest to occur of the following events: (x) more than 179 days shall 98 have elapsed since the date of receipt of such written notice by the Trustee, (y) such Non-Payment Event of Default shall have been cured or waived in writing or shall have ceased to exist or such Designated Senior Indebtedness shall have been paid in full in cash and the Trustee has been so notified either by the Guarantor Representative or such Guarantor or (z) such Guarantee Payment Blockage Period shall have been terminated by written notice to such Guarantor or the Trustee from the Guarantor Representative, after which, in the case of clause (x), (y) or (z), such Guarantor shall resume making any and all required payments in respect of its Obligations on its Guarantee, including any missed payments. Notwithstanding any other provisions of this Indenture, no event of default with respect to Designated Senior Indebtedness which constitutes Guarantor Senior Indebtedness (other than a Payment Default) which existed or was continuing on the date of the commencement of any Guarantee Payment Blockage Period initiated by the Guarantor Representative shall be, or be made, the basis for the commencement of a second Guarantee Payment Blockage Period initiated by the Guarantor Representative unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days. In no event shall a Guarantee Payment Blockage Period extend beyond 179 days from the date of the receipt by the Trustee of the notice referred to in this Section 10.7(b) or, in the event of a Non-Payment Event of Default which formed the basis for a Payment Blockage Period under Section 11.3(b) hereof, 179 days from the date of the receipt by the Trustee of the notice referred to Section 11.3(b) (the "Initial Guarantee Blockage Period"). Any number of additional Guarantee Payment Blockage Periods may be commenced during the Initial Guarantee Blockage Period; provided, however, that no such additional Guarantee Payment Blockage -------- ------- Period shall extend beyond the Initial Guarantee Blockage Period. After the expiration of the Initial Guarantee Blockage Period, no Guarantee Payment Blockage Period may be commenced under this Section 10.7(b) and no Payment Blockage Period may be commenced under Section 11.3(b) hereof until at least 180 consecutive days have elapsed from the last day of the Initial Guarantee Blockage Period. (c) In the event that, notwithstanding the foregoing, the Trustee or the Holder of any Note shall 99 have received any payment from a Guarantor prohibited by the foregoing provisions of this Section 10.7, then and in such event such payment shall be paid over and delivered forthwith to the Guarantor Representative initiating the Guarantee Payment Blockage Period, in trust for distribution to the holders of Guarantor Senior Indebtedness or, if no amounts are then due in respect of Guarantor Senior Indebtedness, promptly returned to the Guarantor, or as a court of competent jurisdiction shall direct. Section 10.8. Subrogation to Rights of Holders of Guarantor Senior Indebtedness. ---------------------------------------------------- Upon the payment in full of all amounts payable under or in respect of all Guarantor Senior Indebtedness of a Guarantor, the Holders shall be subrogated to the rights of the holders of such Guarantor Senior Indebtedness to receive payments and distributions of cash, property and securities of such Guarantor made on such Guarantor Senior Indebtedness until all amounts due to be paid under the Guarantee shall be paid in full. For the purposes of such subrogation, no payments or distributions to holders of Guarantor Senior Indebtedness of any cash, property or securities to which Holders of the Notes or the Trustee would be entitled except for the provisions of this Article 10, and no payments over pursuant to the provisions of this Article 10 to holders of Guarantor Senior Indebtedness by Holders of the Notes or the Trustee, shall, as among each Guarantor, its creditors other than holders of Guarantor Senior Indebtedness and the Holders of the Notes, be deemed to be a payment or distribution by such Guarantor to or on account of such Guarantor Senior Indebtedness. If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article 10 shall have been applied, pursuant to the provisions of this Article 10, to the payment of all amounts payable under Guarantor Senior Indebtedness, then and in such case, the Holders shall be entitled to receive from the holders of such Guarantor Senior Indebtedness at the time outstanding any payments or distributions received by such holders of Guarantor Senior Indebtedness in excess of the amount sufficient to indefeasibly pay all amounts payable under or in respect 100 of such Guarantor Senior Indebtedness in full in cash. Section 10.9. Guarantee Subordination Provisions Solely to Define Relative Rights. ---------------------------------- The subordination provisions of this Article 10 are and are intended solely for the purpose of defining the relative rights of the Holders of the Notes on the one hand and the holders of Guarantor Senior Indebtedness on the other hand. Nothing contained in this Article 10 or elsewhere in this Indenture or in the Notes is intended to or shall (a) impair, as among each Guarantor, its creditors other than holders of its Guarantor Senior Indebtedness and the Holders of the Notes, the obligation of such Guarantor, which is absolute and unconditional, to make payments to the Holders in respect of its Obligations on its Guarantee in accordance with its terms; or (b) affect the relative rights against such Guarantor of the Holders of the Notes and creditors of such Guarantor other than the holders of the Guarantor Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon a Default or an Event of Default under this Indenture, subject to the rights, if any, under this Article 10 of the holders of Guarantor Senior Indebtedness (1) in any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, arrangement, reorganization or other similar case or proceeding in connection therewith or any liquidation, dissolution or other winding-up, or any assignment for the benefit of creditors or other marshaling of assets and liabilities referred to in Section 10.6 hereof, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (2) under the conditions specified in Section 10.7 hereof, to prevent any payment prohibited by such Section or enforce their rights pursuant to Section 10.7(c) hereof. The failure by any Guarantor to make a payment in respect of its obligations on its Guarantee by reason of any provision of this Article 10 shall not be construed as preventing the occurrence of a Default or an Event of Default hereunder. Section 