UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
- --------------------------------------------------------------------------------
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended September 30, 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 0-27584
IRON MOUNTAIN INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3107342
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
745 Atlantic Avenue, Boston, MA 02111
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(Address of Principal Executive Offices, Including Zip Code)
(617) 357-4455
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(Registrant's Telephone Number, Including Area Code)
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
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As of November 6, 1997, there were 13,445,174 shares of the Registrant's Common
Stock, par value $0.01 per share, and no shares of the Registrant's Nonvoting
Common Stock, par value $0.01 per share outstanding.
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IRON MOUNTAIN INCORPORATED
INDEX
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Page
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets at December 31, 1996 and
September 30, 1997 (Unaudited) 3
Condensed Consolidated Statements of Operations for the Three Months Ended
September 30, 1996 and 1997 (Unaudited) 4
Condensed Consolidated Statements of Operations for the Nine Months Ended
September 30, 1996 and 1997 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1997 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7-10
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of
Operations 11-15
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 16
Item 2 - Changes in Securities 16
Item 6 - Exhibits and Reports on Form 8-K 16-17
Signatures 18
</TABLE>
2
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IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
December 31, September 30,
1996 1997
------------ ---------
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 3,453 $ 2,242
Accounts Receivable (less allowances of
$1,061 and $1,332, respectively) 24,136 35,372
Inventories 767 989
Deferred Income Taxes 3,378 4,831
Prepaid Expenses and Other Current Assets 3,054 7,402
-------- ---------
Total Current Assets 34,788 50,836
PROPERTY, PLANT AND EQUIPMENT:
Property, Plant and Equipment at Cost 163,495 207,617
Less: Accumulated Depreciation (45,146) (56,996)
-------- ---------
Property, Plant and Equipment, net 118,349 150,621
OTHER ASSETS:
Goodwill, net 109,363 226,779
Customer Acquisition Costs, net 6,334 6,511
Deferred Financing Costs, net 7,358 7,525
Other 5,607 8,827
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Total Other Assets 128,662 249,642
-------- ---------
Total Assets $281,799 $451,099
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Long-term Debt $ 396 $ 403
Accounts Payable 3,750 5,947
Accrued Expenses 17,275 28,276
Deferred Income 4,995 8,810
Other Current Liabilities 414 739
-------- ---------
Total Current Liabilities 26,830 44,175
LONG-TERM DEBT, NET OF CURRENT PORTION 184,337 273,965
DEFERRED RENT 7,651 8,209
DEFERRED INCOME TAXES 4,021 4,237
OTHER LONG-TERM LIABILITIES 6,576 6,568
COMMITMENTS AND CONTINGENCIES (SEE NOTE 4)
STOCKHOLDERS' EQUITY:
Common Stock 96 117
Common Stock - Nonvoting 5 5
Additional Paid-in Capital 62,135 125,485
Accumulated Deficit (9,852) (11,662)
-------- ---------
Total Stockholders' Equity 52,384 113,945
-------- ---------
Total Liabilities and
Stockholders' Equity $281,799 $ 451,099
======== =========
The accompanying notes are an integral part of these
consolidated financial statements.
3
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IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands except Per Share Data)
(Unaudited)
Three Months Ended
September 30,
---------------------
1996 1997
-------- --------
REVENUES:
Storage $22,056 $32,390
Service and Storage Material Sales 13,963 22,265
------- ------
Total Revenues 36,019 54,655
OPERATING EXPENSES:
Cost of Sales (Excluding Depreciation) 18,708 27,870
Selling, General and Administrative 8,695 14,180
Depreciation and Amortization 4,366 6,530
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Total Operating Expenses 31,769 48,580
------- ------
OPERATING INCOME 4,250 6,075
INTEREST EXPENSE 3,596 6,550
------- ------
Income (Loss) Before Provision (Credit)
for Income Taxes 654 (475)
PROVISION (CREDIT) FOR INCOME TAXES 654 (150)
------- ------
Net Income (Loss) $ -- $ (325)
======= =======
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE $ -- (0.03)
======= =======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 10,505 12,048
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
4
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IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands except Per Share Data)
(Unaudited)
Nine Months Ended
September 30,
-----------------------
1996 1997
--------- ---------
REVENUES:
Storage $ 61,419 $ 86,199
Service and Storage Material Sales 38,550 57,195
-------- --------
Total Revenues 99,969 143,394
OPERATING EXPENSES:
Cost of Sales (Excluding Depreciation) 51,091 73,742
Selling, General and Administrative 24,762 35,682
Depreciation and Amortization 11,896 18,495
-------- --------
Total Operating Expenses 87,749 127,919
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OPERATING INCOME 12,220 15,475
INTEREST EXPENSE 9,981 17,631
-------- --------
Income (Loss) Before Provision (Credit)
for Income Taxes 2,239 (2,156)
PROVISION (CREDIT) FOR INCOME TAXES 1,542 (346)
-------- --------
Net Income (Loss) 697 (1,810)
ACCRETION OF REDEEMABLE PUT WARRANT 280 --
-------- --------
Net Income (Loss) Applicable to
Common Stockholders $ 417 $ (1,810)
======== ========
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.04 $ (0.17)
======== ========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 10,101 10,906
======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
5
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IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1996 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 697 $ (1,810)
Adjustments to Reconcile Net Income (Loss) to Cash
Flows Provided by Operating Activities:
Depreciation and Amortization 11,896 18,495
Amortization of Financing Costs 637 685
Income Tax Benefit from Exercise of Stock Options -- 580
Other (14) 53
Changes in Assets and Liabilities
(Exclusive of Acquisitions):
Accounts Receivable (2,355) (4,884)
Inventories 20 (133)
Deferred Income Taxes 370 (1,452)
Prepaid Expenses and Other Current Assets 1,233 (4,182)
Other Assets (221) 362
Accounts Payable (438) 1,220
Accrued Expenses 169 3,993
Deferred Income (1,143) (426)
Other Current Liabilities (55) 325
Deferred Rent (179) 558
Other Long-term Liabilities -- (8)
-------- --------
Cash Flows Provided by Operating Activities 10,617 13,376
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash Paid for Acquisitions (45,638) (81,265)
Capital Expenditures (17,413) (20,618)
Additions to Customer Acquisition Costs (1,265) (688)
Other (25) --
-------- --------
Cash Flows Used in Investing Activities (64,341) (102,571)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Debt (30,435) (10,407)
Proceeds from Borrowings 60,520 99,050
Financing Costs (824) (852)
Proceeds from Exercise of Stock Options 16 653
Stock Issuance Costs -- (460)
Net Proceeds from Initial Public Offering 33,286 --
Retirement of Redeemable Put Warrant (6,612) --
-------- --------
Cash Flows Provided by Financing Activities 55,951 87,984
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,227 (1,211)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,585 3,453
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,812 $ 2,242
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
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IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands except Per Share Data)
(Unaudited)
(1) GENERAL
The interim condensed consolidated financial statements presented herein have
been prepared by Iron Mountain Incorporated ("Iron Mountain" or the "Company")
without audit and, in the opinion of management, reflect all adjustments of a
normal recurring nature necessary for a fair presentation. Interim results are
not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 1996, has been
derived from the consolidated financial statements that have been audited by the
Company's independent public accountants. The unaudited condensed consolidated
financial statements have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in the annual financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to those rules and regulations, but the Company believes that the
disclosures are adequate to make the information presented not misleading. The
condensed consolidated financial statements and notes included herein should be
read in conjunction with the consolidated financial statements and notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1996.
(2) ACQUISITIONS
During the nine months ended September 30, 1997, the Company purchased
substantially all of the assets, and assumed certain liabilities, of nine
records management businesses and acquired all of the outstanding capital stock
of five records management businesses (collectively, the "1997 Acquisitions").
In connection with certain 1997 Acquisitions, related real estate was also
purchased. Each of the 1997 Acquisitions and all 16 of the records management
businesses acquired during 1996 (the "1996 Acquisitions") were accounted for
using the purchase method of accounting, and accordingly, the results of
operations for each acquisition have been included in the consolidated results
of the Company from the respective acquisition dates. The purchase price for the
1997 Acquisitions exceeded the underlying fair value of the net assets acquired
by $122,455 which has been assigned to goodwill and is being amortized over 25
to 30 years. The purchase price allocations are preliminary and subject to
adjustment. To finance the 1997 Acquisitions, the Company issued approximately
2,032 shares of its common stock, issued options to purchase approximately 133
shares of its common stock and paid approximately $81,265 in cash, which was
provided through the Company's Revolving Credit Facility.
A summary of the total consideration and the preliminary allocations of the
purchase price, as of the acquisition dates, is as follows:
Fair Value of Common Stock Issued $ 59,474
Fair Value of Options Issued 3,071
Cash Paid 81,265
---------
Total Consideration $143,810
--------
Fair Value of Assets Acquired During 1997 35,753
Liabilities Assumed (14,398)
--------
Fair Value of Net Assets Acquired 21,355
--------
Recorded Goodwill $122,455
========
7
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IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands except Per Share Data)
(Unaudited)
(Continued)
The following unaudited pro forma combined information shows the results of the
Company's operations for the year ended December 31, 1996 and the nine months
ended September 30, 1997, as though each of the 1996 and 1997 Acquisitions had
occurred as of the beginning of the respective year:
Year Nine Months
Ended Ended
December 31, September 30,
1996 1997
------------ ------------
Revenues $ 197,139 $ 162,907
Net Loss (5,521) (3,311)
Accretion of Redeemable Put Warrant 280 --
--------- ---------
Net Loss Applicable to Stockholders $ (5,241) (3,311)
========= ==========
Net Loss Per Share $ (0.44) $ (0.27)
========= ==========
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 the beginning of each year 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 businesses. Certain acquisitions,
representing annual revenues of approximately $2,800, were not included in the
pro forma results as their effect was immaterial.
On September 26, 1997, the Company entered into an agreement to acquire all of
the outstanding capital stock of Arcus Group, Inc. ("AGI") and its subsidiaries
for approximately $160 million. The principal operating subsidiary of AGI is
Arcus Technology Services, Inc. ("ATSI"). The purchase price consists of Common
Stock and options to acquire Common Stock valued at approximately $63 million,
the assumption of net indebtedness of approximately $31 million and
approximately $66 million in cash. The number of shares of Common Stock and
options will be based on the average market price for the 20 trading days ending
three trading days before the closing, subject to a floor of $29.00 and a
ceiling of $36.00. In addition to the stated purchase price of $160 million, the
Company presently expects to record approximately $3 million in capitalized
transaction costs and approximately $2 million in additional equity resulting
from a higher financial valuation of the options to acquire shares of Common
Stock for accounting purposes.
The Company has issued shares of Common Stock in connection with the 1997
Acquisitions and acquisitions completed subsequent to September 30, 1997 and
will record such shares for financial reporting purposes at fair value. Because
under the terms of the relevant acquisition agreements a portion of such shares
are subject to resale restrictions, the Company is in the process of obtaining
appraisals to determine the fair value of such shares. Pending the appraisals,
the Company initially recorded the value of such shares based upon their market
price at the time of the applicable closing. The Company anticipates that the
appraised value of the restricted shares will be less than the initially
recorded value for accounting purposes and expects to record corresponding
decreases in equity, goodwill and goodwill amortization. The Company intends to
follow the same process with respect to those shares of Common Stock to be
issued in the AGI acquisition that will be subject to resale restrictions.
8
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IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands except Per Share Data)
(Unaudited)
(Continued)
(3) LONG-TERM DEBT
Long-term debt consists of the following:
December 31, September 30,
1996 1997
------------ --------------
10-1/8% Senior Subordinated Notes
(the "1996 Notes") $ 165,000 $ 165,000
Revolving Credit Facility 9,000 98,550
Real Estate Mortgages 10,733 10,405
Other -- 413
----------- ----------
Total Long-term Debt 184,733 274,368
Less: Current Portion (396) (403)
---------- -----------
Long-term Debt, Net of Current Portion $ 184,337 $ 273,965
---------- -----------
On September 29, 1997, the Company amended its revolving credit facility,
increasing its credit availability thereunder from $150 million to $250 million.
The amendment also extended the maturity of the revolving credit facility by one
year to September 2002 and changed certain other terms.
(4) COMMITMENTS AND CONTINGENCIES
Litigation
Iron Mountain is presently involved as a defendant in various litigation which
has occurred in the normal course of business. Management believes it has
meritorious defenses in all such actions, and in any event, the amount of
damages, if such matters were decided adversely, would not have a material
adverse effect on Iron Mountain's financial condition or results of operations.
Facility Fire
In March 1997, Iron Mountain experienced three fires that resulted in extensive
damage to two of its records management facilities in South Brunswick, New
Jersey. The affected facilities represented less than three percent of revenues
and less than two percent of EBITDA for 1996. The results of the third quarter
do not include any gain or loss resulting from the fires. The Company filed
several insurance claims, including a significant claim under its business
interruption insurance policy. Currently, the Company expects to realize a gain
from proceeds under its business interruption insurance. The claims process is
lengthy and its outcome cannot be predicted with certainty. Based on its present
assessment of the situation, management does not believe that the fires will
have material adverse effect on Iron Mountain's financial condition or results
of operations, although there can be no assurance in this regard. At September
30, 1997, the Company has a receivable of approximately $2,579 related to
various claims filed under its property and casualty insurance policies.
9
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands except Per Share Data)
(Unaudited)
(Continued)
(5) EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." The
Company is required to adopt the new standard in its 1997 year end financial
statements. Pursuant to the requirements of SFAS No. 128, all prior period
Earnings Per Share ("EPS"), information will be restated at that time. The new
statement cannot be adopted early. Had the Company calculated EPS as prescribed
by SFAS No. 128, there would have been no change in the reported EPS amounts for
any of the periods shown.
(6) SUBSEQUENT EVENTS
During October 1997, the Company acquired four records management businesses,
including Records Retention/FileSafe, L.P. ("FileSafe"), Allegiance Business
Archives, Ltd. ("Allegiance") and HIMSCORP, Inc. and Subsidiaries ("HIMSCORP")
and certain related real estate, for approximately $157,300, including shares of
Common Stock preliminarily valued at approximately $46,200 (see Note 2). All of
these acquisitions were accounted for as purchases.
HIMSCORP is the leading national provider of records management services for
hospitals and other organizations in the healthcare industry. The acquisition,
effective November 1, 1997, was structured as a tax free reorganization for
total consideration, including transaction costs, of $98,800 including $1.2
million shares of Iron Mountain Common Stock preliminarily valued at $46,200 and
cash and assumed indebtedness of $52,600.
Filesafe and Allegiance, which also closed in October 1997, had purchase prices
of approximately $44,600 and $8,800, respectively.
On October 24, 1997, the Company successfully completed the sale, in a private
placement to qualified institutional buyers, of $250 million in aggregate
principal amount of its 8 3/4% Senior Subordinated Notes due 2009 (the "1997
Notes"). The 1997 Notes were issued at a price to investors of 99.806%. A
portion of the net proceeds from the sale of the 1997 Notes was used to repay
outstanding bank debt and to fund the cash portion of the purchase price of the
HIMSCORP acquisition. The balance of the net proceeds will be used to fund a
portion of the purchase price of AGI and for general corporate purposes.
10
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IRON MOUNTAIN INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and
results of operations for the three and nine month periods ended September 30,
1996 and 1997 should be read in conjunction with the consolidated financial
statements and footnotes for the three and nine month periods ended September
30, 1997, included herein, and the year ended December 31, 1996, included in the
Company's Annual Report filed on Form 10-K.
Overview
During the third quarter of 1997, the Company acquired four records management
businesses and a software escrow business for total consideration of
approximately $36 million. The consideration included Common Stock and options
to acquire Common Stock preliminarily valued at approximately $9 million and
cash and assumed indebtedness of approximately $27 million. These five
acquisitions reported approximately $6 million in revenues for the six months
ended June 30, 1997 prior to their acquisition by the Company. The third quarter
of 1997 was also the first quarter to fully reflect the operations of Safesite
Records Management Corporation ("Safesite") which was acquired by the Company on
June 12, 1997. Safesite accounted for approximately $6 million of the Company's
$55 million in total revenue for the third quarter of 1997.
As a result of the third quarter acquisitions, Iron Mountain commenced
operations in one new market and bolstered its presence in four existing
markets. As of September 30, 1997, the Company operated 156 records centers in
43 markets nationwide. The Company serves more than 41,000 customer accounts,
including more than half of the Fortune 500 companies.
In March 1997, Iron Mountain experienced three fires that resulted in extensive
damage to two of its records management facilities in South Brunswick, New
Jersey. The affected facilities represented less than three percent of revenues
and less than two percent of EBITDA for 1996. The results of the third quarter
do not include any gain or loss resulting from the fires. The Company has filed
several insurance claims, including a significant claim under its business
interruption insurance policy. Currently, the Company expects to realize a gain
from proceeds under its business interruption insurance. The claims process is
lengthy and its outcome cannot be predicted with certainty. Based on its present
assessment of the situation, management does not believe that the fires will
have a material adverse effect on Iron Mountain's financial condition or results
of operations, although there can be no assurance in this regard. At September
30, 1997, the Company had a receivable of approximately $2,579 related to
various claims filed under its property and casualty insurance policies.
The Company's total revenues increased $18.7 million, or 51.7%, to $54.7 million
for the third quarter of 1997 from $36.0 million for the third quarter of 1996.
Of the 51.7% revenue growth, 45.0 percentage points were attributable to thirty
acquisitions completed by the Company in 1996 and the first nine months of 1997
and 6.7 percentage points were attributable to internal growth. The internal
growth percentage was reduced by the loss of revenues resulting from the fires
in South Brunswick, NJ in March 1997. Excluding the Company's South Brunswick
operations for both years, internal growth for the quarter was 10.2%.
11
<PAGE>
IRON MOUNTAIN INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results of Operations
Three Months Ended September 30, 1997 Compared to Three Months Ended
September 30, 1996
Storage revenues increased $10.3 million, or 46.9%, to $32.4 million for the
third quarter of 1997, from $22.1 million for the third quarter of 1996. Thirty
acquisitions completed by the Company in 1996 and the first nine months of 1997
accounted for $8.9 million, or 86.1%, of such increase. The balance of the
storage revenue growth resulted primarily from net increases in Cartons stored
by existing customers and from sales to new customers. The term "Carton" is
defined as a measurement of volume equal to a single standard storage carton,
approximately 1.2 cubic feet.
Service and storage material sales revenue increased $8.3 million, or 59.5%, to
$22.3 for the third quarter of 1997 from $14.0 million for the third quarter of
1996. Acquisitions accounted for $7.6 million, or 91.5%, of such increase. The
balance of such increase resulted from increases in service and storage material
sales to existing customers and the addition of new customer accounts. The
greater percentage increase in service and storage material sales revenues, as
compared to storage revenues, for the third quarter of 1997, over the same
period in 1996, is primarily attributable to certain businesses acquired in 1997
that have a higher component of service and storage material sales revenues,
compared to storage revenues, than the rest of the Company.