10.10. Application of Certain 101 Article 11 Provisions. --------------------- The provisions of Sections 11.4, 11.7, 11.8, 11.9, 11.10, 11.12 and 11.13 hereof shall apply, mutatis mutandis, to each Guarantor and their ------- -------- respective holders of Guarantor Senior Indebtedness and the rights, duties and obligations set forth therein shall govern the rights, duties and obligations of each Guarantor, the holders of Guarantor Senior Indebtedness, the Holders and the Trustee with respect to the Guarantee and all references therein to Article 11 hereof shall mean this Article 10. Section 10.11 Rights of Trustee as a Holder of Guarantor Senior Indebtedness; Preservation of Trustee's Rights. -------------------------------------------------------------- The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article 10 with respect to any Guarantor Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Guarantor Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.7 hereof. ARTICLE 11. SUBORDINATION OF NOTES Section 11.1. Notes Subordinate to Senior Indebtedness. ---------------------------------------- The Company covenants and agrees, and each Holder of Notes, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article 11, the Indebtedness represented by the Notes and the payment of the principal of, premium, if any, and interest on the Notes are hereby expressly made subordinate and subject in right of payment as provided in this Article 11 to the prior indefeasible payment and satisfaction in full in cash or, as acceptable to the holders of Senior Indebtedness, in any other manner, of all existing and future 102 Senior Indebtedness. This Article 11 shall constitute a continuing offer to all Persons who, in reliance upon such provisions, become holders of or continue to hold Senior Indebtedness; and such provisions are made for the benefit of the holders of Senior Indebtedness; and such holders are made obligees hereunder and they or each of them may enforce such provisions. Section 11.2. Payment Over of Proceeds upon Dissolution, etc. ----------------------------- In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, whether voluntary or involuntary or (b) any liquidation, dissolution or other winding-up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any general assignment for the benefit of creditors or any other marshalling of assets or liabilities of the Company, then and in any such event: (1) the holders of Senior Indebtedness shall be entitled to receive payment and satisfaction in full in cash or, as acceptable to the holders of Senior Indebtedness, in any other manner, of all amounts due on or in respect of all Senior Indebtedness, before the Holders of the Notes are entitled to receive or retain any payment or distribution of any kind or character on account of principal of, premium, if any, or interest on the Notes; and (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article 11 shall be paid by the liquidating trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees 103 under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash or, as acceptable to the holders of Senior Indebtedness, in any other manner, of all Senior Indebtedness remaining unpaid, after giving effect to any con current payment or distribution, or provision therefor, to the holders of such Senior Indebtedness; and (3) in the event that, notwithstanding the foregoing provisions of this Section 11.2, the Trustee or the Holder of any Note shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including, without limitation, by way of set-off or otherwise, in respect of principal of, premium, if any, and interest on the Notes before all Senior Indebtedness is paid and satisfied in full in cash or such payment and satisfaction thereof in cash is provided for, then and in such event such payment or distribution upon written notice to the Trustee or the Holder of such Note, as the case may be, shall be held by the Trustee or the Holder of such Note, as the case may be, in trust for the benefit of the holders of such Senior Indebtedness and shall be immediately paid over or delivered forthwith to the liquidating trustee or agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full in cash or, as acceptable to the holders of Senior Indebtedness, any other manner, after giving effect to any concurrent payment or distribution, or provision therefor, to or for the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company with or into, another Person or the liquidation or dissolution of the Company following the transfer of all its assets (as an entirety or substantially as an entirety) to another Person upon the terms 104 and conditions set forth in Article 5 hereof shall not be deemed a dissolution, winding-up, liquidation, reorganization, assignment for the benefit of creditors or marshaling of assets and liabilities of the Company for the purposes of this Article 11 if the Person formed by such consolidation or the surviving entity of such merger or the Person which acquires by transfer such assets (as an entirety or substantially as an entirety) shall, as a part of such consolidation, merger or transfer, comply with the conditions set forth in such Article 5 hereof. 105 Section 11.3. Suspension of Payment When Senior Indebtedness in Default. --------------------------------- (a) Unless Section 11.2 hereof shall be applicable, after the occurrence of a Payment Default no payment or distribution of any assets or securities of the Company or any Restricted Subsidiary of any kind or character (including, without limitation, cash, property and any payment or distribution which may be payable or deliverable by reason of the payment of any other Indebtedness of the Company being subordinated to the payment of the Notes by the Company) may be made by or on behalf of the Company or any Restricted Subsidiary, including, without limitation, by way of set-off or otherwise, for or on account of principal of, premium, if any, or interest on the Notes, or for or on account of the purchase, redemption, defeasance or other acquisition of the Notes, and neither the Trustee nor any holder or owner of any Notes shall take or receive from the Company or any Restricted Subsidiary, directly or indirectly in any manner, payment in respect of all or any portion of Notes following the delivery by the representative of the holders of Designated Senior Indebtedness (the "Representative") to the Trustee of written notice of (i) the occurrence of a Payment Default on Designated Senior Indebtedness or (ii) the occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness and the acceleration of the maturity of Designated Senior Indebtedness in accordance