For the reasons discussed above, total revenue increased $18.7 million, or
51.7%, to $54.7 million for the third quarter of 1997 from $36.0 million for
the third quarter of 1996. Of such increase, $16.5 million, or 88.5%, was
attributable to acquisitions completed by the Company in 1996 and the first nine
months of 1997.
Cost of sales (excluding depreciation) increased $9.2 million, or 49.0%, to
$27.9 million (51.0% of revenues) for the third quarter of 1997 from $18.7
million (51.9% of revenues) for the third quarter of 1996. The increase was
primarily attributable to the increase in Cartons stored and expenses related to
certain facility relocations. The decrease as a percentage of revenues was
primarily attributable to the software escrow business acquired in the third
quarter of 1997 having a higher gross margin than the rest of the Company.
Selling, general and administrative expenses increased $5.5 million, or 63.1%,
to $14.2 million (26.0% of revenues) for the third quarter of 1997 from $8.7
million (24.2% of revenues) for the third quarter of 1996. The increase was
primarily attributable to: (i) the addition of overhead, primarily salespeople,
related to the Safesite acquisition; (ii) the integration, training and
redeployment of personnel principally related to the Safesite acquisition; and
(iii) increased personnel, office and overhead costs needed to support the
Company's growth.
Depreciation and amortization expense increased $2.1 million, or 49.6%, to $6.5
million (11.9% of revenues) for the third quarter of 1997 from $4.4 million
(12.1% of revenues) for the third quarter of 1996. The dollar increase was
primarily attributable to the additional depreciation and amortization expense
related to the aforementioned acquisitions, and capital expenditures including
racking systems, information systems and improvements to existing facilities.
As a result of the foregoing factors, operating income increased $1.8 million,
or 42.9%, to $6.1 million (11.1% of revenues) for the third quarter of 1997 from
$4.3 million (11.8% of revenues) for the third quarter of 1996.
12
<PAGE>
IRON MOUNTAIN INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Interest expense increased $3.0 million, or 82.1%, to $6.6 million for the third
quarter of 1997 from $3.6 million for the third quarter of 1996. The increase
was primarily attributable to increased indebtedness related to the financing of
acquisitions and capital expenditures. Such increase was partially offset by
lower effective interest rates for the third quarter of 1997 compared to the
same period in 1996.
As a result of the foregoing factors, income (loss) before provision (credit)
for income taxes decreased $1.2 million to a loss of $0.5 million (0.9% of
revenue) for the third quarter of 1997 from income of $0.7 million (1.8% of
revenue) for the third quarter of 1996. Provision (credit) for income taxes was
a credit of $0.2 million for the third quarter of 1997 compared to a provision
of $0.7 million for the third quarter of 1996. The Company's effective tax rate
is less favorable than statutory rates primarily due to the amortization of the
nondeductible portion of goodwill associated with certain acquisitions (the tax
laws generally permit deduction of such expenses for asset purchases, but not
for acquisitions of stock). In the third quarter of 1997, the Company recorded
approximately $23 million in nondeductible goodwill.
Net income (loss) decreased $0.3 million to a net loss of $0.3 million (0.6% of
revenues) for the third quarter of 1997 from break even for the third quarter of
1996.
As a result of the foregoing factors, earnings before interest, taxes,
depreciation, amortization and extraordinary charges ("EBITDA") increased $4.0
million, or 46.3%, to $12.6 million (23.1% of revenues) for the third quarter of
1997 from $8.6 million (23.9% of revenues) for the third quarter of 1996.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Storage revenue increased $24.8 million, or 40.4%, to $86.2 million for the
first nine months of 1997 from $61.4 million for the first nine months of 1996.
Thirty acquisitions completed by the Company in 1996 and the first nine months
of 1997 accounted for $20.3 million, or 81.8%, of such increase. The balance of
the storage revenue growth resulted primarily from net increases in Cartons
stored by existing customers and from sales to new customers.
Service and storage material sales revenue increased $18.6 million, or 48.4%,to
$57.2 million for the first nine months of 1997 from $38.6 million for the first
nine months of 1996. Acquisitions accounted for $16.3 million, or 87.6%, of such
increase. The balance of such increase resulted from increases in service and
storage material sales to existing customers and the addition of new customer
accounts. The greater percentage increase in service and storage material sales
revenues, as compared to storage revenues, for the first nine months of 1997, is
primarily attributable to certain businesses acquired in 1997 that have higher
component of service and storage material sales revenues, compared to storage
revenues, than the rest of the Company.
For the reasons discussed above, total revenue increased $43.4 million, or
43.4%, to $143.4 million for the first nine months of 1997 from $100.0 million
for the first nine months of 1996. Of such increase, $36.6 million, or 84.3%,
was attributable to acquisitions completed by the Company in 1996 and the first
nine months of 1997.
Cost of sales (excluding depreciation) increased $22.6 million, or 44.3%, to
$73.7 million (51.4% of revenues) for the first nine months of 1997 from $51.1
million (51.1% of revenues) for the first nine months of 1996. The increase was
primarily attributable to the increase in Cartons stored and expenses related to
certain facility relocations.
13
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IRON MOUNTAIN INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Selling, general and administrative expenses increased $10.9 million, or 44.1%,
to $35.7 million (24.9% of revenues) for the first nine months of 1997 from
$24.8 million (24.8% of revenues) for the first nine months of 1996. The
increase was primarily attributable to: (i) the addition of overhead, primarily
salespeople, related to the Safesite acquisition; (ii) the integration, training
and redeployment of personnel principally related to the Safesite acquisition;
and (iii) increased personnel, office and overhead costs needed to support the
Company's growth.
Depreciation and amortization increased $6.6 million, or 55.5%, to $18.5 million
(12.9% of revenues) for the first nine months of 1997 from $11.9 million (11.9%
of revenues) for the first nine months of 1996. The increase was primarily
attributable to the additional depreciation and amortization related to the
aforementioned acquisitions and capital expenditures including racking systems,
information systems and improvements to existing facilities.
As a result of the foregoing factors, operating income increased $3.3 million,
or 26.6%, to $15.5 million (10.8% of revenues) for the first nine months of 1997
from $12.2 million (12.2% of revenues) for the first nine months of 1996.
Interest expense increased $7.6 million, or 76.6%, to $17.6 million for the
first nine months of 1997 from $10.0 million for the first nine months of 1996.
The increase was primarily attributable to increased indebtedness related to the
financing of acquisitions and capital expenditures. Such increase was partially
offset by lower effective interest rates for the first nine months of 1997 as
compared to the same period for 1996.
As a result of the foregoing factors, income (loss) before provision (credit)
for income taxes decreased $4.4 million to a loss of $2.2 million (1.5% of
revenues) for the first nine months of 1997 from income of $2.2 million (2.2% of
revenues) for the first nine months of 1996. Provision (credit) for income taxes
was a credit of $0.3 million for the first nine months of 1997 compared with a
provision of $1.5 million for the first nine months of 1996. The Company's
effective tax rate is less favorable than statutory rates primarily due to the
amortization of the nondeductible portion of goodwill associated with certain
acquisitions (the tax laws generally permit deduction of such expenses for asset
purchases, but not for acquisitions of stock). In the first nine months of 1997,
the Company recorded approximately $86.7 million in nondeductible goodwill,
$61.9 million of which related to the acquisition of Safesite.
Net income (loss) decreased $2.5 million to a net loss of $1.8 million (1.3% of
revenues) for the first nine months of 1997 from net income of $0.7 million
(0.7% of revenues) for the first nine months of 1996. Net income (loss)
applicable to common stockholders decreased $2.2 million to a net loss of $1.8
million (1.3% of revenues) for the first nine months of 1997 from net income of
$0.4 million (0.4% of revenues) after accretion of $0.3 million related to a
redeemable put warrant for the first nine months of 1996. The put warrant was
redeemed in full in February 1996, with a portion of the proceeds from the
Company's initial public offering of common stock. As a result of such
redemption, there will be no future charges for such accretion.
As a result of the foregoing factors, EBITDA increased $9.9 million, or 40.9%,
to $34.0 million (23.7% of revenues) for the first nine months of 1997 from
$24.1 million (24.1% of revenues) for the first nine months of 1996.
14
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IRON MOUNTAIN INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Financial Condition and Liquidity
As the Company has sought to increase its EBITDA, it has made significant
capital investments, consisting primarily of: (i) acquisitions; (ii) capital
expenditures, primarily related to growth (including investments in real estate,
racking systems, information systems and improvements to existing facilities);
and (iii) customer acquisition costs. Cash paid for these investments during the
first nine months of 1997 amounted to $81.3 million, $20.6 million and $0.7
million, respectively. These investments have been primarily funded through cash
flows from operations and borrowings under the Company's revolving credit
facility.
Net cash provided by operations was $13.4 million for the first nine months of
1997 compared to $10.6 million for the same period in 1996. The increase
resulted from the $9.9 million increase in EBITDA, which was partially offset by
the $4.9 million increase in trade accounts receivable related to increased
revenues and the $2.6 million increase in the insurance receivable due to costs
associated with the South Brunswick, New Jersey fires and other changes in
assets and liability accounts.
Net cash provided by financing activities was $88.0 million for the nine months
ended September 30, 1997, consisting primarily of the proceeds from borrowings
under the Company's revolving credit facility of $99.0 million, which were
partially offset by repayments of debt of $10.4 million. On September 29, 1997,
the Company amended its revolving credit facility, increasing its credit
availability thereunder from $150 million to $250 million. The amendment also
extended the maturity of the revolving credit facility by one year to September
2002 and changed certain other terms. As of September 30, 1997 the Company had
$151 million available under its revolving credit facility.
On October 24, 1997, the Company successfully completed the sale, in a private
placement to qualified institutional buyers, of $250 million in aggregate
principal amount of the 1997 Notes. The 1997 Notes were issued at a price to
investors of 99.806%. A portion of the net proceeds from the sale of the 1997
Notes was used to repay outstanding bank debt and to fund the cash portion of
the purchase price of the HIMSCORP acquisition. The remaining balance of
approximately $22 million will be used to fund a portion of the purchase price
of AGI and for general corporate purposes.
The Company has recently issued shares of Common Stock and options to purchase
Common Stock as partial consideration for certain acquisitions, particularly for
larger acquisitions. In June 1997, the Company issued approximately 1.8 million
shares of Common Stock, valued at $51.3 million, and options to acquire
approximately 0.1 million shares of Common Stock, valued at $2.3 million, as
partial consideration for its acquisition of Safesite. In the third quarter of
1997, the Company issued approximately 0.3 million shares of Common Stock,
valued at $8.2 million, as partial consideration for two of the five
acquisitions. In October 1997, in connection with the HIMSCORP acquisition, the
Company issued approximately 1.2 million shares of Common Stock, valued at
approximately $46.2 million.
The Company expects to incur costs during the next two to three years as it
addresses the impact of the year 2000 on its information systems. According to
published reports, certain information systems, primarily computer software
programs, cannot properly recognize and process date sensitive information for
the year 2000 and beyond. The Company is evaluating its systems to determine
whether they are year 2000 compliant and is in the process of addressing this
issue. Accordingly, management has not yet estimated the cost of this effort.
15
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IRON MOUNTAIN INCORPORATED
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Company is presently involved as a defendant in various litigation which has
occurred in the normal course of business. Management believes that it has
meritorious defenses in all such actions, and in any event, the amount of
damages, if such matters were decided adversely, would not have a material
adverse effect on the Company's financial condition or results of operations.
Item 2 - Changes in Securities
On July 1, 1997, the Company issued 35,358 shares of its Common Stock as partial
consideration for the acquisition of Archives Express, Inc. The number of shares
issued was based on the average closing price for the ten trading days ending
three trading days before the closing. The fair value of the shares recorded,
based on the closing price on the date of acquisition, was $1.1 million.
On September 2, 1997, the Company issued 226,788 shares of its Common Stock as
partial consideration for the acquisition of Data Securities International, Inc.
The number of shares issued was based on the average closing price for the
fifteen trading days ending four trading days before the closing. The fair value
of the shares recorded, based on the closing price on the date of acquisition,
was $7.1 million.
Such shares were issued in reliance upon section 4(2) of the Securities Act of
1933, as amended.
Item 6 - Exhibits and Reports on Form 8-K
(a) Certain exhibits indicated below are incorporated by reference to documents
of Iron Mountain on file with the Securities and Exchange Commission. Such
filings and the exhibit numbers in the applicable filing are indicated in
parentheses. All other exhibits are filed herewith.
Exhibit Description
------- -----------
2.1 Agreement and Plan of Merger by and among Iron Mountain, IM-3
Acquisition Corp. and HIMSCORP, Inc., dated as of September 17, 1997,
and Joinder to Agreement and Plan of Merger by and among said parties
and Iron Mountain Records Management, Inc., dated as of October 31,
1997. (Current Report on Form 8-K/A dated November 10, 1997;
exhibit 2.2)
2.2 Agreement and Plan of Merger, dated as of September 26, 1997, by and
among Iron Mountain, Arcus Group, Inc., United Acquisition Company and
Arcus Technology Services, Inc.
2.3 Agreement and Plan of Merger by and among Iron Mountain, DSI
Acquisition Corporation and Data Securities International, Inc., dated
as of August 25, 1997.
16
<PAGE>
IRON MOUNTAIN INCORPORATED
10.1 Second Amended and Restated Credit Agreement, dated as of September
26, 1997, among Iron Mountain, the lenders party thereto and The Chase
Manhattan Bank, as Administrative Agent.
10.2 Asset Purchase and Sale Agreement between Iron Mountain Records
Management, Inc. as buyer and Records Retention/FileSafe as seller,
dated as of August 20, 1997.
11 Statement re: computation of earnings per share
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K/A on August 26, 1997,
which included the required financial statements for the acquisition of
Safesite Records Management Corporation under Item 7.
17
<PAGE>
IRON MOUNTAIN INCORPORATED
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IRON MOUNTAIN INCORPORATED
November 14, 1997 By: /s/ Jean A. Bua
- ------------------------- ----------------------------------------
(date) Jean A. Bua
Vice President and Corporate Controller
(Principal Accounting Officer)
18
AGREEMENT AND PLAN OF MERGER
By and Among
IRON MOUNTAIN INCORPORATED,
ARCUS GROUP, INC.,
UNITED ACQUISITION COMPANY
and
ARCUS TECHNOLOGY SERVICES, INC.
dated as of
September 26, 1997
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1. THE MERGER .................................................................. 6
Section 1.1 The Merger .................................................................. 6
Section 1.2 Action by Stockholders ...................................................... 6
Section 1.3 Closing ..................................................................... 6
Section 1.4 Effective Time ............................................................ 6
Section 1.5 Effect of the Merger ...................................................... 7
Section 1.6 Certificate of Incorporation ................................................ 7
Section 1.7 Bylaws ..................................................................... 7
Section 1.8 Directors and Officers ...................................................... 7
ARTICLE 2. CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES ........................ 7
Section 2.1 Conversion of Securities ................................................... 7
Section 2.2 Exchange of Certificates; Exchange Agent and Exchange Procedures ............ 9
Section 2.3 Stock Transfer Books ......................................................10
Section 2.4 Option Securities .........................................................11
Section 2.5 Dissenting Shares .........................................................11
Section 2.6 Further Adjustment .........................................................12
Section 2.7 Standstill ..................................................................12
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE ARCUS PARTIES ........................13
Section 3.1 Organization and Qualification; Power and Authority; Effect of Transaction 13
Section 3.2 Financial and Other Information .............................................14
Section 3.3 Changes in Condition ......................................................15
Section 3.4 Liabilities ...............................................................15
Section 3.5 Title to Properties; Leases ................................................15
Section 3.6 Compliance with Private Authorizations ....................................16
Section 3.7 Compliance with Governmental Authorizations and Applicable Law ............17
Section 3.8 Intangible Assets .........................................................17
Section 3.9 Related Transactions ......................................................17
Section 3.10 Insurance ..................................................................17
Section 3.11 Tax Matters ...............................................................18
Section 3.12 ERISA .....................................................................19
Section 3.13 Authorized and Outstanding Capital Stock ....................................20
Section 3.14 Employment Arrangements ...................................................21
Section 3.15 Material Agreements .........................................................21
Section 3.16 Ordinary Course of Business ................................................22
Section 3.17 Bank Accounts, Etc. .........................................................23
Section 3.18 Adverse Restrictions ......................................................23
Section 3.19 Broker or Finder ............................................................23
Section 3.20 Environmental Matters ......................................................23
Section 3.21 Customer Contracts .........................................................24
Section 3.22 Reorganization ............................................................24
Section 3.23 Materiality ...............................................................25
Section 3.24 Fairness Opinion ............................................................25
Section 3.25 Inapplicability of Specified Statute .......................................25
Section 3.26 Bankruptcy Plan ............................................................25
</TABLE>
2
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<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF ACQUIROR ................................. 25
Section 4.1 Organization and Qualification; Power and Authority; Effect of Transaction 25
Section 4.2 Changes in Condition ...................................................... 26
Section 4.3 Capitalization of Acquiror ................................................ 26
Section 4.4 SEC Filings; Financial Statements and Other Information .................. 26
Section 4.5 Registration Statement ................................................... 27
Section 4.6 Brokers .................................................................. 27
Section 4.7 Liabilities ............................................................... 27
Section 4.8 Related Transactions ...................................................... 28
Section 4.9 Materiality ............................................................... 28
Section 4.10 [Intentionally Omitted] ................................................... 28
Section 4.11 Ordinary Course of Business ................................................ 28
Section 4.12 Fairness Opinion ......................................................... 28
Section 4.13 Inapplicability of Specified Statutes .................................... 28
ARTICLE 5. ADDITIONAL COVENANTS ...................................................... 28
Section 5.1 Access to Information; Confidentiality .................................... 28
Section 5.2 Agreement to Cooperate ................................................... 29
Section 5.3 Affiliate Agreements ...................................................... 30
Section 5.4 No Solicitation ............................................................ 30
Section 5.5 Directors' and Officers' Indemnification and Insurance ..................... 31
Section 5.6 Notification of Certain Matters and Cure ................................. 31
Section 5.7 Public Announcements ...................................................... 32
Section 5.8 Employee Benefits; Severance Policy ....................................... 32
Section 5.9 Certain Actions Concerning Business Combinations ........................... 32
Section 5.10 Option Securities ......................................................... 33
Section 5.11 Tax Treatment ............................................................ 33
Section 5.12 Preparation of the Registration Statement ................................. 33
Section 5.13 Disclosure of Acquisitions ................................................ 34
Section 5.14 Amendment to Preserve Tax-Free Transaction ................................. 34
Section 5.15 Warrant Purchase Agreement, Non-Competition Agreement, Etc. ............... 34
Section 5.16 Customers .................................................................. 35
ARTICLE 6. CLOSING CONDITIONS ......................................................... 35
Section 6.1 Conditions to Obligations of Each Party to Effect the Merger ............... 35
Section 6.2 Conditions to Obligations of Acquiror .................................... 36
Section 6.3 Conditions to Obligations of the Company ................................. 36
ARTICLE 7. TERMINATION, AMENDMENT AND WAIVER .......................................... 37
Section 7.1 Termination ............................................................... 37
Section 7.2 Effect of Termination ...................................................... 39
Section 7.3 Amendment .................................................................. 39
Section 7.4 Waiver ..................................................................... 39
Section 7.5 Fees, Expenses and Other Payments .......................................... 39
Section 7.6 Effect of Investigation ................................................... 40
ARTICLE 8. INDEMNIFICATION; ADJUSTMENT ................................................ 40
Section 8.1 Survival .................................................................. 40
Section 8.2 Escrow; Indemnification ................................................... 40
Section 8.3 Limitation of Liability; Disposition of Escrow Indemnity Funds ............ 41
</TABLE>
3
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<CAPTION>
<S> <C> <C>
Section 8.4 Notice of Claims ....................................... 42
Section 8.5 Defense of Third Party Claims ........................... 43
Section 8.6 Balance Sheet Adjustment; Arcus Parties' Expenses ...... 43
Section 8.7 Exclusive Remedy ....................................... 44
ARTICLE 9. ARBITRATION ............................................. 45
ARTICLE 10. GENERAL PROVISIONS .................................... 45
Section 10.1 Notices ................................................ 45
Section 10.2 Headings ................................................ 46
Section 10.3 Severability .......................................... 46
Section 10.4 Entire Agreement ....................................... 46
Section 10.5 Assignment ............................................. 46
Section 10.6 Parties in Interest .................................... 46
Section 10.7 Governing Law; Attorneys Fees ........................... 47
Section 10.8 Enforcement of the Agreement ........................... 47
Section 10.9 Counterparts .......................................... 47
Section 10.10 Mutual Drafting ....................................... 47
ARTICLE 11. DEFINITIONS ............................................. 47
</TABLE>
EXHIBITS
2.7 Form of Amendment to the Restated By-Laws of Acquiror
5.3 Form of Affiliate Agreement
5.15(a) Form of Non-Competition Agreement
5.15(b) Form of Non-Competition Agreement
5.16 Form of Liability Limitation
6.1(g) Form of Warrant Purchase Agreement
7.1(f) Form of Acquiror Voting Agreement
8.3(b) Form of Escrow Agreement
SCHEDULES
A. UAC Plan of Merger
B. ATSI Plan of Merger
C. Pre-Merger Reorganization
D. Disclosure Schedule
E. Acquiror Disclosure Schedule
4
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 26, 1997, by and among
Iron Mountain Incorporated, a Delaware corporation ("Acquiror"), Arcus Group,
Inc., a Delaware corporation (the "Company"), United Acquisition Company, a
Nevada corporation ("UAC"), and Arcus Technology Services, Inc., a Delaware
corporation ("ATSI," and together with UAC and the Company, the "Arcus
Parties").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement
(this and other capitalized terms used herein are either defined in Article 11
below or in a Section of this Agreement and, in such case, Article 11 includes a
reference to such Section), in accordance with the General Corporation Law of
the State of Delaware (the "DGCL"), the Company and Acquiror will carry out a
business combination transaction pursuant to which the Company will merge with
and into Acquiror with Acquiror continuing as the surviving corporation (the
"Merger") and the stockholders of the Company (the "Stockholders") will convert
their holdings into a combination of cash and shares of the Common Stock, par
value $.01 per share, of Acquiror ("Acquiror Stock"); and
WHEREAS, upon the terms and subject to the conditions of this Agreement, on
or prior to the Closing Date each of the Arcus Parties shall cause (i) UAC to
merge with and into the Company (the "UAC Merger") pursuant to and in accordance
with the Agreement and Plan of Merger between UAC and the Company substantially
in the form set forth in Schedule A hereto (the "UAC Plan of Merger"), with the
Company continuing as the surviving corporation, and (ii) ATSI to merge with and
into the Company (the "ATSI Merger") pursuant to and in accordance with the
Agreement and Plan of Merger between ATSI and the Company substantially in the
form set forth in Schedule B hereto (the "ATSI Plan of Merger"), with the
Company continuing as the surviving corporation (such transactions, together
with the actions required or desirable to effectuate such transactions, as
described on Schedule C hereto, being hereafter referred to as the
"Reorganization"); and
WHEREAS, the Board of Directors of the Company has unanimously determined
that the Merger and the Reorganization are fair to, and in the best interests
of, the Company and the Stockholders and has approved this Agreement as a
tax-free plan of reorganization within the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), has approved this
Agreement, the Merger and the Transactions for which its approval is required
under Applicable Law and has recommended approval and adoption of this
Agreement, the Merger and the Transactions for which approval is required under
Applicable Law by the Stockholders; and
WHEREAS, the Board of Directors of each of UAC and ATSI has unanimously
determined that the Reorganization is fair to, and in the best interests of, UAC
and ATSI, respectively, and their respective stockholders, has approved this
Agreement and, subject to stockholder approval where required, the Transactions
and has recommended approval and adoption of the Transactions for which approval
is required by their respective stockholders; and
WHEREAS, the Company has approved and adopted this Agreement and, in its
capacity as a stockholder of UAC, has agreed to vote its shares in favor of the
Reorganization (including, without limitation, the UAC Merger) in accordance
with the DGCL and the Nevada Revised Statutes (the "NRS"), as applicable, and
UAC has approved and adopted this Agreement and, in its capacity as a
stockholder of ATSI, has agreed to vote its shares in favor of the
Reorganization (including, without limitation, the ATSI Merger) in accordance
with the DGCL and the NRS, as applicable; and
WHEREAS, the Board of Directors of Acquiror has unanimously approved this
Agreement, the Merger and the Transactions for which approval is required under
Applicable Law and, to the extent such approval is required under Applicable Law
or Schedule D of the NASD By-Laws, has recommended to its stockholders the
approval and adoption of this Agreement, the Merger and the Transactions.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto, intending to be legally bound, agree as follows:
5
<PAGE>
ARTICLE 1.
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, at the Effective Time,
the Company shall be merged with and into Acquiror. As a result of the Merger
and as provided in the DGCL, the separate existence of the Company shall cease
and Acquiror shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
Section 1.2. Action by Stockholders.
(a) Each of the Arcus Parties, acting through its Board of Directors,
shall, in accordance with and subject to Applicable Law and its Organic
Documents, as soon as practicable, duly call, give notice of, convene and hold a
special meeting of the stockholders of such Arcus Party for the purpose of
adopting and approving (i) in the case of the Company, the UAC Plan of Merger,
the UAC Merger, the ATSI Plan of Merger, the ATSI Merger, this Agreement, the
Merger and the Transactions for which stockholder approval is required as set
forth on Schedule C, (ii) in the case of UAC, the UAC Plan of Merger, the UAC
Merger and the Transactions for which stockholder approval is required as set
forth on Schedule C and (iii) in the case of ATSI, the ATSI Plan of Merger, the
ATSI Merger and the Transactions for which stockholder approval is required as
set forth on Schedule C (collectively, the "Arcus Special Meetings"); include in
any proxy statement related to the Arcus Special Meetings the conclusion and
recommendation of each such Board of Directors to the effect that such Board of
Directors, having determined that (x) in the case of the Company, this
Agreement, the Merger and the Transactions, including, without limitation, the
UAC Plan of Merger, the UAC Merger, the ATSI Plan of Merger and the ATSI Merger,
(y) in the case of UAC, this Agreement, the Merger and the Transactions,
including, without limitation, the UAC Plan of Merger and the UAC Merger and (z)
in the case of ATSI, this Agreement, the Merger and the Transactions, including,
without limitation, the ATSI Plan of Merger and the ATSI Merger, are in the best
interests of such Arcus Party and its stockholders, has approved each such
matter and recommends that the stockholders of such Arcus Party vote in favor of
each such matter; and use its best efforts to obtain the necessary approval and
adoption of each such matter.
(b) If required by Applicable Law or by Schedule D of the NASD By-Laws,
Acquiror, acting through its Board of Directors, shall, in accordance with and
subject to Applicable Law and its Organic Documents, as soon as practicable,
duly call, give notice of, convene and hold a special meeting of the
stockholders of Acquiror for the purpose of adopting and approving this
Agreement, the Merger and the Transactions for which approval is required under
Applicable Law or by Schedule D of the NASD By-Laws (the "Acquiror Special
Meeting"); include in any proxy statement related to the Acquiror Special
Meeting the conclusion and recommendation of the Board of Directors of Acquiror
to the effect that the Board of Directors of Acquiror, having determined that
this Agreement, the Merger and the Transactions for which approval is required
under Applicable Law or by Schedule D of the NASD By-Laws are in the best
interests of Acquiror and the stockholders of Acquiror, has approved this
Agreement, the Merger and the Transactions for which approval is required under
Applicable Law and recommends that the stockholders of Acquiror vote in favor of
the approval and adoption of this Agreement, the Merger and the Transactions for
which approval is required under Applicable Law or by Schedule D of the NASD
By-Laws; and use its best efforts to obtain the necessary approval and adoption
of this Agreement, the Merger and the Transactions by the stockholders of
Acquiror.
Section 1.3. Closing. Unless this Agreement shall have been terminated
pursuant to Section 7.1 hereof, the closing of the Merger (the "Closing") will
take place as promptly as practicable (and in any event within five (5) business
days) after the date on which the last of the conditions set forth in Article 6
is satisfied or waived, at the offices of Sullivan & Worcester LLP, One Post
Office Square, Boston, Massachusetts 02109, unless another date, time or place
is agreed to in writing by the Company and Acquiror (the date on which the
Closing occurs being referred to herein as the "Closing Date").
Section 1.4. Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article 6
(but subject to Section 1.3 hereof), the Parties shall cause the Merger to be
consummated by filing a certificate of merger with the Secretary of State of the
State of Delaware and by making any related filings required under the DGCL. The
Merger shall become effective at such time (but not prior to the
6
<PAGE>
Closing Date) as such certificate is duly filed with the Secretary of State of
the State of Delaware or at such later time as is specified in such certificate
(the "Effective Time"), but in no event more than ninety (90) days after the
filing of such certificate.
Section 1.5. Effect of the Merger. From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all the restrictions, disabilities and duties of
Acquiror and the Company, after giving effect to the Reorganization, including,
without limitation, any duties to stockholders that dissent from, or exercise
appraisal rights in connection with, the Reorganization, and the Merger shall
otherwise have the effect, all as provided under the DGCL.
Section 1.6. Certificate of Incorporation. From and after the Effective
Time, the Certificate of Incorporation of Acquiror as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation, until amended in accordance with Applicable Law.
Section 1.7. Bylaws. Subject to Section 2.7 hereof, from and after the
Effective Time, the By-Laws of Acquiror as in effect immediately prior to the
Effective Time shall be the By-Laws of the Surviving Corporation, until amended
in accordance with Applicable Law.
Section 1.8. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified (or their earlier
resignation or removal) in accordance with Applicable Law, the directors of
Acquiror at the Effective Time shall be the directors of the Surviving
Corporation and the officers of Acquiror at the Effective Time shall be the
officers of the Surviving Corporation. At the Effective Time, Clarke H. Bailey
shall be appointed or elected as a Class C Director of Acquiror, to hold office
in accordance with the Restated Certificate of Incorporation and By-Laws of
Acquiror.
ARTICLE 2.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.1. Conversion of Securities. Subject to the terms and conditions
of this Agreement, at the Effective Time, by virtue of the Merger, automatically
and without any action on the part of Acquiror, the Company or the holders of
any of the following securities:
(a) Each share of the common stock, par value $.0001 per share, of the
Company (the "Company Stock") issued and outstanding immediately prior to the
Effective Time after giving effect to the Reorganization, including all shares
of Company Stock for which shares of UAC Common Stock or ATSI Common Stock are
exchanged pursuant thereto, or deemed to be outstanding immediately prior to the
Effective Time by virtue of the withdrawal, in accordance with Applicable Law or
as otherwise consented to by Acquiror in its sole and absolute discretion,
following the Effective Time, of a demand for appraisal previously made by a
stockholder of UAC or ATSI in connection with the UAC Merger or the ATSI Merger,
as the case may be (each such share of Company Stock, a "Share" and
collectively, the "Shares") (other than any Shares to be cancelled pursuant to
Section 2.1(c) and any Dissenting Shares), shall become and be converted into
the right to receive, subject to the indemnification and adjustment provisions
of Article 8 hereof (i) that number equal to the Common Stock Conversion Number
of fully paid and nonassessable shares of Acquiror Stock (the "Stock Merger
Consideration") and (ii) cash in an amount equal to the Common Cash Conversion
Number (the "Cash Merger Consideration"). At the Effective Time, all Shares
shall no longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each certificate previously evidencing any Shares,
including each certificate evidencing shares of UAC Common Stock or ATSI Common
Stock exchanged for Shares of Company Stock in connection with the
Reorganization (each, a "Share Certificate") (other than any Share Certificate
representing Shares to be cancelled pursuant to Section 2.1(c) or Dissenting
Shares) shall thereafter represent the right to receive, upon the surrender of
such Share Certificate in accordance with the provisions of Section 2.2, but
subject to the indemnification and adjustment provisions of Article 8 hereof,
the Stock Merger Consideration and Cash Merger Consideration multiplied by the
number of Shares represented by such Share Certificate, and a holder of more
than one such Share Certificate shall have the right to receive the Stock Merger
Consideration and Cash Merger Consideration multiplied by the number of Shares
represented by all such Share Certificates (the "Exchange Common
Consideration"). The holders of Share
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Certificates evidencing Shares shall, at and after the Effective Time, cease to
have any rights with respect to such Shares except as otherwise provided herein
or by Applicable Law. Notwithstanding anything to the contrary herein, the Cash
Merger Consideration to be received by any Stockholder shall be adjusted to give
full effect to the indemnification and adjustment provisions in Article 8
hereof.
(b) Each share of preferred stock, par value $.01 per share, of the Company
(the "Company Preferred") issued and outstanding immediately prior to the
Effective Time after giving effect to the Reorganization, including all shares
of Company Preferred for which shares of UAC Preferred Stock are exchanged
pursuant thereto or deemed to be outstanding immediately prior to the Effective
Time by virtue of the withdrawal, in accordance with Applicable Law or as
otherwise consented to by Acquiror in its sole and absolute discretion,
following the Effective Time, of a demand for appraisal previously made by a
holder of UAC Preferred Stock in connection with the UAC Merger (each such share
of Company Preferred, a "Preferred Share" and collectively, the "Preferred
Shares") (other than any Preferred Shares to be cancelled pursuant to Section
2.1(c)) shall become and be converted into the right to receive (i) that number
equal to the Preferred Stock Conversion Number of fully paid and nonassessable
shares of Acquiror Stock (the "Preferred Stock Merger Consideration") and (ii)
cash in an amount equal to the Preferred Cash Conversion Number (the "Preferred
Cash Merger Consideration"). At the Effective Time, all Preferred Shares shall
no longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each certificate previously evidencing any such
Preferred Shares, including each certificate evidencing shares of UAC Preferred
Stock exchanged for shares of Company Preferred in connection with the UAC
Merger (each, a "Preferred Certificate" and, together with the Share
Certificates, the "Certificates") (other than any Preferred Certificate
representing Preferred Shares to be cancelled pursuant to Section 2.1(c)) shall
thereafter represent the right to receive, upon the surrender of such Preferred
Certificate in accordance with the provisions of Section 2.2, the Preferred
Stock Merger Consideration and Preferred Cash Merger Consideration multiplied by
the number of Preferred Shares represented by such Preferred Certificate, and a
holder of more than one such Preferred Certificate shall have the right to
receive the Preferred Stock Merger Consideration and Preferred Cash Merger
Consideration multiplied by the number of Preferred Shares represented by all
such Preferred Certificates (the "Exchange Preferred Consideration"). The
holders of Preferred Certificates evidencing Preferred Shares shall, at and
after the Effective Time, cease to have any rights with respect to such
Preferred Shares except as otherwise provided herein or by Applicable Law.
(c) Each Share, each Preferred Share and each warrant to acquire shares of
Company Stock (each, a "Warrant" and collectively, the "Warrants") outstanding
as of the Effective Time and owned of record by Acquiror shall automatically be
cancelled and extinguished without any exercise or conversion thereof and no
exchange or payment shall be made with respect thereto.
(d) Each share of capital stock of Acquiror, and each security convertible
into or exercisable for shares of capital stock of Acquiror, issued and
outstanding immediately prior to the Effective Time shall remain outstanding.
(e) In lieu of issuing fractional shares, Acquiror shall convert a holder's
right to receive shares of Acquiror Stock pursuant to Sections 2.1(a) and 2.1(b)
into a right to receive the highest whole number of shares of Acquiror Stock
constituting the non-cash portion of the Exchange Common Consideration or the
Exchange Preferred Consideration, as the case may be, plus cash in an amount
equal to the fraction of a share of Acquiror Stock to which the holder would
otherwise be entitled multiplied by the Determination Price, and the Exchange
Common Consideration or the Exchange Preferred Consideration to which a holder
is entitled shall be deemed to be such number of shares of Acquiror Stock plus
such cash in lieu of fractional shares plus the Cash Merger Consideration or the
Preferred Cash Merger Consideration to which the holder is entitled. For
purposes of carrying out the intent of this Section 2.1(e), Acquiror may
aggregate Share Certificates or Preferred Certificates, as the case may be, so
that fractional shares of Acquiror Stock due in exchange for multiple Share
Certificates or multiple Preferred Certificates, as the case may be, may be
combined to yield a number of whole shares thereof plus a single fraction.
(f) In the event that on or prior to December 31, 1999, (i) one or more
holders of options to acquire shares of Acquiror Stock issued in accordance with
Section 2.4 ceases to be employed by Acquiror or any of its Subsidiaries
(whether by reason of death, disability, a termination by Acquiror or otherwise)
(collectively, a "Termination") and (ii) Acquiror shall not have duly and
irrevocably provided, within sixty (60) days following the date of Termination,
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either pursuant to the incentive plan under which such options were issued or
otherwise, for the immediate vesting of all of such options for the benefit of
such employee or such employee's representative, as the case may be, then prior
to March 1, 2000 Acquiror shall deliver cash or immediately saleable shares of
Acquiror Stock (or a combination thereof) having a Deemed Value equal to the
Aggregate Spread Value represented by all such options not so vested in
accordance with the immediately preceding clause (ii) (the "Adjustment Aggregate
Spread Value") to the Stockholder Representative for the benefit of each former
holder of a Share Certificate, each former holder of a Warrant sold pursuant to
a Warrant Purchase Agreement and each holder of an Option Security that received
options to acquire shares of Acquiror Stock pursuant to Section 2.4, other than
any such holder of an Option Security who, following the Effective Time and on
or prior to December 31, 1999, was terminated by Acquiror and for whom Acquiror
shall not have provided, within sixty (60) days following the date of
Termination, either pursuant to the incentive plan under which such options were
issued or otherwise, for the immediate vesting of all of such options for the
benefit of such employee or such employee's representative, as the case may be
(an "Acquiror Optionee"). The amount of the Adjustment Aggregate Spread Value
that each such Person shall receive shall be equal to (x) in the case of a
former holder of a Share Certificate, the Adjustment Aggregate Spread Value
times a fraction, the numerator of which shall equal the value (calculated based
on the Determination Price) of such former holder's Exchange Common
Consideration and the denominator of which shall equal the sum of (1) the value
(calculated based on the Determination Price) of the aggregate Exchange Common
Consideration, (2) the aggregate Warrant Purchase Price, and (3) the Acquiror
Optionee Aggregate Spread Value (such sum being hereafter referred to as the
"Total Common Equity Base"), (y) in the case of a former holder of a Warrant
sold pursuant to a Warrant Purchase Agreement, the Adjustment Aggregate Spread
Value times a fraction, the numerator of which shall equal the Warrant Purchase
Price paid to such holder pursuant to the Warrant Purchase Agreement and the
denominator of which shall equal the sum of the Total Common Equity Base, all as
more specifically set forth in the Warrant Purchase Agreement, and (z) in the
case of an Acquiror Optionee, the Adjustment Aggregate Spread Value times a
fraction, the numerator of which shall equal that portion of the Acquiror
Optionee Aggregate Spread Value represented by Option Securities held by such
Acquiror Optionee and the denominator of which shall equal the Total Common
Equity Base.