with its terms, and in any such event, such prohibition shall continue until such Payment Default is cured, waived in writing or ceases to exist or such acceleration has been rescinded or otherwise cured; provided that -------- nothing in this sentence shall be deemed to affect the right of the Holders to receive solely from the funds deposited in trust pursuant to clause (1) of Section 9.4 hereof prior to the date of such Payment Default and as more fully set forth in such Section payments or distributions in respect of the principal of, premium, if any, and interest on the Notes in connection with any Legal Defeasance or Covenant Defeasance. At such time as the prohibition set forth in the preceding sentence shall no longer be in effect, subject to the provisions of the following paragraph (b), the Company shall resume making any and all required payments in respect of the Notes, including any missed payments. (b) Unless Section ll.2 hereof shall be applicable, upon the occurrence of a Non-Payment Event of 106 Default on Designated Senior Indebtedness, no payment or distribution of any assets or securities of the Company of any kind or character (including, without limitation, cash, property and any payment or distribution which may be payable or deliverable by reason of the payment of any other Indebtedness of the Company being subordinated to the payment of the Notes by the Company) shall be made by or on behalf of the Company, including, without limitation, by way of set-off or otherwise, for or on account of any principal of, premium, if any, or interest on the Notes or for or on account of the purchase, redemption, defeasance or other acquisition of Notes, and neither the Trustee nor any holder or owner of any Notes shall take or receive from the Company, directly or indirectly in any manner, payment in respect of all or any portion of the Notes, for a period (a "Payment Blockage Period") commencing on the date of receipt by the Trustee of written notice from the Representative of such Non-Payment Event of Default unless and until (subject to any blockage of payments that may then be in effect under the preceding paragraph (a)) the earliest to occur of the following events: (x) more than 179 days shall have elapsed since the date of receipt of such written notice by the Trustee, (y) such Non-Payment Event of Default shall have been cured or waived in writing or shall have ceased to exist or such Designated Senior Indebtedness shall have been paid in full in cash and the Trustee has been so notified by either the Representative or the Company or (z) such Payment Blockage Period shall have been terminated by written notice to the Company or the Trustee from the Representative, after which, in the case of clause (x), (y) or (z), the Company shall resume making any and all required payments in respect of the Notes, including any missed payments. Notwithstanding any other provisions of this Indenture, no event of default with respect to Designated Senior Indebtedness (other than a Payment Default) which existed or was continuing on the date of the commencement of any Payment Blockage Period initiated by the Representative shall be, or be made, the basis for the commencement of a second Payment Blockage Period initiated by the Representative unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days. In no event shall a Payment Blockage Period extend beyond 179 days from the date of the receipt by the Trustee of the notice referred to in this Section 11.3(b) 107 (the "Initial Blockage Period"). Any number of additional Payment Blockage Periods may be commenced during the Initial Blockage Period; provided, however, -------- ------- that no such additional Payment Blockage Period shall extend beyond the Initial Blockage Period. After the expiration of the Initial Blockage Period, no Payment Blockage Period may be commenced under this Section 11.3(b) and no Guarantee Payment Blockage Period may be commenced under Section 10.7(b) hereof until at least 180 consecutive days have elapsed from the last day of the Initial Blockage Period. (c) In the event that, notwithstanding the foregoing, the Trustee or the Holder of any Note shall have received any payment prohibited by the foregoing provisions of this Section 11.3, then and in such event such payment shall be paid over and delivered forthwith to the Representative initiating the Payment Blockage Period, in trust for distribution to the holders of Senior Indebtedness or, if no amounts are then due in respect of Senior Indebtedness, promptly returned to the Company, or otherwise as a court of competent jurisdiction shall direct. Section 11.4. Trustee's Relation to Senior Indebtedness. ---------------------------- With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article 11, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall not be liable to any holder of Senior Indebtedness if it shall mistakenly pay over or deliver to Holders, the Company or any other Person moneys or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article 11 or otherwise. 108 Section 11.5. Subrogation to Rights of Holders of Senior Indebtedness. -------------------------------- Upon the payment in full of all Senior Indebtedness, the Holders of the Notes shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of, premium, if any, and interest on the Notes shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Holders of the Notes or the Trustee would be entitled except for the provisions of this Article 11, and no payments pursuant to the provisions of this Article 11 to the holders of Senior Indebtedness by Holders of the Notes or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Notes, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article 11 shall have been applied, pursuant to the provisions of this Article 11, to the payment of all amounts payable under the Senior Indebtedness of the Company, then and in such case the Holders shall be entitled to receive from the holders of such Senior Indebtedness at the time outstanding any payments or distributions received by such holders of such Senior Indebtedness in excess of the amount sufficient to indefeasibly pay all amounts payable under or in respect of such Senior Indebtedness in full in cash. Section 11.6. Provisions Solely to Define Relative Rights. ------------------------------------------- The provisions of this Article 11 are and are intended solely for the purpose of defining the relative rights of the Holders of the Notes on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Notes is intended to or shall (a) impair, as among the Company, its creditors other than 109 holders of Senior Indebtedness and the Holders of the Notes, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Notes the principal of, premium, if any, and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or (b) affect the relative rights against the Company of the Holders of the Notes and creditors of the Company other than the holders of Senior Indebtedness or (c) prevent the Trustee or the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon a Default or an Event of Default under this Indenture, subject to the rights, if any, under this Article 11 of the holders of Senior Indebtedness (1) in any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, arrangement, reorganization or other similar case or proceeding in connection therewith, or any liquidation, dissolution or other winding-up, or any assignment for the benefit of creditors or other marshaling of assets and liabilities referred to in Section 11.2 hereof, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (2) under the conditions specified in Section 11.3, to prevent any payment prohibited by such Section or enforce their rights pursuant to Section 11.3(c) hereof. The failure to make a payment on account of principal of, premium, if any, or interest on the Notes by reason of any provision of this Article 11 shall not be construed as preventing the occurrence of a Default or an Event of Default hereunder. Section 11.7. Trustee to Effectuate Subordination. ----------------------------------- Each Holder of a Note by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company whether in bankruptcy, insolvency, receivership proceedings, or otherwise, the timely filing of a claim for the unpaid balance of the indebtedness of the Company owing to such Holder in the form required in such 110 proceedings and the causing of such claim to be approved. If the Trustee does not file such a claim prior to 30 days before the expiration of the time to file such a claim, the holders of Senior Indebtedness, or any Representative, may file such a claim on behalf of Holders of the Notes. Section 11.8. No Waiver of Subordination Provisions. ------------------------------------- (a) No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without limiting the generality of subsection (a) of this Section 11.8, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article 11 or the obligations hereunder of the Holders of the Notes to the holders of Senior Indebtedness, do any one or more of the following: (1) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same (or any agreement under which Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any Person liable in any manner for the collection or payment of Senior Indebtedness; and (4) exercise or refrain from exercising any rights against the Company and any other Person; provided, however, that in no -------- ------- event shall any such actions limit the right of the Holders of the Notes to take any action to accelerate the maturity of the Notes pursuant to Article 6 hereof or to pursue any rights or remedies hereunder or under applicable laws if the taking of such action does not otherwise violate the terms of this Indenture. 111 Section 11.9. Notice to Trustee. ----------------- (a) The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee at its Corporate Trust Office in respect of the Notes. Notwithstanding the provisions of this Article 11 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Notes, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of this Section 11.9, shall be entitled in all respects to assume that no such facts exist. (b) Subject to the provisions of Section 7.1 hereof, the Trustee shall be entitled to rely on the delivery to it of a written notice to the Trustee and the Company by a Person representing itself to be a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor); provided, however, that failure to give such -------- ------- notice to the Company shall not affect in any way the ability of the Trustee to rely on such notice. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article 11, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 11, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 11.10. Reliance on Judicial Order or Certificate of Liquidating Agent. -------------------------------- 112 Upon any payment or distribution of assets of the Company referred to in this Article 11, the Trustee, subject to the provisions of Section 7.1 hereof, and the Holders shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. Section 11.11. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights. --------------------------------- The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article 11 with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 11 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.7 hereof. Section 11.12. Article Applicable to Paying Agents. ----------------------------------- In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article 11 shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article 11 in addition to or in place of the Trustee. 113 Section 11.13. No Suspension of Remedies. ------------------------- Nothing contained in this Article 11 shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Article 6 or to pursue any rights or remedies hereunder or under applicable law, subject to the rights, if any, under this Article 11 of the holders, from time to time, of Senior Indebtedness. ARTICLE 12. SECURITY Section 12.1. Pledge Agreement. ---------------- Each Holder, by accepting any Notes, agrees to all of the terms and provisions of the Pledge Agreement as the same may be in effect or may be amended from time to time and authorizes and directs the Collateral Agent under the Pledge Agreement to act as secured party with respect thereto. The due and punctual payment of the principal of and interest on the Notes when and as the same shall be due and payable, whether on an Interest Payment Date, at maturity, by acceleration, call for redemption or otherwise, and interest on the overdue principal and interest, if any, of the Notes and payment and performance of all other obligations of the Company to the Holders or the Trustee under this Indenture and the Notes, according to the terms hereunder or thereunder, shall, subject to the prior Liens described therein, be secured as provided in the Pledge Agreement. The security interest in the Collateral of the Holders of the Notes shall be junior in priority to such security interest in the Collateral securing indebtedness under the Credit Agreement (as defined in the Pledge Agreement) and the 1996 Notes (as defined in the Pledge Agreement), and any renewals, extensions, replacements, refundings, refinancings and restructurings thereof, and amendments, modifications