Section 2.2. Exchange of Certificates; Exchange Agent and Exchange
Procedures.
(a) Prior to the Effective Time, the Company and Acquiror shall designate
Boston Equiserve (or such other bank or trust company as may be reasonably
satisfactory to the Company and Acquiror) to act as Exchange Agent in the Merger
(the "Exchange Agent"). As soon as reasonably practicable after the Effective
Time, Acquiror shall deposit or cause to be deposited with the Exchange Agent,
for exchange in accordance with this Article, through the Exchange Agent, for
the benefit of (i) the holders of Shares (other than Shares to be cancelled
pursuant Section 2.1(c) and Dissenting Shares), (A) cash (by wire transfer of
federal funds pursuant to instructions reasonably satisfactory to the Exchange
Agent) in an amount equal to the Cash Merger Consideration multiplied by the
number of all Shares (other than Shares to be cancelled pursuant to Section
2.1(c) and Dissenting Shares) (such number of Shares less Shares to be so
cancelled and less Dissenting Shares, the "Net Shares") less (1) the Common
Stock Escrow Indemnity Contribution, (2) the Common Stock Expense Fund
Contribution and (3) the Escrow Holdback Amount, if any, and (B) the Stock
Merger Consideration multiplied by the Net Shares, plus cash in an amount
sufficient to make payment for fractional shares, pursuant to Section 2.1(e), in
exchange for all Net Shares (the "Share Exchange Fund") and (ii) the holders of
Preferred Shares (other than Preferred Shares to be cancelled pursuant to
Section 2.1(c)) (A) cash (by wire transfer of federal funds pursuant to
instructions reasonably satisfactory to the Exchange Agent) in an amount equal
to the Preferred Cash Merger Consideration multiplied by the number of all
Preferred Shares (other than Preferred Shares to be cancelled pursuant to
Section 2.1(c)) (such number of Preferred Shares less Preferred Shares to be so
cancelled, the "Net Preferred Shares") and (B) the Preferred Stock Merger
Consideration multiplied by the Net Preferred Shares, plus cash in an amount
sufficient to make payment for fractional shares pursuant to Section 2.1(e), in
exchange for all Net Preferred Shares (the "Preferred Exchange Fund" and,
together with the Share Exchange Fund, the "Exchange Fund").
(b) As soon as reasonably practicable after the Effective Time, Acquiror
will instruct the Exchange Agent to issue (pursuant to instructions from each
holder of record reasonably satisfactory to Acquiror, the Company and the
Exchange Agent, and otherwise by mail to the most recent address of such holder
as shown on the books and records of the applicable Arcus Entity) to each holder
of a Certificate which immediately prior to the Effective Time
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evidenced Net Shares or Net Preferred Shares, a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
such Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent and shall be in such form and have such other provisions as
Acquiror and the Company may reasonably specify) and instructions to effect the
surrender of such Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate which immediately prior to the Effective Time
evidenced Net Shares or Net Preferred Shares for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Acquiror together
with such letter of transmittal, duly executed, and such other customary
documents as may be reasonably required pursuant to such instructions
(collectively, the "Transmittal Documents"), the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration which
such holder has the right to receive, subject to Article 8 hereof, pursuant to
Sections 2.1(a) and 2.1(b) hereof, and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Shares or
Preferred Shares that is not registered in the transfer records of the Company,
UAC or ATSI, the Merger Consideration which a transferee has the right to
receive may be issued and paid in accordance with this Article to such
transferee if the Certificate is presented to the Exchange Agent, accompanied by
all documents reasonably required to evidence and effect such transfer and by
evidence that any applicable stock transfer taxes have been paid. The
appropriate Merger Consideration will be delivered by the Exchange Agent
promptly following surrender of a Certificate and delivery of the related
Transmittal Documents, and cash payments for fractional shares and the cash
portion of the Merger Consideration may be made by check (or, pursuant to
instructions reasonably satisfactory to the Exchange Agent, by wire transfer).
Each Certificate (other than Certificates representing Shares or Preferred
Shares to be cancelled pursuant to Section 2.1(c) or Dissenting Shares) shall be
deemed at all times after the Effective Time to evidence only the right to
receive, upon such surrender, the Exchange Common Consideration or the Exchange
Preferred Consideration, as appropriate, without interest from the Effective
Time.
(c) In the event any Share Certificate or Preferred Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed and subject
to such other conditions as Acquiror and the Company reasonably may impose, the
Surviving Corporation shall issue in exchange for such lost, stolen or destroyed
Certificate the Exchange Common Consideration or Exchange Preferred
Consideration deliverable in respect thereof as determined in accordance with
Sections 2.1(a) and 2.1(b). Acquiror may, in its discretion and as a condition
precedent to authorizing the issuance thereof by the Surviving Corporation,
require the owner of such lost, stolen or destroyed Certificate to provide a
bond or other surety to Acquiror and the Surviving Corporation in such sum as
Acquiror may reasonably direct as indemnity against any claim that may be made
against Acquiror or the Surviving Corporation (and their Affiliates) with
respect to the Certificate alleged to have been lost, stolen or destroyed.
(d) Any portion of the Exchange Fund which remains undistributed to the
holders of the Company Stock or the Company Preferred, as the case may be, for
ninety (90) days after the Effective Time shall be delivered to Acquiror upon
demand by Acquiror, and any holders of Certificates who have not theretofore
complied with this Article shall thereafter look only to Acquiror for the
Exchange Merger Consideration or Exchange Preferred Consideration to which they
are entitled pursuant to this Article.
(e) None of Acquiror, the Company, UAC, ATSI, the Surviving Corporation or
the Exchange Agent shall be liable to any holder of Shares or Preferred Shares
for any shares of Acquiror Stock or cash from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(f) Each of Acquiror and the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Shares or Preferred Shares such amounts as Acquiror or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of federal, state, local or
foreign tax law. To the extent that amounts are so withheld by Acquiror or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares or Preferred Shares in
respect of which such deduction and withholding was made by Acquiror or the
Exchange Agent.
Section 2.3. Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of Shares or Preferred Shares thereafter on the
records
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of the Company other than to Acquiror. On or after the Effective Time, any
Certificate presented to the Exchange Agent or the Surviving Corporation shall
be converted into the Exchange Common Consideration or the Exchange Preferred
Consideration, as appropriate, deliverable in respect thereof as determined in
accordance with Sections 2.1(a) and 2.1(b).
Section 2.4. Option Securities. Subject to and as more fully provided in
Section 5.10, each Option Security comprising a stock option that is outstanding
at the Effective Time shall automatically be converted into an option (an
"Exchange Option") to purchase Acquiror Stock, which Exchange Option shall (A)
have an exercise price per share of Acquiror Stock determined by dividing (x)
the exercise price per share of the applicable Option Security (after giving
effect to any changes thereto resulting from the Reorganization) by (y) the
quotient of the Share Price divided by the Determination Price, (B) entitle the
holder to purchase that number of shares of Acquiror Stock as equals the product
of (x) the number of shares subject to such Option Security (after giving effect
to any changes thereto resulting from the Reorganization) and (y) the quotient
of the Share Price divided by the Determination Price and (C) have the same
vesting schedule as is currently included in such Option Security (except as
required pursuant to Section 5.10 and except that there shall be immediate
vesting of any unvested portion thereof upon termination by the Surviving
Corporation or any of its Subsidiaries of employment of the holder of such
Exchange Option (other than any termination for Cause)). In lieu of issuing any
option to acquire a fractional share of Acquiror Stock, Acquiror shall convert a
holder's right to receive an option pursuant to this Section 2.4 into a right to
receive an option to acquire the nearest whole number of shares of Acquiror
Stock (with no adjustment to any cash amount received in connection with the
conversion of an Option Security). Each Option Security comprising a warrant
that is outstanding at the Effective Time shall automatically be converted into
a warrant to purchase Acquiror Stock at a value equivalent to that set forth in
such Option Security based upon the formula set forth in the first sentence of
this Section 2.4.
Section 2.5. Dissenting Shares.
(a) Notwithstanding any other provision of this Agreement to the contrary,
Shares that are held by Stockholders who shall have not voted in favor of the
Merger or consented thereto in writing and who shall be entitled to and shall
have demanded properly in writing appraisal for such Shares in accordance with
the DGCL, and who shall not have withdrawn such demand within the statutory time
period allowed or otherwise have forfeited appraisal rights (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Exchange Common Consideration. Such Stockholders shall be entitled
to receive payment of the appraised value of such Shares in accordance with the
provisions of the DGCL, except that all Dissenting Shares held by Stockholders
who effectively shall have withdrawn, forfeited or lost their rights to
appraisal of such Dissenting Shares under the DGCL shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive, without any interest thereon, the Exchange
Common Consideration upon surrender, in the manner provided in Section 2.2, of
the Certificate or Certificates that formerly evidenced such Shares.
(b) The Company shall give Acquiror prompt notice of any demands for
appraisal received by it as a result of the Transactions, or by ATSI as a result
of the ATSI Merger or by UAC as a result of the UAC Merger, withdrawals of such
demands, and any other instruments served pursuant to the DGCL or the NRS and
received by an Arcus Party and relating thereto. The Arcus Parties and Acquiror
shall jointly direct all negotiations and proceedings with respect to demands
for appraisal under Applicable Law; provided, however, that Acquiror shall be
and remain the Person obligated to satisfy such demands as required by
Applicable Law. No Arcus Party shall, except with the prior written consent of
Acquiror, make any payment with respect to any demands for appraisal, or offer
to settle, or settle, any such demands.
(c) The Parties hereto acknowledge and agree that, as more fully set forth
in the ATSI Plan of Merger and the UAC Plan of Merger, shares of ATSI Common
Stock, UAC Common Stock and UAC Preferred Stock that are outstanding immediately
prior to the effective time of the ATSI Merger and UAC Merger, as the case may
be, and which are held by stockholders of ATSI and UAC, respectively, who shall
have not voted in favor of the ATSI Merger or the UAC Merger, as the case may
be, or consented thereto in writing and who shall be entitled to and shall have
demanded properly the fair value of, or appraisal for, such shares in accordance
with the DGCL or the NRS, as
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applicable, and, where the DGCL applies, who shall not have withdrawn such
demand within the statutory time period allowed or otherwise forfeited appraisal
rights, shall not be converted into or represent the right to receive shares of
capital stock of the Company and, as a result thereof, shall not be converted
into or represent the right to receive the Exchange Common Consideration or the
Exchange Preferred Consideration, as the case may be, except if and to the
extent such holders shall have effectively withdrawn, forfeited or lost their
rights to appraisal of such shares, as more fully set forth in the ATSI Plan of
Merger and UAC Plan of Merger, or as otherwise consented to by Acquiror in its
sole discretion.
Section 2.6. Further Adjustment. If the value of the sum of the aggregate
Stock Merger Consideration (excluding shares of Acquiror Stock issued to Persons
who have exercised Option Securities since January 1, 1997) and the Preferred
Stock Merger Consideration, in each case based on the closing price of Acquiror
Stock on the Nasdaq National Market System for the trading day immediately prior
to the Closing Date, as provided by the Nasdaq National Market System or, if
unavailable from such source, then as reported in the Wall Street Journal, is
less than 47% (the "Threshold Percentage") of the sum of the value of the
aggregate Merger Consideration, based on such closing price, and the amount of
cash and the fair market value of assets distributed by the Arcus Entities to
holders of their capital stock on or after August 1, 1997 (collectively, the
"Aggregate Consideration Amount"), then (i) the number of shares of Acquiror
Stock deliverable pursuant to Sections 2.1(a) and 2.1(b) shall be increased such
that the sum of the value of the aggregate Stock Merger Consideration (excluding
shares of Acquiror Stock issued to Persons who have exercised Option Securities
since January 1, 1997) and the Preferred Stock Merger Consideration (based on
such closing price and after giving effect to the decrease in the cash
consideration contemplated by this Section 2.6) equals the Threshold Percentage
of the Aggregate Consideration Amount, and (ii) the Cash Merger Consideration
and Preferred Cash Merger Consideration, respectively, shall be reduced by an
amount equal to the product of (A) the number of such additional shares of
Acquiror Stock and (B) the Determination Price (calculated without giving effect
to the first proviso in the definition of Determination Price).
Section 2.7. Standstill.
(a) Until the earlier of (i) the first anniversary of the Effective Time or
(ii) the date on which a Transfer (as such term is defined in Exhibit 2.7
hereto) may be effected in a manner that Acquiror reasonably determines does not
adversely affect the tax-free nature of the Merger under Section 368(a) of the
Code, except as permitted by Acquiror's Restated By-Laws, any Person who
receives or is entitled to receive at or after the Effective Time any shares of
Acquiror Stock pursuant to Section 2.1 shall not Transfer, and Acquiror shall
not be required to register the Transfer of, the shares of Acquiror Stock issued
to such Person in the Merger.
(b) Each certificate representing shares of Acquiror Stock issued pursuant
to the Merger shall bear the following legend:
"The shares represented by this certificate may not be transferred prior
to [the first anniversary date of the Effective Time to be inserted]
except as otherwise permitted by the Restated By-Laws of the
Corporation. A copy of the Restated By-Laws of the Corporation will be
furnished without charge upon written request addressed to the
Corporation at 745 Atlantic Avenue, Boston, Massachusetts 02111,
Attention: Chief Executive Officer."
(c) In order to implement the provisions of this Section 2.7, the Restated
By-Laws of Acquiror shall be amended on or prior to the Closing Date to include
the provisions as to the limitations on the transferability of the Acquiror
Stock set forth in Exhibit 2.7 hereto.
(d) Notwithstanding the foregoing, the provisions of this Section 2.7 shall
not apply to any Person who receives shares of Acquiror Stock as a result of the
application of Section 5.10(a) or to the certificates representing such shares.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE ARCUS PARTIES
Each of the Arcus Parties hereby represents and warrants to, and in respect
of Sections 3.16 and 3.22 represents, warrants and covenants to, and agrees
with, Acquiror as follows:
Section 3.1. Organization and Qualification; Power and Authority; Effect
of Transaction.
(a) The Company:
(i) is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has no direct Subsidiaries other
than UAC,
(ii) has all requisite power and corporate authority to own or hold under
lease its properties and to conduct its business as now conducted and as
presently proposed to be conducted, and to the Arcus Parties' knowledge,
except as set forth in Section 3.1(a)(ii) of the Disclosure Schedule, has in
full force and effect all material Governmental Authorizations and Private
Authorizations and has made all Governmental Filings, to the extent required
for such ownership and lease of its property and conduct of its business,
(iii) is duly qualified and authorized to do business and is in good
standing as a foreign corporation in each jurisdiction (a true and correct
list of which is set forth in Section 3.1(a)(iii) of the Disclosure Schedule)
in which the character of its property or the nature of its business or
operations requires such qualification or authorization, except to the extent
the failure to so qualify or to maintain such authorizations could not
reasonably be expected to have an Adverse Effect on the Arcus Entities, and
(iv) is, and at all times since its formation has been, a corporation whose
sole purpose is to hold assets (including ownership interests in Subsidiaries
or other entities controlled by it), and is not now conducting, and at all
times since its formation has not conducted, any business operations other
than through its Subsidiaries or other entities controlled by it and other
than incidental, nonmaterial operations relating to other assets held by it.
(b) UAC:
(i) is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada; each Subsidiary of UAC listed in
Section 3.1(b) of the Disclosure Schedule is duly organized, validly existing
and in good standing under the laws of its respective state of incorporation,
(ii) and each of its Subsidiaries has all requisite power and corporate
authority to own or hold under lease its properties and to conduct its
business as now conducted and as presently proposed to be conducted, and, to
the Arcus Parties' knowledge, except as set forth in Section 3.1(b)(ii) of
the Disclosure Schedule, has in full force and effect all Governmental
Authorizations and Private Authorizations and has made all Governmental
Filings, to the extent required for such ownership and lease of its property
and conduct of its business, and
(iii) and each of its Subsidiaries is duly qualified and authorized to do
business and is in good standing as a foreign corporation in each
jurisdiction (a true and correct list of which is set forth in Section
3.1(b)(iii) of the Disclosure Schedule) in which the character of its
property or the nature of its business or operations requires such
qualification or authorization, except to the extent the failure to so
qualify or to maintain such authorizations could not reasonably be expected
to have an Adverse Effect on the Arcus Entities.
(c) Each of the Arcus Parties has all requisite power and corporate
authority and has in full force and effect all Governmental Authorizations and
Private Authorizations in order to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto and to
consummate the Merger and the Transactions, and the execution, delivery and
performance of this Agreement and each Collateral Document executed or required
to be executed pursuant hereto or thereto have been duly authorized by all
requisite corporate or other action (other than that of the stockholders of the
Arcus Parties). This Agreement has been duly executed and delivered by each
Arcus Party and,
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subject to the affirmative vote of the stockholders of the Arcus Parties
referred to below, constitutes, and each Collateral Document executed or
required to be executed pursuant hereto or thereto or to consummate the Merger
and the Transactions, when executed and delivered by an Arcus Party or an
Affiliate of an Arcus Party will constitute, legal, valid and binding
obligations of such Arcus Party or such Affiliate, enforceable in accordance
with their respective terms, except as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization, arrangement, voidable
preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity (the "Enforceability Exceptions").
Schedule C hereto sets forth the affirmative votes, actions by written consent
or other actions required of the holders of any class or series of the capital
stock of the Arcus Parties necessary to approve this Agreement, the Merger and
the Transactions under Applicable Law and the Arcus Parties' Organic Documents.
Neither the provisions of Section 203 of the DGCL nor the provisions of Section
78.411 of the NRS will apply to this Agreement, the Merger or the Transactions.