and supplements thereto and any other Senior Indebtedness that may have a lien on the Collateral. Section 12.2. Certificates and Opinions. ------------------------- 114 The Company shall cause (a) TIA (S) 314(b), relating to an Opinion of Counsel regarding the lien of the Pledge Agreement and (b), TIA (S) 314(d), relating to an Officers' Certificate or other documents regarding the fair value of the Collateral (as defined in the Pledge Agreement), to be complied with to the extent applicable. Any determinations regarding fair value shall be made by an independent appraiser or other expert. Section 12.3. Authorization of Actions to Be Taken by the Collateral Agent Under the Pledge Agreement. ----------------------------------- The Collateral Agent may (but shall not be obligated to), in its sole discretion and without the consent of the Holders of the Notes, take all actions it deems necessary or appropriate in order to (a) enforce or effect the Pledge Agreement and (b) collect and receive any and all amounts payable in respect of the obligations of the Company hereunder as provided therein. Such actions shall include, but not be limited to, advis ing, instructing or otherwise directing any agent ap pointed by it in connection with enforcing or effecting any term or provision of the Pledge Agreement. Subject to the provisions of the Pledge Agreement, the Collateral Agent shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of the Pledge Agreement, and such suits and proceedings as the Collateral Agent may deem expedient to preserve or protect its interests and the interests of any parties secured by the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security under the Pledge Agreement or be prejudicial to the interests of any parties secured by the Collateral or of the Collateral Agent). Section 12.4. Authorization of Receipt of Funds by the Trustee Under the Pledge Agreement. -------------------------------------- The Trustee is authorized to execute and deliver 115 the Pledge Agreement, receive any funds for the benefit of Holders distributed under the Pledge Agreement, to make further distributions of such funds to the Holders according to the provisions of this Indenture, and otherwise take or refrain from taking any action permitted or required to be taken or refrained from taking by the Trustee, in its capacity as such, pursuant to the provisions of the Pledge Agreement. In receiving any such funds or otherwise taking or refraining from taking any such action, the Trustee shall be deemed to be acting pursuant to this Indenture and shall have the benefit of all of the protections, limitations on liability and exculpations afforded to it as Trustee under this Indenture. Section 12.5. Termination of Security Interest. -------------------------------- Upon the payment in full of all obligations of the Company under this Indenture and the Notes, or in the event of an earlier termination of the Pledge Agreement pursuant to the terms thereof, the Trustee shall, at the request of the Company together with an Officers' Certificate to such effect, deliver notification to the Collateral Agent that such obligations have been paid in full or, if the Collateral Agent is not the pledgee, send a certificate executed by a Trust Officer to such pledgee, stating that such obligations have been paid in full. ARTICLE 13. MISCELLANEOUS Section 13.1. Trust Indenture Act Controls. ---------------------------- If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. Section 13.2. Notices. ------- Any notice or communication shall be given in writing and delivered in person, sent by facsimile, delivered by commercial courier service or mailed by 116 first-class mail, postage prepaid, addressed as follows: If to the Company or any Guarantor: Pierce Leahy Corp. 631 Park Avenue King of Prussia, Pennsylvania 19406 Attention: Chief Financial Officer Fax Number: 610-992-8394 Copy to: Cozen and O'Connor 1900 Market Street Philadelphia, Pennsylvania 19103 Attention: Richard J. Busis, Esq. Fax Number: 215-665-2013 If to the Trustee: The Bank of New York 101 Barclay Street - 21W New York, New York 10286 Attention: Corporate Trust Administration Fax Number: (212) 815-5915 Such notices or communications shall be effective when received and shall be sufficiently given if so given within the time prescribed in this Indenture. The Company, any Guarantors or the Trustee by written notice to the others may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Noteholder shall be mailed to him by first-class mail, postage prepaid, at his address shown on the register kept by the Registrar. If a notice or communication to a Noteholder is mailed in the manner provided above, it shall be deemed duly given on the date so deposited in the mail, whether or not the addressee receives it. Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. 117 In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice as required by this Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice. Section 13.3. Communications by Holders with Other Holders. -------------------------------------------- Noteholders may communicate pursuant to TIA (S) 312 (b) with other Noteholders with respect to their rights under this Indenture or the Notes. The Company, the Guarantors, the Trustee, the Registrar and anyone else shall have the protection of TIA (S) 312(c). Section 13.4. Certificate and Opinion as to Conditions Precedent. ---------------------------------------- Upon any request or application by the Company or any Guarantor to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee at the request of the Trustee: (1) an Officers' Certificate (which shall include the statements set forth in Section 13.5 below) in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel (which shall include the statements set forth in Section 13.5 below) in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Section 13.5. Statements Required in Certificate and Opinion. ---------------------------------- Each certificate and opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: 118 (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, it or he has made such examination or investigation as is necessary to enable it or him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such Person, such covenant or condition has been complied with. Section 13.6. When Treasury Notes Disregarded. ------------------------------- In determining whether the Holders of the required aggregate principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, any Guarantor or any other obligor on the Notes or by any Affiliate of any of them shall be disregarded as though they were not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee actually knows are so owned shall be so disregarded. Notes so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to the Notes and that the pledgee is not the Company, a Guarantor or any other obligor upon the Notes or any Affiliate of any of them. Section 13.7. Rules by Trustee and Agents. --------------------------- The Trustee may make reasonable rules for action by or meetings of Noteholders. The Registrar and Paying Agent may make reasonable rules for their functions. 