(d) Except as set forth in Section 3.1(d) of the Disclosure Schedule,
neither the execution and delivery of this Agreement or any Collateral Document
executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by any Arcus Parties or any of the other parties
hereto or thereto which is Affiliated with the Arcus Parties:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law on the part of any Arcus Party
or their respective Subsidiaries or will conflict with, or result in a breach
or violation of, or constitute a default under, or permit the acceleration of
any obligation or liability in, or but for any requirement of giving of
notice or passage of time or both would constitute such a conflict with,
breach or violation of, or default under, or permit any such acceleration in,
any Contractual Obligation of any Arcus Party or any of their respective
Subsidiaries,
(ii) will result in or permit the creation or imposition of any material
Lien upon any property now owned or leased by any Arcus Entity or any such
other party, or
(iii) will require any Governmental Authorization or Governmental Filing or
Private Authorization, except pursuant to the HSR Act or as otherwise set
forth on Schedule C hereto.
Section 3.2. Financial and Other Information.
(a) The Arcus Parties have heretofore furnished to Acquiror copies of the
consolidated financial statements of the Arcus Parties, as listed in Section
3.2(a) of the Disclosure Schedule (the "Financial Statements"). The Financial
Statements, including in each case the notes thereto, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, except as otherwise noted therein or in Section 3.2(a) of the
Disclosure Schedule, and fairly present the financial condition and results of
operations of such entities and their respective Subsidiaries, on the bases
therein stated, as of the respective dates thereof, and for the respective
periods covered thereby and include, in the case of unaudited financial
statements, all material adjustments and accruals consistent with those included
in the audited financial statements.
(b) Except as set forth in Section 3.2(b) of the Disclosure Schedule,
neither the Disclosure Schedule, the Financial Statements, this Agreement nor
any Collateral Document, including the information memorandum prepared by
Donaldson, Lufkin & Jenrette Securities Corporation dated May 1997, furnished or
to be furnished by or on behalf of the Arcus Parties or any of their
stockholders pursuant to this Agreement or any Collateral Document executed or
required to be executed by or on behalf of the Arcus Parties or their
stockholders to consummate the Merger and the Transactions, taken as a whole,
contained on the date delivered or will contain when delivered any untrue
statement of a material fact or omitted on the date delivered or will omit when
delivered to state a material fact required to be stated in such documents by
their terms or necessary in order to make the statements contained herein or
therein not misleading and, to the Arcus Parties' knowledge, all such Collateral
Documents, taken as a whole, are on the date delivered and will be when
delivered true, correct and complete.
(c) As of the date hereof, a true and correct list of all Subsidiaries of
each of the Arcus Parties is set forth in Section 3.2(c) of the Disclosure
Schedule. None of the Arcus Parties own any capital stock or equity or other
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beneficial ownership interest in any other Entity or enterprise, however
organized and however such interest may be denominated or evidenced, except as
set forth in Section 3.2(c) of the Disclosure Schedule.
(d) The copies of the Organic Documents and all amendments thereto of each
of the Arcus Entities that have been delivered to Acquiror are true, correct and
complete copies thereof, as in effect on the date hereof. The minute books of
each of the Arcus Entities (other than the Company and UAC) for the period
January 1, 1992 to the date hereof and the minute books of each of the Company
and UAC for the period January 1, 1993 to the date hereof, copies of which have
been made available to Acquiror, contain accurate minutes of all actions taken
at all meetings of, and accurate consents to all actions taken without meetings
by, the Board of Directors (and any committees thereof) and the stockholders of
each of the Arcus Entities during such periods (except as set forth in Section
3.2(d) of the Disclosure Schedule and except to the extent any such minutes have
not yet been approved by the Board of Directors of any such Arcus Entity).
Section 3.3. Changes in Condition. Since the applicable Balance Sheet Date,
except to the extent described in Section 3.3 of the Disclosure Schedule, there
has been no Adverse Change in the Arcus Entities. There is no Event known to the
Arcus Parties which Adversely Affects or could reasonably be expected to
Adversely Affect the Arcus Entities, except for changes in general economic
conditions or the industries in which the Arcus Entities operate and to the
extent set forth in Section 3.3 of the Disclosure Schedule.
Section 3.4. Liabilities. At the applicable Balance Sheet Date, none of the
Arcus Entities had any obligations or liabilities, past, present or deferred,
accrued or unaccrued, fixed, absolute, contingent or other, except as disclosed
in such balance sheet, or the notes thereto, and since such date none of the
Arcus Entities has incurred any such obligations or liabilities, other than
obligations and liabilities incurred in the ordinary course of business
consistent with past practice of the Arcus Entities, which do not, and could not
reasonably be expected to, in the aggregate, Adversely Affect the Arcus
Entities, except to the extent set forth in Section 3.4 of the Disclosure
Schedule. None of the Arcus Entities has Guaranteed or is otherwise primarily or
secondarily liable in respect of any obligation or liability of any other Person
(other than a Subsidiary), except for endorsements of negotiable instruments for
deposit in the ordinary course of business, consistent with prior practice, or
as disclosed in the most recent balance sheet, or the notes thereto, forming
part of the Financial Statements or in Section 3.4 of the Disclosure Schedule.
Section 3.5. Title to Properties; Leases.
(a) Each of the Arcus Entities has good legal, marketable and insurable
title, with respect to all real property owned (in fee simple), good title with
respect to all real property leased (in leasehold) reflected as an asset on the
most recent balance sheet forming part of the Financial Statements, or held by
any such Arcus Entity for use in its business, if not so reflected, and good
indefeasible and merchantable title to all other assets, tangible and
intangible, reflected on such balance sheet, or (excluding leased real estate)
held by any such Arcus Entity for use in its business if not so reflected, or
purported to have been acquired by such Arcus Entity since such date, except
inventory sold or depleted, or property, plant and other equipment used up or
retired, since such date, in each case in the ordinary course of business
consistent with past practice of the Arcus Entities, free and clear of all
Liens, except such as are reflected in the most recent balance sheet, or the
notes thereto, forming part of the Financial Statements or set forth in Section
3.5(a) of the Disclosure Schedule. Except for financing statements evidencing
Liens referred to in the preceding sentence (a true, correct and complete list
and description of which is set forth in Section 3.5(a) of the Disclosure
Schedule), to the Arcus Parties' knowledge, no financing statements under the
Uniform Commercial Code and no other filing which names any Arcus Entity as
debtor or which covers or purports to cover any of the property of the Arcus
Entities is on file in any state or other jurisdiction, and no Arcus Entity has
signed or agreed to sign any such financing statement or filing or any agreement
authorizing any secured party thereunder to file any such financing statement or
filing. Each Lease or other occupancy or other agreement under which any Arcus
Entity holds real or personal property has been duly authorized, executed and
delivered by such Arcus Entity and, to the Arcus Parties' knowledge, by each of
the parties thereto; each such Lease is a legal, valid and binding obligation of
such Arcus Entity and, to the Arcus Parties' knowledge, of each other party
thereto, enforceable in accordance with its terms subject to the Enforceability
Exceptions. Each of the Arcus Entities has a valid leasehold interest in and
enjoys peaceful and undisturbed possession under all Leases pursuant to which it
holds any real property or tangible personal property, none of which contains
any provision which would impair
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in any material respect such Arcus Entity's ability to use such property as it
is currently used by such Arcus Entity, except as described in Section 3.5(a) of
the Disclosure Schedule. To the Arcus Parties' knowledge, except as disclosed in
Section 3.5(a) of the Disclosure Schedule, all of such Leases are valid and
subsisting and in full force and effect; and neither the Arcus Entities nor, to
the Arcus Parties' knowledge, any other party thereto, is in default in the
performance, observance or fulfillment of any obligation, covenant or condition
contained in any such Lease.
(b) Section 3.5(b) of the Disclosure Schedule contains a true, correct and
complete description of all real estate owned or leased by the Arcus Entities
and all Leases. To the Arcus Parties' knowledge, except as disclosed in Section
3.5(b) of the Disclosure Schedule, the real property (other than land),
fixtures, fixed assets and machinery and equipment are in a state of good repair
and maintenance and are in good operating condition, reasonable wear and tear
excepted.
(c) Except as set forth in Section 3.5(c) of the Disclosure Schedule, all
real property owned or leased by the Arcus Entities conforms to and complies
with, in all material respects, all applicable title covenants, conditions,
restrictions and reservations and all applicable zoning, wetland, land use and
other Applicable Laws.
(d) The Arcus Parties have no knowledge of any public plans or proposals
for changes in road grade, access or other municipal improvements which would
materially and adversely affect the real property owned or leased by the Arcus
Entities or result in any assessment against the real property owned or leased
by the Arcus Parties or the ownership thereof, and, to the Arcus Parties'
knowledge, no ordinance authorizing improvements, the cost of which might be
assessed against any of the Arcus Entities or the real property owned or leased
by the Arcus Entities, is pending or contemplated.
(e) There is no condemnation or eminent domain proceeding, or proceeding in
lieu thereof, pending as to which any of the Arcus Entities has been served with
process or written notice or threatened in writing relating to any material part
of the real property owned by the Arcus Entities. To the Arcus Parties'
knowledge, there are no boundary claims made by any adjoining land owner against
any portion of the real property owned by the Arcus Entities, the presence of
which, singly or in the aggregate, would be reasonably likely to have an Adverse
Effect on the Arcus Entities.
(f) Except as set forth in Section 3.5(f) of the Disclosure Schedule, to
the Arcus Parties' knowledge, there are no facts or conditions that could result
in the termination of the present access from the real property owned or leased
by the Arcus Entities to any existing highways, streets or roads, or in the
termination or expiration of any conditional use permits, tentative tract maps,
sign permits or similar governmental permits or approvals necessary for the
ownership, development and/or operation of the real property owned or leased by
the Arcus Entities. Except as set forth in Section 3.5(f) of the Disclosure
Schedule, to the Arcus Parties' knowledge, there are no geological conditions,
other than generally known earthquake fault lines, affecting the real property
owned or leased by the Arcus Entities that could materially and adversely affect
the real property owned or leased by the Arcus Entities or the ownership,
operation and/or development thereof.
Section 3.6. Compliance with Private Authorizations. Section 3.6 of the
Disclosure Schedule sets forth, to the Arcus Parties' knowledge, a true, correct
and complete list and description of each Private Authorization which
individually is material to the Arcus Entities. The Arcus Entities have obtained
all Private Authorizations which are necessary for the ownership by the Arcus
Entities of their properties and the conduct of their business as now conducted
or as presently proposed to be conducted or which, if not obtained and
maintained, could, singly or in the aggregate, reasonably be expected to
Adversely Affect the Arcus Entities. Except as set forth in Section 3.6 of the
Disclosure Schedule, (i) each Private Authorization which individually is
material to the Arcus Entities is, to the Arcus Parties' knowledge, in full
force and effect, (ii) none of the Arcus Entities is in breach or violation of,
or is in default in the performance, observance or fulfillment of, any Private
Authorization, and (iii) no Event exists or has occurred, which constitutes, or
but for any requirement of giving of notice or passage of time or both would
constitute, such a breach, violation or default, under any Private
Authorization, except for such defaults, breaches or violations as do not and
could not reasonably be expected to, in the aggregate, have any Adverse Effect
on the Arcus Entities. No material Private Authorization is the subject of any
pending or, to the Arcus Parties' knowledge, threatened attack, revocation or
termination.
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Section 3.7. Compliance with Governmental Authorizations and Applicable
Law.
(a) Section 3.7(a) of the Disclosure Schedule contains a description of:
(i) all Legal Actions which are pending in which any of the Arcus Entities
is engaged, or which involve the business, operations or properties of any of
the Arcus Entities or, to the Arcus Parties' knowledge, which are threatened
or contemplated against, any of the Arcus Entities or any of their respective
business, operations or properties; and
(ii) to the Arcus Parties' knowledge, each material Governmental
Authorization to which the Arcus Entities are subject and which relates to
the business, operations, properties, condition (financial or other), or
results of operations of the Arcus Entities, all of which are in full force
and effect, except as set forth in Section 3.7(a)(ii) of the Disclosure
Schedule.
(b) Each of the Arcus Entities has obtained all Governmental Authorizations
which are necessary for the ownership or use of its properties and the conduct
of its business as now conducted or as presently proposed to be conducted by the
Arcus Entities or which, if not obtained and maintained, could singly or in the
aggregate reasonably be expected to have any Adverse Effect on the Arcus
Entities. No material Governmental Authorization is the subject of any pending
or, to the Arcus Parties' knowledge, threatened attack, revocation or
termination and, to the Arcus Parties' knowledge, all material Governmental
Authorizations are in full force and effect. Except as set forth in Section
3.7(b) of the Disclosure Schedule, none of the Arcus Entities is in material
breach or violation of, or in default in the performance, observance or
fulfillment of, any Governmental Authorization or any Applicable Law, and no
Event exists or has occurred, which constitutes, or but for any requirement of
giving of notice or passage of time or both would constitute, such a breach,
violation or default, under any Governmental Authorization or any Applicable
Law, except for such breaches, violations or defaults as do not and could not
reasonably be expected to have in the aggregate any Adverse Effect on the Arcus
Entities.
(c) Except as set forth in Section 3.7(c) of the Disclosure Schedule, the
matters, if any, referred to in Section 3.7(a) or 3.7(b) of the Disclosure
Schedule, if adversely determined against any of the Arcus Entities, could not
reasonably be expected to have an Adverse Effect on the Arcus Entities, except
to the extent set forth in the Disclosure Schedule.
Section 3.8. Intangible Assets. To the Arcus Parties' knowledge, Section
3.8 of the Disclosure Schedule sets forth a true, accurate and complete
description of all material Intangible Assets held or used by the Arcus
Entities, including without limitation the nature of the Arcus Entities'
interest in each and the extent to which the same have been duly registered in
the offices as indicated therein, but excluding general contract rights or other
rights or remedies under contracts or other instruments in favor of any of the
Arcus Entities. Each Arcus Entity owns or possesses or otherwise has the right
to use all Intangible Assets necessary for the present and planned future
conduct of its business, except where the failure to so own, possess or have the
right to use could not individually or in the aggregate, reasonably be expected
to have an Adverse Effect on the Arcus Entities. Except as set forth in Section
3.8 of the Disclosure Schedule, each Arcus Entity possesses all proprietary
rights in or has a valid license to the principal software used in operating and
conducting its business and, other than in the case of software generally
available in the market, no other Person has any rights therein or with respect
thereto.
Section 3.9. Related Transactions. Section 3.9 of the Disclosure Schedule
sets forth a true, correct and complete description of any Contractual
Obligation or transaction, whether now existing or existing during the period
covered by the most recent audited Financial Statements, between the Arcus
Entities and any Affiliate thereof (other than reasonable compensation for
services as officers, directors and employees and reimbursement for
out-of-pocket expenses reasonably incurred in support of the Arcus Entities'
businesses), including without limitation any providing for the furnishing of
services to or by, providing for rental of property, real, personal or mixed, to
or from, or providing for the lending or borrowing of money to or from or
otherwise requiring payments to or from, any such Affiliate.
Section 3.10. Insurance.
(a) Section 3.10(a) of the Disclosure Schedule lists all insurance policies
maintained by the Arcus Entities and includes the insurers' names, policy
numbers, expiration dates, risks insured against, amounts of coverage, the
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annual premiums, exclusions, deductibles and self-insured retention and
describes in reasonable detail any retrospective rating plan, fronting
arrangement or any other self-insurance or risk assumption agreed to by the
Arcus Entities or imposed upon each Arcus Entity by any such insurers, as well
as any self-insurance program that is in effect.
(b) No Arcus Entity is in breach or violation of or in default under any
such policy, and all premiums due thereon have been paid, and each such policy
or a comparable replacement policy will continue to be in force and effect up to
and including the Closing Date.
Section 3.11. Tax Matters.
(a) Except as set forth in Section 3.11(a) of the Disclosure Schedule, each
Arcus Entity has in accordance with all Applicable Laws filed all Tax Returns
which are required to be filed, and has paid, or made adequate provision for the
payment of, all Taxes which have or may become due and payable pursuant to said
Returns and all other governmental charges and assessments received to date. The
Tax Returns of each Arcus Entity have been prepared in accordance with all
Applicable Laws and generally accepted principles applicable to taxation
consistently applied. All Taxes which each Arcus Entity is required by law to
withhold and collect have been duly withheld and collected, and have been paid
over, in a timely manner, to the proper Authorities to the extent due and
payable. Except as set forth in Section 3.11(a) of the Disclosure Schedule, no
Arcus Entity has executed any waiver to extend, or otherwise taken or failed to
take any action that would have the effect of extending, the applicable statute
of limitations in respect of any Tax liabilities of any Arcus Entity for the
fiscal years prior to and including the most recent fiscal year. Except as set
forth in Section 3.11(a) of the Disclosure Schedule, adequate provision has been
made on the most recent balance sheet forming part of the Financial Statements
for all Taxes of any kind, including interest and penalties in respect thereof,
whether disputed or not, and whether past, current or deferred, accrued or
unaccrued, fixed, contingent, absolute or other, and to the knowledge of the
Arcus Parties there are no transactions or matters or any basis which might or
could result in additional Taxes of any nature to any Arcus Entity for which an
adequate reserve has not been provided on such balance sheet. No Arcus Entity is
a "consenting corporation" within the meaning of Section 341(f) of the Code.
Each Arcus Entity has at all times been taxable as a Subchapter C corporation
under the Code, except as otherwise set forth in Section 3.11(a) of the
Disclosure Schedule. No Arcus Entity has ever been a member of any consolidated
group (other than exclusively with the Arcus Parties and their former
Subsidiaries) for Tax purposes, except as set forth in Section 3.11(a) of the
Disclosure Schedule.
(b) Except as set forth in Section 3.11(b) of the Disclosure Schedule, each
Arcus Entity has paid all Taxes which have become due pursuant to its Returns
and has paid all installments (to the extent required to avoid material
underpayment penalties) of estimated Taxes due and payable.
(c) From the end of its most recent fiscal year to the date hereof, no
Arcus Party has made any payment on account of any Taxes except regular payments
required in the ordinary course of business, consistent with prior practice,
with respect to current operations or property presently owned.
(d) The information shown on the Federal income Tax Returns of each Arcus
Entity, to the extent any such Tax Return remains open pursuant to the
applicable statute of limitations, is true, correct and complete and fairly and
accurately reflects the information purported to be shown. True, correct and
complete copies of the Tax Returns set forth in Section 3.11(d) of the
Disclosure Schedule have been furnished by the Arcus Parties to Acquiror.
Federal and state income Tax Returns of each Arcus Entity have been examined or
audited by the IRS or applicable state, local, foreign or other Authority
through the taxable periods set forth in Section 3.11(d) of the Disclosure
Schedule and, except to the extent set forth in Section 3.11(d) of the
Disclosure Schedule, all Federal and State income Tax Returns of the Arcus
Entities are closed pursuant to the applicable statute of limitations and there
are no open, pending or threatened Tax-related proceedings, audits,
examinations, assessments, asserted deficiencies or claims for additional Taxes
with respect to any Arcus Entity, except as shown in Section 3.11(d) of the
Disclosure Schedule. Except as shown in Section 3.11(d) of the Disclosure
Schedule, there are no current revenue agents' reports or any other assertions
of unpaid or unresolved deficiencies or other liabilities for Taxes (including
any reports, statements, summaries and other communications or assertions or
claims of unpaid or unresolved deficiencies or other liabilities) with respect
to any Arcus Entity.
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(e) Except as set forth in Section 3.11(e) of the Disclosure Schedule, no
Arcus Party is a party to any tax sharing agreement or arrangement.
(f) No Arcus Party is, or within five (5) years of the date hereof has
been, a "United States real property holding corporation" as defined in Section
897 of the Code.
Section 3.12. ERISA.
(a) No Arcus Entity (which for purposes of this Section 3.12 shall include
any ERISA Affiliate with respect to any Plan subject to Title IV of ERISA)
contributes to any Plan or sponsors any Plan or Benefit Arrangement and, no
Arcus Entity has contributed to or sponsored any Plan or Benefit Arrangement,
except (i) as set forth in Section 3.12(a) of the Disclosure Schedule or (ii) as
would not result in any liability to an Arcus Entity. As to all Plans and
Benefit Arrangements listed in Section 3.12(a) of the Disclosure Schedule, and
except as disclosed in such Section 3.12(a) of the Disclosure Schedule:
(i) all such Plans and Benefit Arrangements comply and have been
administered in all material respects in form and in operation with all
Applicable Laws, and the Arcus Entities have not received any outstanding
notice from any Authority questioning or challenging such compliance;
(ii) all such Plans maintained or previously maintained by the Arcus
Entities that are or were intended to comply with Section 401 of the Code
comply and complied in all material respects in form and in operation with
all applicable requirements of such Section, and, except as set forth in
Section 3.12(a)(ii) of the Disclosure Schedule, a favorable determination
letter has been received from the Internal Revenue Service with respect to
each such Plan, or the sponsor of the Plan is entitled to rely on a favorable
determination opinion letter issued to the prototype sponsor by the Internal
Revenue Service with respect to each such Plan and no event has occurred
which will or could reasonably be expected to give rise to disqualification
of any such Plan under such Section or to a tax under Section 511 of the
Code;
(iii) none of the assets of any such Plan are invested in employer
securities or employer real property;
(iv) the Arcus Entities have not engaged in nor, to the Arcus Parties'
knowledge, have there been, any "prohibited transactions" (as described in
Section 406 of ERISA or Section 4975 of the Code) with respect to any such
Plan;
(v) there have been no acts or omissions by the Arcus Entities which have
given rise to or may reasonably be expected to give rise to material fines,
penalties, taxes or related charges under Sections 502(c), 502(i) or 4071 of
ERISA or Chapter 43 of the Code for which the Arcus Entities may be liable;
(vi) there are no Claims (other than routine claims for benefits) pending
or, to the Arcus Parties' knowledge, threatened involving such Plans or the
assets of such Plans, except as set forth on Section 3.12(a)(vi) of the
Disclosure Schedule;
(vii) no such Plan is subject to Title IV of ERISA, or if subject, there
have been no "reportable events" (as described in Section 4043 of ERISA) as
to which there is any material risk of termination of such Plan, and no steps
have been taken to terminate any such Plan;
(viii) to the extent that the most recent balance sheets forming part of
the Financial Statements do not include a pro rata amount of the
contributions which would otherwise have been made in accordance with past
practices for the plan years which include the Closing Date, such amounts are
set forth in Section 3.12(a)(viii) of the Disclosure Schedule;
(ix) neither the Arcus Entities nor any of their directors, officers,
employees or any other fiduciary have committed any breach of fiduciary
responsibility imposed by ERISA that would subject the Arcus Entities or any
of their directors, officers or employees to liability under ERISA;
(x) no such Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA or Section 412 of the Code had an accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recently completed fiscal year of such
Plan;
(xi) no material liability to the PBGC has been or is expected by the Arcus
Entities to be incurred by the Arcus Entities with respect to any such Plan,
and there has been no event or condition which presents a material risk of
termination of any such Plan by the PBGC;
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(xii) except as set forth in Section 3.12(a)(xii) of the Disclosure
Schedule (which entry, if applicable, shall indicate the present value of
accumulated plan liabilities calculated in a manner consistent with FAS 106
and actual annual expense for such benefits for each of the last two (2)
years) and pursuant to the provisions of COBRA, which provisions have been
complied with in all material respects, the Arcus Entities do not maintain
any Plan that provides benefits described in Section 3(1) of ERISA to any
former employees or retirees of the Arcus Entities;
(xiii) the Arcus Entities have made available to Acquiror a copy of the two
most recently filed Federal Form 5500 series and accountant's opinion, if
applicable, for each Plan (and the two (2) most recent actuarial valuation
reports for each Plan, if any, that is subject to Title IV of ERISA), and all
information provided by the Arcus Entities to any actuary in connection with
the preparation of any such actuarial valuation report was true, correct and
complete in all material respects; and
(xiv) the Arcus Entities have delivered to Acquiror correct and complete
copies of all Plans and Benefit Arrangements which, as of the Closing Date,
are sponsored by any Arcus Entity, or to which any of the Arcus Entities
contribute, and, where applicable, each of the following documents with
respect to such plans: (i) any amendments; (ii) any related trust documents;
(iii) the most recent summary plan descriptions and summaries of material
modifications; and (iv) written communications to employees to the extent the
substance of the Plans and Benefit Arrangements described therein differ
materially from the other documentation furnished under this clause.
(b) The Arcus Entities have not and have never been party to any
Multiemployer Plan or made contributions to any such plan.
Section 3.13. Authorized and Outstanding Capital Stock.
(a) As of the date hereof, the authorized and outstanding capital stock,
Option Securities and Convertible Securities of each Arcus Entity is as set
forth in Section 3.13(a) of the Disclosure Schedule. All shares of such
outstanding capital stock have been duly authorized and validly issued, are
fully paid and nonassessable and are not subject to any preemptive or similar
rights. Except as set forth in Section 3.13(a) of the Disclosure Schedule or
contemplated by Schedule C hereto, (i) there is neither outstanding nor has any
Arcus Entity agreed to grant or issue any shares of its capital stock or any
Option Security or Convertible Security, and (ii) no Arcus Entity is a party to
and no Arcus Entity is bound by any agreement, put or commitment pursuant to
which it is obligated to purchase, redeem or otherwise acquire any shares of
capital stock or any Option Security or Convertible Security. Between the date
hereof and the Closing, except as set forth in Section 3.13(a) of the Disclosure
Schedule or contemplated by Schedule C hereto, no Arcus Entity will issue, sell
or purchase or agree to issue, sell or purchase any capital stock or any Option
Security or Convertible Security of any Arcus Entity, except to the extent
required pursuant to the terms hereof. All of the issued and outstanding shares
of capital stock and any Option Security or Convertible Security of each Arcus
Entity were sold or granted, as applicable, in compliance with the Securities
Act, the Exchange Act and applicable state securities laws.
(b) As of the date hereof, (i) Option Securities to acquire 217,390 shares
of UAC Common Stock are outstanding under UAC's 1995 Stock Option Plan (the "UAC
Option Plan"), all of which are currently vested, none of which Option
Securities is currently exercisable and of which the Minimum Exercise Number
will be exercisable as of the Effective Time; and (ii) 42,610 shares of UAC
Common Stock are reserved for future issuance pursuant to Option Securities
which may be granted under the UAC Option Plan. UAC has duly complied in all
material respects with all of the terms and conditions of the UAC Option Plan
and no amendment, modification or other revision to the UAC Option Plan or any
related option award agreement which required the consent or approval of a
holder of an Option Security has been made unless, in each case, such consent or
approval was duly obtained. All shares of UAC capital stock subject to issuance
under an Option Security will be, upon issuance on the terms and conditions
specified in such Option Security, validly issued, fully paid and nonassessable.
(c) As of the date hereof, (i) Option Securities to acquire 409,980 shares
of ATSI Common Stock are outstanding under ATSI's 1995 Stock Option Plan (the
"ATSI Option Plan"), none of which Option Securities is currently exercisable
and the vesting schedule for which, except as may be provided pursuant to
Section 5.10, is
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as set forth in Schedule 3.13(d) of the Disclosure Schedule; and (ii) 45,020
shares of ATSI Common Stock are reserved for future issuance pursuant to Option
Securities which may be granted under the ATSI Option Plan. The UAC Option Plan,
the ATSI Option Plan and the ZDC Warrant constitute the only plans or
arrangements pursuant to which Option Securities or Convertible Securities are
currently outstanding. Other than as set forth in Section 3.13(c) of the
Disclosure Schedule and except as provided in Section 5.10 hereof, neither the
execution and delivery of this Agreement nor the consummation of the Merger or
the Transactions are events which will cause an acceleration of the exercise or
vesting schedule of any Option Security of ATSI. ATSI has duly complied in all
material respects with all of the terms and conditions of the ATSI Option Plan
and no amendment, modification or other revision to the ATSI Option Plan or any
related option award agreement which required the consent or approval of a
holder of an Option Security of ATSI has been made unless, in each case, such
consent or approval was duly obtained. All shares of ATSI capital stock subject
to issuance under an Option Security of ATSI will be, upon issuance on the terms
and conditions specified in such Option Security, validly issued, fully paid and
nonassessable.
(d) As of the date hereof, all of the outstanding capital stock of each
Arcus Entity is owned of record as set forth in Section 3.13(d) of the
Disclosure Schedule and all of the outstanding Option Securities and Convertible
Securities of each Arcus Entity are owned of record by the Persons as set forth
in Section 3.13(d) of the Disclosure Schedule, and are in each case, to the
Arcus Parties' knowledge in the case of capital stock owned by a party other
than an Arcus Entity, free and clear of all Liens, except as set forth in
Section 3.13(d) of the Disclosure Schedule, and, to the Arcus Parties'
knowledge, except as set forth in Section 3.13(d) of the Disclosure Schedule or
as contemplated by Schedule C hereto, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character to which any
stockholder is a party relating to the pledge, disposition or voting of any
shares of the Company Stock that are owned by such stockholder, and there are no
voting trusts or voting agreements with respect to such shares.
Section 3.14. Employment Arrangements.
(a) No Arcus Entity has any obligation or liability, contingent or other,
under any Employment Arrangement, other than those listed or described in
Section 3.14(a) of the Disclosure Schedule. No Arcus Entity is now or during the
past five (5) years has been subject to or involved in or, to the Arcus Parties'
knowledge, threatened with any union elections, petitions therefor or other
union organizing activities, except as described in Section 3.14(a) of the
Disclosure Schedule. None of the employees of the Arcus Entities is now, or
during the past five (5) years has been, in his or her capacity as an Arcus
Entity employee, represented by any labor union or other employee collective
bargaining organization or is party to any labor or other collective bargaining
agreement, and there are no pending grievances, disputes or controversies with
any labor union or any other employee collective bargaining organization of such
employees, or, to the Arcus Parties' knowledge, threats of strikes, work
stoppages or slowdowns or any pending demands for collective bargaining by any
labor union or other such organization, except as set forth in Section 3.14(a)
of the Disclosure Schedule. The Arcus Entities have performed all obligations
required to be performed under all Employment Arrangements and are not in
material breach or violation of or in default or arrears under any of the terms,
provisions or conditions thereof, except as set forth in Section 3.14(a) of the
Disclosure Schedule.
(b) Except as set forth in Section 3.14(b) of the Disclosure Schedule, no
employee of any Arcus Entity will accrue or receive or is entitled to accrue or
receive additional benefits, service or accelerated rights to payments of
benefits, whether under any Employment Arrangement or otherwise, including the
right to receive any parachute payment, as defined in Section 280G of the Code,
or become entitled to severance, termination allowance or similar payments as a
result of this Agreement, the Merger or the Transactions.
Section 3.15. Material Agreements. To the Arcus Parties' knowledge, listed
on Section 3.15 of the Disclosure Schedule are all Material Agreements (other
than customer contracts) relating to the ownership or operation of the business
and property of the Arcus Entities presently held or used by the Arcus Entities
or to which any of the Arcus Entities is a party or to which they or any of
their property is subject or bound. True, complete and correct copies of each of
the Material Agreements have been made available to or furnished by the Arcus
Parties to Acquiror (or true, complete and correct descriptions thereof have
been set forth in Section 3.15 of the Disclosure Schedule, if any such Material
Agreements are oral). All of the Material Agreements are valid, binding and
legally enforceable
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obligations of the Arcus Entities and, to the Arcus Parties' knowledge, of each
other party thereto (subject to the Enforceability Exceptions). The Arcus
Entities are validly and lawfully operating their business and owning their
property under each of the Material Agreements. The Arcus Entities have duly
complied in all material respects with all of the terms and conditions of each
Material Agreement and have not done or performed, or failed to do or perform
(and, to the knowledge of the Arcus Parties, there is no pending or threatened
Claim that any of the Arcus Entities, as the case may be, has not so complied,
done and performed or fail to do and perform) any act the effect of which would
be to invalidate or provide grounds for the other party thereto to terminate
(with or without notice, passage of time or both) such Material Agreement or
impair the rights or benefits, or increase the costs, of the Arcus Entities, as
the case may be, under any of the Material Agreements.
Section 3.16. Ordinary Course of Business.
(a) The Arcus Parties, from July 31, 1997 to the date hereof, and until the
Closing Date, except (i) as may be described on Section 3.16(a) of the
Disclosure Schedule, (ii) as may be required or expressly contemplated by the
terms of this Agreement (including without limitation Schedule C hereto and
Section 3.22 hereof), (iii) as may be reflected in the Financial Statements, or
(iv) as may be consented to by Acquiror, which consent shall not be unreasonably
withheld or delayed:
(i) have operated, and will continue to operate, their businesses in the
normal, usual and customary manner in the ordinary course of business,
consistent with prior practice;
(ii) have not sold or otherwise disposed of, or contracted to sell or
otherwise dispose of, and will not sell or otherwise dispose of or contract
to sell or otherwise dispose of, any of their properties or assets, other
than in the ordinary course of business;
(iii) except in each case in the ordinary course of business, consistent
with prior practice:
(A) have not incurred and will not incur any obligations or liabilities
(fixed, contingent or other);
(B) have not entered and will not enter into any commitments; and
(C) have not cancelled and will not cancel any debts or claims;
(iv) have not made or committed to make, and will not make or commit to
make, any additions to their property or any purchases of machinery or
equipment, except in the ordinary course of business, consistent with past
practice; provided, however, that the Arcus Entities shall continue to make
capital expenditures consistent with past practice in an amount equal to not
less than 80% of the amount provided therefor in their respective capital
budgets;
(v) have not discharged or satisfied, and will not discharge or satisfy,
any Lien and have not paid and will not pay any obligation or liability
(absolute or contingent) other than current liabilities or obligations under
contracts then existing or thereafter entered into in the ordinary course of
business, consistent with prior practice, and commitments under Leases
existing on that date or incurred since that date in the ordinary course of
business or repaying or prepaying long-term indebtedness or the current
portion thereof;
(vi) have not created or permitted to be created, and will not create or
permit to be created any material Lien on any of their tangible property;
(vii) except in the ordinary course of business, have not transferred or
created, or permitted to be created, and will not transfer or create, or
permit to be created, any Lien on any Intangible Assets;
(viii) except in the ordinary course of business, consistent with prior
practice, have not increased and will not increase the compensation payable
or to become payable to any of their directors, officers, employees,
advisers, consultants, salesmen or agents or otherwise alter, modify or
change the terms of their employment or engagement;
(ix) have not suffered any material damage, destruction or loss (whether or
not covered by insurance) or any acquisition or taking of property by any
Authority;
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(x) have not waived, and will not waive, any rights of material value
without fair and adequate consideration;
(xi) have not entered into, amended or terminated and will not enter into,
amend or terminate any Lease, Private Authorization, Governmental
Authorization, Material Agreement or Employment Arrangement or any
Contractual Obligation or transaction with any Affiliate, except for
terminations in the ordinary course of business, consistent with prior
practice, in accordance with the terms thereof;
(xii) have not amended or terminated and will not amend or terminate (other
than to increase coverage), and have kept and will keep in full force and
effect including without limitation renewing to the extent the same would
otherwise expire or terminate, all insurance policies and coverage;
(xiii) have not amended and will not amend any provision of their Organic
Documents;
(xiv) have not issued and will not issue any additional shares of capital
stock (other than the issuance of shares in accordance with the terms of
Option Securities outstanding on the date hereof, or except as set forth in
Section 3.13(a), 3.13(b), 3.13(c) or 3.13(d) of the Disclosure Schedule) or
any Option Securities or Convertible Securities and have not entered, and
will not enter into any agreement to do the same;
(xv) have not entered into and will not enter into any other transaction or
series of related transactions which individually or in the aggregate is
material to the Arcus Entities, except in the ordinary course of business;
and
(xvi) have maintained and will continue to maintain their policies
regarding collection of accounts receivable and payment of accounts payable
consistent with prior practice.
(b) Except as set forth in Section 3.16(b) of the Disclosure Schedule, from
the end of its most recent fiscal year to the date hereof, none of the Arcus
Entities has, nor on or prior to the Closing Date will any of them have,
declared, made or paid, or agreed to declare, make or pay, any Distribution
(other than Distributions made in connection with the Reorganization which are
expressly set forth in Schedule C hereto and Distributions paid only to an Arcus
Entity).
(c) The Arcus Parties shall cause each other Arcus Entity which is not a
party to this Agreement to comply with the terms and provisions of this Section
3.16.
Section 3.17. Bank Accounts, Etc. Section 3.17 of the Disclosure Schedule
contains a true and correct and complete list as of the date hereof of all
banks, trust companies, savings and loan associations and brokerage firms in
which the Arcus Entities have an account or a safe deposit box and the names of
all Persons authorized to draw thereon, to have access thereto, or to authorize
transactions therein, the names of all Persons, if any, holding powers of
attorney from the Arcus Entities and a summary statement as to the terms
thereof.
Section 3.18. Adverse Restrictions. To the Arcus Parties' knowledge, the
Arcus Entities are not a party to or subject to, nor is any of their property
subject to, any Applicable Law, Governmental Authorization, Contractual
Obligation, Employment Arrangement, Material Agreement or Private Authorization,
or any other obligation or restriction of any kind or character, or any
aggregation thereof, which impairs in any material respect the Arcus Entities'
ability to conduct their businesses as they are currently being conducted or
which could reasonably be expected to have any Adverse Effect on the Arcus
Entities, except as set forth in Section 3.18 of the Disclosure Schedule.
Section 3.19. Broker or Finder. No Person assisted in or brought about the
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of the Arcus Entities (other than Donaldson, Lufkin &
Jenrette Securities Corporation, whose fees and expenses will be paid out of the
Expense Fund).
Section 3.20. Environmental Matters.