119 Section 13.8. Business Days; Legal Holidays. ----------------------------- A "Business Day" is a day that is not a Legal Holiday. A "Legal Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. Section 13.9. Governing Law. ------------- THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES. Section 13.10. No Adverse Interpretation of Other Agreements. ----------------- This Indenture may not be used to interpret another indenture, loan, security or debt agreement of the Company or any Subsidiary thereof. No such indenture, loan, security or debt agreement may be used to interpret this Indenture. Section 13.11. No Recourse Against Others. -------------------------- No recourse for the payment of the principal of or premium, if any, or interest on any of the Notes, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any Guarantor in this Indenture or in any supplemental indenture, or in any of the Notes, or because of the creation of any Indebtedness represented thereby, shall be had against any shareholder, officer, director, partner, affiliate, beneficiary or employee, as such, past, present or future, of the Company or of any successor corporation or against the property or assets of any such shareholder, officer, employee, partner, affiliate, beneficiary or 120 director, either directly or through the Company or any Guarantor, or any successor corporation thereof, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the Notes are solely obligations of the Company and any Guarantors, and that no such personal liability whatever shall attach to, or is or shall be incurred by, any shareholder, officer, employee, partner, affiliate, beneficiary or director of the Company or any Guarantor, or any successor corporation thereof, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or the Notes or implied therefrom, and that any and all such personal liability of, and any and all claims against every shareholder, officer, employee, partner, affiliate, beneficiary and director, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of the Notes. It is understood that this limitation on recourse is made expressly for the benefit of any such shareholder, employee, officer, partner, affiliate, beneficiary or director and may be enforced by any one or all of them. Section 13.12. Successors. ---------- All agreements of the Company and the Guarantors in this Indenture and the Notes shall bind their respective successors. All agreements of the Trustee, any additional trustee and any Paying Agents in this Indenture shall bind its successor. Section 13.13. Multiple Counterparts. --------------------- The parties may sign multiple counterparts of this Indenture. Each signed counterpart shall be deemed an original, but all of them together represent one and the same agreement. Section 13.14. Table of Contents, Headings, etc. --------------------------------- The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall 121 in no way modify or restrict any of the terms or provisions hereof. Section 13.15. Separability. ------------ Each provision of this Indenture shall be considered separable and if for any reason any provision which is not essential to the effectuation of the basic purpose of this Indenture or the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 122 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed, and the Company's corporate seal to be hereunto affixed and attested, all as of the date and year first written above. PIERCE LEAHY CORP. By: /s/ Joseph P. Linaugh -------------------------- Name: Joseph P. Linaugh Title: Vice President, Treasurer ATTEST: /s/ Michael Pierce - ------------------------ Name: Michael Pierce Title: Secretary The Bank of New York, as Trustee By: /s/ Lucille Firrincieli -------------------------- Name: Lucielle Firrincieli Title: Assistant Vice President 123 EXHIBIT A --------- (FACE OF NOTE) [FORM OF NOTE] A-1 CUSIP 720722 AC1 Number PIERCE LEAHY CORP. 9% SENIOR SUBORDINATED NOTE DUE 2007 Pierce Leahy Corp., a Pennsylvania corporation (the "Company", which term includes any successor corporation) for value received promises to pay to _______________ or registered assigns the principal sum of ______________ Dollars, on July 15, 2007. Interest Payment Dates: January 15 and July 15, commencing January 15, 1998 Record Dates: January 1 and July 1 Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. A-2 IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. PIERCE LEAHY CORP. By: --------------------------------------- By: --------------------------------------- [SEAL] Certificate of Authentication: This is one of the 9% Senior Subordinated Notes due 2007 referred to in the within-mentioned Indenture Dated: The Bank of New York, as Trustee By: -------------------------- Authorized Signatory A-3 (REVERSE SIDE) PIERCE LEAHY CORP. 9 1/8% SENIOR SUBORDINATED NOTE DUE 2007 I. INTEREST. Pierce Leahy Corp., a Pennsylvania corporation (the "Company"), promises to pay interest on the principal amount of this Note semiannually on January 15 and July 15 of each year (each an "Interest Payment Date"), commencing on January 15, 1998, at the rate of 9% per annum. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of the original issuance of the Notes. The Company shall pay interest on overdue principal, and on overdue premium, if any, and overdue interest, to the extent lawful, at the rate equal to 1% per annum in excess of the rate borne by the Notes. II. METHOD OF PAYMENT. The Company will pay interest on this Note provided for in Paragraph I above (except defaulted interest) to the person who is the registered Holder of this Note at the close of business on the January 1 or July 1 preceding the Interest Payment Date (whether or not such day is a Business Day). The Holder must surrender this Note to a Paying Agent to collect principal payments. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts; provided, however, that the Company may pay principal, premium, -------- ------- if any, and interest by check payable in such money. It may mail an interest check to the Holder's registered address. III. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, a New York banking corporation (the "Trustee"), will act as Paying A-4 Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to the Holders of the Notes. Neither the Company nor any of its Subsidiaries or Affiliates may act as Paying Agent but may act as registrar or co-registrar. IV. INDENTURE; RESTRICTIVE COVENANTS. The Company issued this Note under an Indenture dated as of July 7, 1997 (the "Indenture") by and between the Company and the Trustee. The terms of this Note include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture. This Note is subject to all such terms, and the Holder of this Note is referred to the Indenture and said Trust Indenture Act for a statement of them. All capitalized terms in this Note, unless otherwise defined, have the meanings assigned to them by the Indenture. The Notes are general unsecured obligations of the Company limited to $120,000,000 aggregate principal amount. The Indenture imposes certain restrictions on, among other things, the incurrence of indebtedness, the incurrence of liens and the issuance of preferred stock by the Company and its subsidiaries, mergers and sale of assets, the payments of dividends on, or the repurchase of, capital stock of the Company and its subsidiaries, certain other restricted payments by the Company and it subsidiaries, certain transactions with, and investments in, its affiliates, certain sale and lease-back transactions and a provision regarding change-of-control transactions. The restrictions are subject to a number of important qualifications and exceptions. V. SUBORDINATION. The Indebtedness represented by the Notes is, to the extent and in the manner provided in the Indenture, subordinated in right of payment to the prior indefeasible payment and satisfaction in full in cash of all existing and future Senior Indebtedness as defined in the Indenture, and this Note is issued subject to such provisions. Each Holder of this Note, by accepting the same, (a) agrees to and shall be bound by such provisions, A-5 (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced -------- ------- by this Note shall cease to be so subordinate and subject in right of payment upon any defeasance of this Note referred to in Paragraph XVII below. VI. OPTIONAL REDEMPTION. The Company, at its option, may redeem the Notes, in whole or in part, at any time on or after July 15, 2002 at the redemption prices set forth in Section 3.7 of the Indenture, together, in each case, with accrued and unpaid interest to the redemption date. In addition, the Company, at its option, may redeem Notes out of the Net Proceeds of one or more Public Equity Offerings at the redemption price, in the amount and under the terms set forth in the Indenture. VII. NOTICE OF REDEMPTION. Notice of redemption will be mailed via first class mail at least 30 days but not more than 60 days prior to the redemption date to each Holder of Notes to be redeemed at its registered address as it shall appear on the register of the Notes maintained by the Registrar. On and after any Redemption Date, interest will cease to accrue on the Notes or portions thereof called for redemption unless the Company shall fail to redeem any such Note. VIII. OFFERS TO PURCHASE. The Indenture requires that certain proceeds from Asset Sales be used, subject to further limitations contained therein, to make an offer to purchase certain amounts of Notes in accordance with the procedures set forth in the Indenture. The Company is also required to make an offer to purchase Notes upon occurrence of a Change of Control in accordance with procedures set forth in the Indenture. A-6 IX. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Note selected for redemption for a period of 15 days before the day of mailing of the notice of redemption of any such Notes to be redeemed or any Note after it is called for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. X. PERSONS DEEMED OWNERS. The registered Holder of this Note may be treated as the owner of it for all purposes. XI. UNCLAIMED MONEY. If money for the payment of principal, premium or interest on any Note remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to money must look only to the Company for payment as general creditors unless an "abandoned property" law designates another person. XII. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes may be modified, amended or supplemented by the Company, the Guarantors, if any, and the Trustee with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding and any existing default or compliance with any provision may be waived in a particular instance with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Without the consent of Holders, the Company, the Guarantors, if any, and the Trustee may amend the A-7 Indenture or the Notes or supplement the Indenture for certain specified purposes including providing for uncertificated Notes in addition to certificated Notes, and curing any ambiguity, defect or inconsistency, or making any other change that does not materially and adversely affect the rights of any Holder. XIII. SUCCESSOR ENTITY. When a successor corporation assumes all the obligations of its predecessor under the Notes and the Indenture and immediately before and thereafter no Default exists and certain other conditions are satisfied, the predecessor corporation will be released from those obligations. XIV. DEFAULTS AND REMEDIES. Events of Default are set forth in the Indenture. If an Event of Default (other than an Event of Default pursuant to Section 6.1(6) or (7) of the Indenture with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding by written notice to the Company and the Trustee, may declare to be immediately due and payable the entire principal amount of all the Notes then outstanding plus accrued but unpaid interest to the date of acceleration and (i) such amounts shall become immediately due and payable or (ii) if there are any amounts outstanding under or in respect of the Credit Facility, such amounts shall become due and payable upon the first to occur of an acceleration of amounts outstanding under or in respect of the Credit Facility or five Business Days after receipt by the Company and the Representative of notice of the acceleration of the Notes; provided, however, that after such acceleration but before judgment or decree - ----------------- based on such acceleration is obtained by the Trustee, the Holders of a majority in aggregate principal amount of the outstanding Notes may rescind and annul such acceleration and its consequences if all existing Events of Default, other than the nonpayment of principal, premium or interest that has become due solely because of the acceleration, have been cured or waived and if the rescission would not conflict with any judgment or decree. No such rescission shall affect any A-8 subsequent Default or impair any right consequent thereto. In case an Event of Default specified in Section 6.1(6) or (7) of the Indenture with respect to the Company occurs, such, principal amount, together with premium, if any, and interest with respect to all of the Notes, shall be due and payable immediately without any declaration or other act on the part of the Trustee or the Holders of the Notes. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal, premium, if any, or interest) if it determines that withholding notice is in their interests. XV. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company, any Guarantor or their Affiliates, and may otherwise deal with the Company, any Guarantor or their Affiliates, as if it were not Trustee. XVI. NO RECOURSE AGAINST OTHERS. As more fully described in the Indenture, a director, officer, employee, partner, affiliate, beneficiary or shareholder, as such, of the Company or any Guarantor shall not have any liability for any obligations of the Company or any Guarantor under the Notes or the Indenture or for any claim based on, in respect or by reason of, such obligations or their creation. The Holder of this Note by accepting this Note waives and releases all such liability. The waiver and release are part of the consideration or the issuance of this Note. XVII. DEFEASANCE AND COVENANT DEFEASANCE. The Indenture contains provisions for defeasance of the entire indebtedness on this Note and for defeasance of certain covenants in the Indenture upon compliance by the Company with certain conditions set forth in the Indenture. XVIII. ABBREVIATIONS. Customary abbreviations may be used in the name A-9 of a Holder of a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). XIX. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Note Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders of the Notes. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. XX. GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES. THE COMPANY WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: PIERCE LEAHY CORP., 631 Park Avenue, King of Prussia, Pennsylvania 19406, Attention: Chief Financial Officer. XXI. AUTHENTICATION. This Note shall not be valid until the Trustee manually signs the Certificate of Authentication on the other side of this Note. A-10 ASSIGNMENT I or we assign and transfer this Note to: (Insert assignee's social security or tax I.D. number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type name, address and zip code of assignee) and irrevocably appoint: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Agent to transfer this Note on the books of the Company. The Agent may substitute another to act for him. Date:______________________________ Your Signature:________________________ _______________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee:__________________________________________________________ OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have all or any part of this Note purchased by the Company pursuant to Section 4.10 or Section 4.19 of the Indenture, check the appropriate box: [ ] Section 4.10 [ ] Section 4.19 If you want to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.19 of the Indenture, state the amount you elect to have purchased: $__________________ (multiple of $1,000) Date:______________ Your Signature:_______________________ (Sign exactly as your name appears on the face of this Note) ___________________________________ Signature Guaranteed EXHIBIT B --------- FORM OF LEGEND FOR GLOBAL NOTES Any Global Note authenticated and delivered hereunder shall bear a legend in substantially the following form: THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. B-1 EXHIBIT C ---------- FORM OF GUARANTEE The undersigned (the "Guarantor") hereby unconditionally guarantees, on a senior subordinated basis, jointly and severally with all other guarantors under the Indenture dated as of July 7, 1997 by and between Pierce Leahy Corp., a Pennsylvania corporation, and The Bank of New York, as trustee (as amended, restated or supplemented from time to time, the "Indenture"), to the extent set forth in the Indenture and subject to the provisions of the Indenture, (a) the due and punctual payment of the principal of and interest on the Notes, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on overdue principal, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Noteholders or the Trustee all in accordance with the terms set forth in Article 10 of the Indenture, and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantor to the Noteholders and to the Trustee pursuant to this Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to the Indenture for the precise terms and limitations of this Guarantee. Guarantor: By:___________________________________ Name: Title: C-1 EX-12 5 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended December 31, ----------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Fixed charges: Rent expense $ 26,829 $ 17,007 $ 14,111 $ 12,261 $ 11,070 -------- -------- -------- -------- -------- Portion of rent representative of an interest factor (1/3) $ 8,943 $ 5,669 $ 4,699 $ 4,087 $ 3,690 Interest expense 29,262 17,225 9,622 7,216 6,160 -------- -------- -------- -------- -------- Total fixed charges 38,205 22,894 14,321 11,303 9,850 Income (loss) before income taxes and extraordinary items (A) (1,737) 2,523 5,347 1,200 2,972 -------- -------- -------- -------- -------- Earnings before fixed charges (B) $ 36,468 $ 25,417 $ 19,668 $ 12,503 $ 12,822 -------- -------- -------- -------- -------- Ratio of earnings to fixed charges (1,737)/(1)/ 1.11x 1.37x 1.11x 1.30x -------- -------- -------- -------- --------
/(1)/ Earnings were inadequate to cover fixed charges by the amount indicated. EX-21 6 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 Subsidiaries of the Registrant Pierce Leahy Command Company, a Nova Scotia Unlimited Liability Company Monarch Box, Inc., a Delaware Corporation Advanced Box, Inc., a Delaware Corporation PLC Command I, L.P., a Pennsylvania limited partnership PLC Command II, L.P., a Pennsylvania limited partnership EX-23 7 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K, into the Company's previously filed Registration Statement on Form S-8 (File No. 333-43787). ARTHUR ANDERSEN LLP Philadelphia, Pa., March 23, 1998 EX-27 8 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 1,782 0 25,201 2,399 813 32,189 214,981 (54,500) 394,713 45,095 278,851 0 0 165 59,158 394,713 0 183,517 0 155,992 0 0 29,202 (1,737) 7,424 (9,161) 0 6,036 0 (15,197) (0.69) (0.69)
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