(a) Except as set forth in Section 3.20(a) of the Disclosure Schedule:
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(i) Each of the Arcus Entities is, and at all times since its organization
has been, in compliance in all material respects with all applicable
Environmental Laws and has not received written notice that it is potentially
liable, has not received any written request for information or other
correspondence concerning any site or facility, and, no Arcus Entity is a
"potentially responsible party" under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation Recovery Act, as amended, or any similar state law;
(ii) no Arcus Entity has entered into or is otherwise bound by any consent
decree, compliance order, or administrative order relating to Environmental
Law;
(iii) no Arcus Entity is in violation of any judgment, order, writ,
injunction or decree of any final order relating to Environmental Law;
(iv) (1) each Arcus Entity has obtained all material Environmental Permits
and made all material Governmental Filings which are required to be filed by
such Arcus Entity for the ownership of its property, facilities and assets
and the operation of its businesses under all applicable Environmental Laws,
(2) no Arcus Entity is the subject of any pending Legal Action nor has any
Arcus Entity received any written notice threatening Legal Action, in each
case involving a demand for damages or other potential liability in any
amount with respect to material violations of applicable Environmental Law;
and
(v) no Arcus Entity has assumed or agreed to any obligation under any of
its leases of real property to clean up any Hazardous Materials which exist
on such property other than as a result of the Arcus Entities' operating and
occupying such property.
(b) Except as set forth in Section 3.20(b) of the Disclosure Schedule:
(i) no Arcus Entity has disposed, released, buried or placed Hazardous
Materials on, and, to the Arcus Parties' knowledge, no other disposal,
release, burial or placement of Hazardous Materials has occurred on, any
property or facility owned, leased, operated or occupied by any Arcus Entity
during the period that such facilities and properties were owned, leased,
operated or occupied by it or, to the knowledge of the Arcus Entities, at any
other time; and
(ii) to the Arcus Parties' knowledge, there has been no disposal, release,
burial or placement of Hazardous Materials on any property which has resulted
in or, to the Arcus Parties' knowledge, is likely to have resulted in
contamination or the threat of contamination of or beneath any properties or
facilities owned, leased, operated or occupied by the Arcus Entities; and
(iii) no written notice has been received by any Arcus Entity and, to the
Arcus Parties' knowledge, no Lien has arisen on its properties or facilities,
in each case under Environmental Law.
(c) Except as disclosed in Section 3.20(c) of the Disclosure Schedule, no
Arcus Entity has installed, used or otherwise operated any above-ground or
underground fuel storage tanks on property owned, leased, operated or occupied
by it and, to the Arcus Parties' knowledge, no above-ground or underground fuel
storage tanks exist on property owned, leased, operated or occupied by it.
(d) Section 3.20(d) of the Disclosure Schedule sets forth all site
assessments, audits or other investigations that have been conducted by or on
behalf of the Arcus Entities as to environmental matters at any property owned,
leased, operated or occupied by the Arcus Entities.
Section 3.21. Customer Contracts. Except as set forth in Section 3.21 of
the Disclosure Schedule, to the Arcus Parties' knowledge, substantially all of
the Arcus Entities' data storage customers are parties to a customer contract
which limits such Arcus Entity's liability in the event of loss, damage or
destruction to (i) replacement value of media or (ii) a nominal dollar value per
storage unit.
Section 3.22. Reorganization. On or prior to the Closing Date, each of the
Arcus Parties shall (i) cause UAC to merge with and into the Company with the
Company continuing as the surviving corporation and ATSI to merge with and into
the Company with the Company continuing as the surviving corporation, in each
case substantially
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according to the procedure and on the terms described in Schedule A, Schedule B
and Schedule C hereto and (ii) take the other actions called for by, and in
accordance with the terms set forth on, Schedule C hereto.
Section 3.23. Materiality. The matters and items excluded from the
representations and warranties set forth in this Article by operation of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, could not reasonably be expected to be Adverse to the Arcus Entities.
Section 3.24. Fairness Opinion. The Arcus Parties have received the opinion
of Donaldson, Lufkin & Jenrette Securities Corporation, dated as of September
25, 1997, to the effect that, as of the date thereof, the aggregate
consideration to be received by the holders of securities of the Company
pursuant to this Agreement is fair to such holders from a financial point of
view. A signed, true and complete copy of such opinion has been delivered to
Acquiror.
Section 3.25. Inapplicability of Specified Statutes. No Arcus Entity is a
"holding company", or a "subsidiary company" or an "affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, or an "investment company" or a company "controlled" by or
acting on behalf of an "investment company", as defined in the Investment
Company Act of 1940, as amended. No Arcus Entity is subject to regulation by the
Federal Energy Regulatory Commission.
Section 3.26. Bankruptcy Plan. The Company has previously filed a
reorganization petition in the United States Bankruptcy Court, Southern District
of Texas, Houston Division (the "Court") pursuant to 11 U.S.C. [sec] 101, et
seq., and was the proponent of a Plan of Reorganization filed with the Court
(the "Plan of Reorganization"), which Plan of Reorganization was filed on or
about August 7, 1990. The Plan of Reorganization was confirmed by the Court, and
has since been substantially consummated. Any and all disbursements required
under the Plan of Reorganization have been made, and the Chapter 11 case has
been closed. The Company has no further obligations or liabilities pursuant to
the Plan of Reorganization or in its capacity as a debtor-in-possession.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents, warrants and covenants to, and agree with, the Arcus
Parties as follows:
Section 4.1. Organization and Qualification; Power and Authority; Effect
of Transaction.
(a) Acquiror: (i) is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware, (ii) has all requisite power and
corporate authority to own or hold under lease its properties and to conduct its
business as now conducted and as presently proposed to be conducted, and to
Acquiror's knowledge, except as set forth in Section 4.1(a)(ii) of the Acquiror
Disclosure Schedule, has in full force and effect all Governmental
Authorizations and Private Authorizations and has made all Governmental Filings,
to the extent required for such ownership and lease of its property and conduct
of its business, and (iii) is duly qualified and authorized to do business and
is in good standing as a foreign corporation in each jurisdiction in which the
character of its property or the nature of its business or operations requires
such qualification or authorization, except to the extent the failure to so
qualify or to maintain such authorizations could not reasonably be expected to
have an Adverse Effect.
(b) Acquiror has all requisite power and authority (corporate and other)
and has in full force and effect all Governmental Authorizations and Private
Authorizations in order to enable it to execute and deliver, and to perform its
obligations under, this Agreement and each Collateral Document executed or
required to be executed by it pursuant hereto or thereto and to consummate the
Merger and the Transactions and the execution, delivery and performance of this
Agreement and each Collateral Document executed or required to be executed
pursuant hereto or thereto have been duly authorized by all requisite corporate
or other action (other than that of the stockholders of Acquiror). This
Agreement has been duly executed and delivered by Acquiror and, subject to the
affirmative vote of the stockholders of Acquiror referred to below, constitutes,
and each Collateral Document executed or required to be executed pursuant hereto
or thereto or to consummate the Merger and the Transactions, when executed
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and delivered by it will constitute, legal, valid and binding obligations of
Acquiror, enforceable in accordance with their respective terms (subject to the
Enforceability Exceptions). If a vote of the stockholders of Acquiror is
required by Applicable Law or by Schedule D of the NASD ByLaws, the affirmative
vote of the holders of a majority of the outstanding shares of Acquiror Stock
are the only votes of the holders of any class or series of the capital stock of
Acquiror necessary to approve this Agreement, the Merger and the Transactions
under Applicable Law, Schedule D of the NASD ByLaws and Acquiror's Organic
Documents.
(c) Neither the execution and delivery of this Agreement or any Collateral
Document executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by Acquiror:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law on the part of Acquiror or
will conflict with, or result in a breach or violation of, or constitute a
default under, or permit the acceleration of any obligation or liability in,
or but for any requirement of giving of notice or passage of time or both
would constitute such a conflict with, breach or violation of, or default
under, or permit any such acceleration in, any Contractual Obligation of
Acquiror,
(ii) will result in or permit the creation or imposition of any Lien upon
any property now owned or leased by Acquiror, or
(iii) will require any Governmental Authorization or Governmental Filing or
Private Authorization, except for the certificate of merger and related
filings under the DGCL in connection with the Merger and the Transactions and
as the Securities Act and applicable state securities laws may apply to
compliance by Acquiror with the provisions of this Agreement relating to the
Registered Stock and except pursuant to the HSR Act.
Section 4.2. Changes in Condition. Since June 30, 1997, except to the
extent specifically described in Section 4.2 of the Acquiror Disclosure
Schedule, there has been no Adverse Change in Acquiror. There is no Event known
to Acquiror which Adversely Affects, or could reasonably be expected to
Adversely Affect, Acquiror except for changes in general economic conditions or
the industries in which Acquiror and its Subsidiaries operate and to the extent
set forth in Section 4.2 of the Acquiror Disclosure Schedule.
Section 4.3. Capitalization of Acquiror. As of the date hereof, the
authorized and outstanding capital stock, Option Securities and Convertible
Securities of Acquiror is as set forth in Section 4.3 of the Acquiror Disclosure
Schedule. All of such outstanding capital stock has been duly authorized and
validly issued, is fully paid and nonassessable and is not subject to any
preemptive or similar rights. When issued to the Stockholders in connection with
the Merger, the Acquiror Stock will be duly authorized, validly issued, fully
paid and nonassessable and will not be subject to any preemptive or similar
rights.
Section 4.4. SEC Filings; Financial Statements and Other Information.
(a) Acquiror has filed all forms, reports and documents required to be
filed by it with the SEC since January 30, 1996, and has heretofore made
available to the Company, in the form filed with the SEC (including any exhibits
thereto), (i) its Annual Report on Form 10-K for the fiscal year ended December
31, 1996, (ii) its Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, and June 30, 1997, (iii) its Current Report on Form 8-K dated June 12,
1997 relating to the acquisition of Safesite Records Management Corporation, as
amended by its Current Report on Form 8- K/A dated August 26, 1997; (iv) its
proxy statement relating to its 1997 meeting of stockholders, and (v) all other
forms, reports and registration statements filed by it with the SEC since June
30, 1997 (the forms, reports and other documents referred to in clauses (i)
through (v) above being referred to herein collectively as the "Acquiror SEC
Reports"). The Acquiror SEC Reports and any forms, reports and other documents
filed by Acquiror with the SEC after the date of this Agreement and until the
Closing Date, (x) complied with or will comply in all material respects with the
requirements of the Securities Act and the Exchange Act, as the case may be, and
the rules and regulations thereunder and (y) did not at the time they were
filed, or will not at the time they are filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
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(b) Acquiror's financial statements ("Acquiror Financial Statements"),
including in each case the notes thereto, contained in the Acquiror SEC Reports
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, except as otherwise noted therein, do
not contain any untrue statement of a material fact or omit to state a material
fact required by GAAP to be stated therein or necessary in order to make the
statements contained therein not misleading, and fairly present the consolidated
financial condition and results of operations of Acquiror and its Subsidiaries,
on the bases therein stated, as of the respective dates thereof, and for the
respective periods covered thereby and include, in the case of unaudited
financial statements, all material adjustments and accruals consistent with
those included in the audited financial statements.
(c) As of the date hereof, a true and correct list of all Subsidiaries of
Acquiror is set forth in Section 4.4(c) of the Acquiror Disclosure Schedule.
Acquiror does not own any capital stock or equity or other beneficial ownership
interest in any other Entity or enterprise, however organized and however such
interest may be denominated or evidenced, except as set forth in Section 4.4(c)
of the Acquiror Disclosure Schedule.
(d) The copies of the Organic Documents and all amendments thereto of
Acquiror and each of its Subsidiaries that have been delivered to the Arcus
Parties are true, correct and complete copies thereof, as in effect on the date
hereof. The minute books of Acquiror and each of its Subsidiaries for the last
five (5) years, copies of which have been made available for review to the Arcus
Parties, contain accurate minutes of all actions taken at all meetings of, and
accurate consents to all actions taken without meetings by, the Board of
Directors (and any committees thereof) and the stockholders of Acquiror and each
of its Subsidiaries during such period and on or prior to the date hereof
(except to the extent any such minutes have not yet been approved by the Board
of Directors of any such entity).
Section 4.5. Registration Statement. As of the Closing Date, the
Registration Statement and any amendments thereto will comply in all material
respects with the provisions of the Securities Act and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Prospectus will not as of the date it is first mailed to the Stockholders of
any of the Arcus Parties, at the time of the Arcus Special Meetings or at the
Closing Date contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, the representations and warranties contained in
Section 4.4(a) and this Section 4.5 shall not apply to statements or omissions
in the Registration Statement or the Prospectus based on information furnished
by and relating to the Arcus Entities. Neither the Acquiror Disclosure Schedule,
this Agreement nor any Collateral Document, furnished or to be furnished by or
on behalf of Acquiror pursuant to this Agreement or any Collateral Document
executed or required to be executed by or on behalf of Acquiror pursuant hereto
or thereto or to consummate the Merger and the Transactions, taken as a whole,
contained on the date delivered or will contain when delivered any untrue
statement of a material fact or omitted on the date delivered or will omit when
delivered to state a material fact required to be stated herein or therein or
necessary in order to make the statements contained herein or therein not
misleading and all such Collateral Documents, taken as a whole, are on the date
delivered and will be when delivered true, accurate and complete.
Section 4.6. Brokers. No Person assisted in or brought about the
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of Acquiror (other than Bear, Stearns & Co. Inc., whose fees
and expenses will be paid by Acquiror).
Section 4.7. Liabilities. At the date of the most recent balance sheet
forming part of the Acquiror Financial Statements, Acquiror had no obligations
or liabilities, past, present or deferred, accrued or unaccrued, fixed,
absolute, contingent or other, except as disclosed in such balance sheet, or the
notes thereto, and since such date Acquiror has not incurred any such
obligations or liabilities, other than obligations and liabilities incurred in
the ordinary course of business consistent with past practice of Acquiror, which
do not and could not reasonably be expected to, in the aggregate, Adversely
Affect Acquiror, except to the extent set forth in Section 4.7 of the Acquiror
Disclosure Schedule. Acquiror has not Guaranteed and is not otherwise primarily
or secondarily liable in respect of any obligation or liability of any other
Person (other than a Subsidiary), except for endorsements of negotiable
instruments for deposit in the ordinary course of business, consistent with
prior practice, or as disclosed in the most
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recent balance sheet, or the notes thereto, forming part of the Acquiror
Financial Statements or in Section 4.7 of the Acquiror Disclosure Schedule.
Section 4.8. Related Transactions. The Acquiror SEC Reports set forth true,
correct and complete summaries (to the extent required to be disclosed by the
rules and regulations promulgated under the Securities Act and the Exchange Act)
of any Contractual Obligation or transaction, whether now existing or existing
during the period covered by the most recent audited Acquiror Financial
Statements, between Acquiror and any Affiliate thereof (to the extent required
to be disclosed by the rules and regulations promulgated under the Securities
Act and the Exchange Act).
Section 4.9. Materiality. The matters and items excluded from the
representations and warranties set forth in this Article by operation of the
materiality exceptions and materiality qualifications contained in such
representations and warranties, in the aggregate for all such excluded matters
and items, are not and could not reasonably be expected to be Adverse to
Acquiror.
Section 4.10. [Intentionally Omitted]
Section 4.11. Ordinary Course of Business. Acquiror, from the date of the
most recent balance sheet forming part of the Acquiror Financial Statements to
the date hereof, and until the Closing Date, except (i) as may be described in
Section 4.11 of the Acquiror Disclosure Schedule, (ii) as may be required or
expressly contemplated by the terms of this Agreement, (iii) as may be reflected
in the Acquiror Financial Statements, or (iv) as may be consented to by the
Arcus Parties, which consent shall not be unreasonably withheld or delayed, (A)
has operated, and will continue to operate, in the line of businesses described
in the Acquiror SEC Reports, (B) has not declared or paid and will not declare
or pay, directly or indirectly, any dividend or distribution, in cash or
otherwise, to any holder of its capital stock, (C) has not repurchased, redeemed
or otherwise acquired and will not repurchase, redeem or otherwise acquire,
directly or indirectly, any of its capital stock and (D) has not sold,
transferred or otherwise disposed of and will not sell, transfer or otherwise
dispose of, directly or indirectly, in one or more transaction or series of
transaction assets or properties having an aggregate fair market value in excess
of $5,000,000.
Section 4.12. Fairness Opinion. Acquiror has received the opinion of Bear,
Stearns & Co. Inc., dated as of September 26, 1997, to the effect that, as of
the date thereof, the consideration to be paid in the Merger is fair, from a
financial point of view, to Acquiror. A signed, true and complete copy of such
opinion has been delivered to the Company.
Section 4.13. Inapplicability of Specified Statutes. Acquiror is not an
"investment company" or a company "controlled" by or acting on behalf of an
"investment company", as defined in the Investment Company Act of 1940, as
amended.
ARTICLE 5.
ADDITIONAL COVENANTS
Section 5.1. Access to Information; Confidentiality.
(a) Each Party shall afford to the other Parties and their Representatives
full access during normal business hours throughout the period prior to the
Effective Time to all of such Party's properties, books, contracts, commitments
and records (including without limitation Tax Returns) and, during such period,
shall furnish promptly upon request (i) to the extent not provided for pursuant
to the preceding clause, all financial records, ledgers, workpapers and other
sources of financial information possessed or controlled by such Party or its
accountants deemed by the other Party or its Representatives necessary or useful
for the purpose of performing an audit of such Party and certifying financial
statements and financial information, and (ii) such other information concerning
any of the foregoing as the other Party shall reasonably request. In addition,
each Party shall furnish promptly upon request a copy of each report, schedule
and other document filed or received by any of them pursuant to the requirements
of any Applicable Law (including without limitation federal or state securities
laws) or filed by it or any of its Subsidiaries with any Authority in connection
with the Transactions or which may have a material effect on their respective
businesses, operations, properties, prospects, personnel, condition (financial
or other), or results
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of operations. ATSI and Acquiror acknowledge that they have heretofore executed
a confidentiality agreement, dated April 25, 1997 (the "Confidentiality
Agreement"), which separately and as incorporated herein shall remain in full
force and effect after and notwithstanding the execution and delivery or
termination of this Agreement, and that information obtained from each Party by
any of the other Parties or their Representatives, pursuant to this Agreement,
the Confidentiality Agreement or otherwise, shall be subject to the provisions
of the Confidentiality Agreement. The Company and UAC agree to be bound by the
terms of the Confidentiality Agreement.
(b) Subject to the terms and conditions of the Confidentiality Agreement,
Acquiror and the Arcus Parties may disclose such information as may be necessary
in connection with seeking all Governmental Authorizations and Private
Authorizations or that is required by Applicable Law to be disclosed. In the
event that this Agreement is terminated in accordance with its terms, Acquiror
and the Company shall each promptly redeliver all non-public written material
provided pursuant to this Section or any other provision of this Agreement or
otherwise in connection with the Merger and the Transactions and shall not
retain any copies, extracts, notes or other reproductions in whole or in part of
such written material other than one copy thereof which shall be delivered to
independent counsel for such party.
(c) No investigation pursuant to this Section 5.1 shall affect any
representation or warranty in this Agreement of any Party hereto or any
condition to the obligations of the Parties hereto.
Section 5.2. Agreement to Cooperate.
(a) Each of the Parties shall use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under Applicable Law to consummate the Merger and make effective
the Transactions, including using its best efforts (i) to prepare and file with
the applicable Authorities as promptly as practicable after the execution of
this Agreement all requisite applications and amendments thereto, together with
related information, data and exhibits, necessary to request issuance of orders
approving the Merger and the Transactions by all such applicable Authorities,
each of which must be obtained or become final in order to satisfy the condition
applicable to it set forth in Section 6.1; (ii) to obtain all necessary or
appropriate waivers, consents and approvals, and to reasonably agree on and
implement a procedure for obtaining the foregoing; (iii) to effect all necessary
registrations, filings and submissions (including without limitation filings
under federal or state securities laws or the HSR Act and any other submissions
requested by the SEC, the Federal Trade Commission or the Department of Justice)
and (iv) to lift any injunction or other legal bar to the Merger and the
Transactions (and, in such case, to proceed with the Merger and the Transactions
as expeditiously as possible), subject, however, to the requisite vote of the
stockholders of the Arcus Parties and the stockholders of Acquiror. Each of the
Parties recognizes that the consummation of the Merger and the Transactions is
subject to the preacquisition notification requirements of the HSR Act and
agrees to make all further filings and submissions with, and respond to all
further inquiries of, the Antitrust Division of the Department of Justice and
the Federal Trade Commission in a manner so as to consummate the Merger and
Transactions as expeditiously as possible. Notwithstanding anything to the
contrary contained in this Agreement, in connection with or as a condition to
receiving the consent or approval of any Authority or otherwise, Acquiror shall
not be required to divest, abandon, license or take similar action with respect
to any assets (tangible or intangible) of it or any of its Subsidiaries
(including, without limitation, the Surviving Corporation after consummation of
the Merger) which, in the aggregate, have a fair market value (determined in the
reasonable judgment of the Board of Directors of Acquiror) in excess of
$2,000,000.
(b) Each of the Parties agrees to take such actions as may be necessary to
obtain any Governmental Authorizations legally required for the consummation of
the Merger and the Transactions, including the making of any Governmental
Filings, publications and requests for extensions and waivers.
(c) The Arcus Parties will use their best efforts on or prior to the
Closing Date to obtain the satisfaction of the conditions applicable to them
specified in Sections 6.1 and 6.2. Acquiror will use its best efforts on or
prior to the Closing Date to obtain the satisfaction of the conditions
applicable to it specified in Sections 6.1 and 6.3.
(d) The Arcus Parties shall take such steps as are necessary and
appropriate to obtain, and shall promptly obtain, satisfaction and discharge of
all Liens set forth in Section 3.5(a) of the Disclosure Schedule but only to the
extent that Acquiror elects to repay or prepay the Indebtedness corresponding to
such Liens from its own funds.
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(e) The parties shall cooperate with one another in the preparation,
execution and filing of all Returns, questionnaires, applications, or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp Taxes or any Plan, Benefit Arrangement or
Employment Arrangement, any transfer, recording, registration and other fees,
and any similar Taxes which become payable in connection with the Transactions
that are required or permitted to be filed on or before the Effective Time.
(f) The Arcus Parties (i) shall supply consolidated financial statements
for the Arcus Entities (and any and all documents and consents related thereto)
which comply with Regulation S-X under the Securities Act and the applicable
published rules and regulations thereunder for inclusion in the Registration
Statement, any other registration statement or other public filing of Acquiror
under the Securities Act or the Exchange Act, and any other offering circular or
document used by Acquiror in any other offering, whether public or private, and
(ii) shall use their best efforts to cause the Arcus Entities' independent
accountants to cooperate with Acquiror in connection with the foregoing
(including, without limitation, causing such independent accountants to deliver
Comfort Letters, written consents and representation letters relating to the
foregoing); provided, however, that Acquiror shall reimburse the Arcus Entities
for the reasonable fees and expenses of such accountants incurred in connection
with preparing and delivering any such Comfort Letters. Without limiting the
generality of the foregoing, the Arcus Parties agree that they will (i) consent
to the use of such audited financial statements in any such registration
statement, document or circular and (ii) execute and deliver, and cause their
officers to execute and deliver, such "representation" letters as are
customarily delivered in connection with audits and as their and Acquiror's
independent accountants may reasonably request under the circumstances.
(g) Without intending to limit the generality of the covenants set forth in
Section 3.16, the Arcus Parties agree that they and the other Arcus Entities
shall not, without the prior written consent of Acquiror, which consent shall
not unreasonably be withheld or delayed, (i) enter into, agree to or otherwise
become bound by any new leases of real property or amend or exercise any option
to extend any existing lease of real property or (ii) hire any new non-billable
employee whose annual compensation exceeds $50,000. In addition, the Arcus
Parties shall confer on a regular and frequent basis with Acquiror with respect
to operational matters of the Arcus Entities.
Section 5.3. Affiliate Agreements. Prior to the Closing Date, the Arcus
Parties shall deliver to Acquiror a letter identifying all Persons who are, at
the time this Agreement is submitted to the Stockholders, "affiliates" of the
Arcus Parties for purposes of Rule 145 under the Securities Act. Each of
Acquiror and the Arcus Parties shall use their best efforts to cause each such
"affiliate", or each Person who will, upon consummation of the Merger and the
Transactions, become an "affiliate" of Acquiror, to deliver to Acquiror on or
prior to the Closing Date a written agreement (an "Affiliate Agreement")
substantially in the form attached hereto as Exhibit 5.3.
Section 5.4. No Solicitation. The Arcus Parties shall not, nor shall they
permit any of the Arcus Parties' Representatives (including, without limitation,
any investment banker, attorney or accountant retained by it) to, initiate,
solicit or facilitate, directly or indirectly, any inquiries or the making of
any proposal with respect to an Other Transaction, engage in any discussions or
negotiations concerning, or provide to any other Person any information or data
relating to, any Arcus Entity for the purposes of, or otherwise cooperate in any
way with or assist or participate in, facilitating any inquiries or the making
of any proposal which constitutes, or may reasonably be expected to lead to, a
proposal to seek or effect an Other Transaction, or agree to or endorse any
Other Transaction; provided, however, that, notwithstanding anything to the
contrary in this Agreement, prior to the approval of this Agreement and the
Reorganization by the stockholders of each of the Arcus Parties, the Arcus
Entities may engage in discussions or negotiations with, and may furnish
information concerning the Arcus Entities and their business, properties and
assets to, a third party who, without any solicitation, initiation,
encouragement, discussion or negotiation, directly or indirectly, by or with the
Arcus Parties or any Representatives of the Arcus Parties, or in furtherance
thereof makes a written, bona fide proposal regarding an Other Transaction that
is not subject to any material contingencies relating to financing and that is
reasonably capable of being financed and is financially superior to the
consideration to be received by the Stockholders pursuant to the Merger (as
determined in good faith by the Board of Directors of each of the Arcus Parties
after consultation with the Arcus Parties' financial advisors) if (1) the Boards
of Directors of the Arcus Parties determine in their good faith, after receipt
of written advice of the Arcus Parties' outside legal counsel, that such action
is required for the Boards of Directors of the Arcus Parties to act in a manner
consistent with their fiduciary duties under Applicable Law and (2) prior to
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furnishing information with respect to the Arcus Entities to such third party,
the Arcus Parties shall have received from such third party an executed
confidentiality agreement in reasonably customary form on terms not more
favorable to such Person or entity than the terms contained in the
Confidentiality Agreement. In the event of a purported termination of this
Agreement by an Arcus Party pursuant to Section 7.1(h), any violation prior to
such termination of the restrictions set forth in the preceding sentence (after
giving effect to the proviso contained therein) by any investment banker or
financial advisor retained by the Arcus Parties, whether or not such Person is
purporting to act on behalf of any Arcus Entity or otherwise, shall be deemed to
constitute a breach of this Section 5.4 by the Arcus Parties. The Arcus Parties
shall promptly advise Acquiror of, and communicate the material terms of, any
proposal it may receive, or any inquiries it receives which may reasonably be
expected to lead to such a proposal relating to an Other Transaction, and the
identity of the Person making it. The Arcus Parties shall further advise
Acquiror of the status and changes in the material terms of any such proposal or
inquiry (or any amendment to any of them). During the term of this Agreement,
except as contemplated by this Section 5.4, the Arcus Parties shall not enter
into any agreement, whether oral or written and whether or not legally binding,
with any Person that provides for, or in any way facilitates, an Other
Transaction, or affects any other obligation of the Arcus Parties under this
Agreement.
Section 5.5. Directors' and Officers' Indemnification and Insurance.
(a) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless each Person who is now, or has been at any
time prior to the date of this Agreement or who becomes prior to the Effective
Time, an officer or director of any of the Arcus Entities (collectively, the
"Indemnified Parties") against all Claims or amounts that, with the approval of
the Surviving Corporation as to settlements only, are paid in settlement of or
otherwise in connection with any Claim based in whole or in part on or arising
in whole or in part out of the fact that such Person is or was a director or
officer of any of the Arcus Entities and pertaining to any matter existing or
arising out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, any Claims arising out of this Agreement, the
Merger or any Transaction), whether asserted or claimed prior to, at or after
the Effective Time, in each case to the fullest extent currently provided under
the applicable Arcus Entity's Organic Documents (but only to the extent
permitted under Applicable Law), and shall pay any expenses, as incurred, in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under Applicable Law, upon
receipt from the Indemnified Party to whom expenses are advanced of an
undertaking to repay such advances to the extent required under Applicable Law.
Without limiting the foregoing (but only to the extent provided for under the
applicable Arcus Entity's Organic Documents), in the event any such Claim is
brought against any of the Indemnified Parties, such Indemnified Parties may
retain counsel (including local counsel) satisfactory to them and which shall be
reasonably satisfactory to the Surviving Corporation, and the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for such
Indemnified Parties. The Indemnified Parties as a group shall retain only one
law firm (plus appropriate local counsel) to represent them with respect to each
such Claim unless there is, as determined by counsel to the Indemnified Parties,
under applicable standards of professional conduct, a conflict or a reasonable
likelihood of a conflict on any significant issue between the positions of any
two or more Indemnified Parties, in which event such Indemnified Party shall be
entitled to retain separate legal counsel at the expense of the Surviving
Corporation.
(b) For a period of six (6) years after the Effective Time, Acquiror shall
cause the individuals currently covered by directors' and officers' liability
insurance maintained by the Arcus Entities to be covered by the directors' and
officers' liability insurance maintained by Acquiror, with coverage
substantially similar to the coverage provided to Acquiror's directors and
officers, with respect to claims arising from facts or events which occurred at
or prior to the Effective Time; provided, that Acquiror shall not be obligated
to maintain such liability insurance in the event that the Board of Directors of
Acquiror elects to discontinue maintaining liability insurance for all of its
officers and directors.
Section 5.6. Notification of Certain Matters and Cure. Each Party shall
give prompt notice to the other Parties of the occurrence or non-occurrence of
any Event the occurrence or non-occurrence of which would be likely to cause in
any material respect (i) any representation or warranty made by it contained in
this Agreement to be untrue or inaccurate, or (ii) any change to be made in the
Disclosure Schedule or the Acquiror Disclosure Schedule, as the case may be, or
(iii) any failure of the Arcus Parties or Acquiror, as the case may be, to
comply with or satisfy,
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or be able to comply with or satisfy, any material covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that, except as set forth in this Section 5.6, the delivery of any notice
pursuant to this Section 5.6 shall not limit or otherwise affect the remedies
available hereunder to the Party receiving such notice. In the event that a
representation or warranty of any Party is true and accurate at the date of
execution of this Agreement and thereafter, not as a result of an intentional
act or omission of such Party, becomes false or untrue subsequent to such date
and prior to the Effective Time, the Parties hereto shall have the right to
fully and adequately remedy and cure such breach prior to the Effective Time;
provided, however, that no such remedy or cure shall otherwise cause the other
representations and warranties contained herein to be untrue or inaccurate or
result in a failure of the conditions hereunder at the Effective Time or
otherwise affect the other rights or obligations of any Party hereunder. In the
event that a representation or warranty of any Party is breached as of the date
of execution of this Agreement and (x) such breach can be fully and adequately
remedied and cured prior to the Effective Time, (y) such remedy and cure does
not require the payment by any Party hereto or their respective Subsidiaries of
any cash, property or assets and (z) such breach and remedy or cure will not
have any Adverse Effect, such Party shall have the right to fully and adequately
remedy and cure such breach prior to the Effective Time but no later than ten
(10) days after the discovery of such breach; provided, however, that no such
remedy or cure shall otherwise cause the other representations and warranties
contained herein to be untrue or inaccurate or result in a failure of the
conditions hereunder at the Effective Time or otherwise affect the other rights
or obligations of any Party hereunder.
Section 5.7. Public Announcements. Until the Closing or, in the event of
termination of this Agreement, until the date of such termination, each Party or
its Affiliates shall consult with the other before issuing any press release or
otherwise making any public statements with respect to this Agreement, the
Merger or any Transaction and shall not issue any such press release or make any
such public statement without the prior consent of the other, which consent
shall not be unreasonably withheld or delayed. Notwithstanding the foregoing,
any Party may, without the prior consent of the other Party, issue such press
releases or make such public statements which, in the opinion of outside counsel
to such Party, are required by Applicable Law, or by the terms of any agreement
or instrument with any exchange, including without limitation the Nasdaq
National Market System, on which such Party's or Affiliate's securities are
listed (each, a "Required Disclosure"), in which case the Party proposing to
make the Required Disclosure shall advise the other Party and afford it the
opportunity to review and comment upon its contents.
Section 5.8. Employee Benefits; Severance Policy.
(a) Provided that it complies in all material respects with Applicable Law
and except as set forth in Section 2.4 hereof, the Surviving Corporation may, in
its sole discretion, substitute employee compensation, benefit and severance
programs for those of the Arcus Entities and any ERISA Affiliates as are
comparable with the programs provided from time to time to Acquiror's employees
and the employees of Acquiror's Subsidiaries. For purposes of vesting in
benefits under, and eligibility to participate in, Acquiror's benefit programs,
service for any Arcus Entity shall be treated as service for the Acquiror for
all persons who were employed by an Arcus Entity on the day before the Merger
and employed by the Surviving Corporation or one of its Subsidiaries as of the
Effective Time. Subject to the first sentence of this Section 5.8(a), the
Surviving Corporation shall have no obligation to continue the existence of any
Plan or Benefit Arrangements maintained by an Arcus Entity or an ERISA Affiliate
thereof.
(b) At least one day prior to the Closing Date, the Arcus Parties shall,
and shall cause their ERISA Affiliates to, take all actions necessary to
terminate each Plan maintained by the Arcus Entities and any ERISA Affiliate
that complies or is intended to comply with Section 401 of the Code (each, a
"Qualified Plan"). If a Qualified Plan is terminated in accordance with this
Section 5.8(b), benefit accruals, including contributions of salary reduction
contributions, if any, shall cease. The Arcus Parties agree not to take, and
shall cause each of their ERISA Affiliates not to take, any action to merge any
of the Qualified Plans, transfer the assets of any of the Qualified Plans or
terminate any of the Qualified Plans, except as otherwise provided in this
Section 5.8(b), following the execution of this Agreement without the consent of
Acquiror.
Section 5.9 Certain Actions Concerning Business Combinations. The Arcus
Parties will not apply, and will not take any action resulting in the
application of, or otherwise elect to apply, the provisions of applicable state
takeover laws, if any, with respect to or as a result of the Merger or the
Transactions.
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Section 5.10 Option Securities. The Arcus Parties will take all action
necessary (a) if requested by Acquiror not less than thirty (30) days prior to
the Closing Date, to require the exercise, on the Designated Exercise Date (or,
if a period is provided as the Designated Exercise Date, then on or prior to the
last date of such period), of the Minimum Exercise Number of Option Securities
comprising non-qualified stock options of an Arcus Party, including, if
applicable, by accelerating the vesting prior to the Effective Time of such
Option Securities that would otherwise not be vested as of the Effective Time,
(b) if requested by Acquiror not less than thirty (30) days prior to the Closing
Date, to provide that any such Option Security which is not so exercised on (or
prior to, as applicable) a Designated Exercise Date shall terminate and be
forfeited as of the close of business on such Designated Exercise Date, (c) to
accelerate, if the Arcus Parties so choose, in their sole discretion, the
vesting of any Option Security held by an employee whose employment by an Arcus
Party is terminated prior to the Effective Time, (d) to amend, prior to the
Effective Time, the UAC Option Plan and the ATSI Option Plan as may be
reasonably requested by Acquiror not less than ten (10) days prior to the
Closing Date, and to cooperate with Acquiror to amend the UAC Option Plan and
the ATSI Option Plan and any Option Security granted thereunder as the Parties
may reasonably agree so as to minimize taxes payable in connection therewith,
(e) to provide timely written notice to all Persons holding Option Securities to
the effect that all Option Securities outstanding as of the Effective Time
(after giving effect to the required exercise described in clause (a)) will be
assumed by Acquiror and thereafter, in accordance with Section 2.4, will
represent options (or warrants as applicable) to acquire Acquiror Stock, and (f)
to obtain any consent or waiver from the holder of an Option Security which may
be necessary to give effect to the actions contemplated by this Section 5.10 and
Section 2.4. Without the prior written consent of Acquiror, except as set forth
above and in Sections 3.13(b) and 3.13(c) of the Disclosure Schedule, the Arcus
Parties will not accelerate, or cause an acceleration of, the exercise, exchange
or vesting schedule of any Option Security. As of the Effective Time, Acquiror
shall assume all of the Company's obligations with respect to the Option
Securities (as amended in accordance with Section 2.4 and this Section 5.10) and
shall, from and after the Effective Time, have reserved for issuance upon the
exercise of the Option Securities the shares of Acquiror Stock covered thereby,
and, as of the Effective Time, shall have filed a Registration Statement on Form
S-8 (or, if appropriate, an amendment to its Registration Statement on Form S-8)
to register the shares of Acquiror Stock subject to such Option Securities (as
so amended).
Section 5.11 Tax Treatment. Acquiror and each Arcus Party shall use its
reasonable best efforts to cause the Merger to qualify as a tax-free
reorganization under the provisions of Section 368(a) of the Code and to obtain
the opinions of counsel referred to in Sections 6.2(i) and 6.3(d). Without
limiting the foregoing, Acquiror covenants that (i) it will not dispose of the
Company, whether by sale of stock, sale of assets, merger, consolidation,
liquidation, redemption, or otherwise, for a period of one year after the
Closing Date, except as permitted under Section 368(a)(2)(C) of the Code and the
administrative authorities under Section 368 of the Code, or unless it first
shall have received an opinion of counsel, addressed to Acquiror and the
Stockholders, that the proposed disposition will not affect the tax-free nature
of the Merger and (ii) it will deliver cash or shares of Acquiror Stock pursuant
to Section 2.1(f) hereof in relative amounts that do not affect the tax-free
nature of the Merger.
Section 5.12 Preparation of the Registration Statement.
(a) Promptly following the date of this Agreement, Acquiror shall prepare
and file with the SEC the Registration Statement. Each of the Arcus Parties and
Acquiror shall use its reasonable best efforts to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after such filing and to cause the Prospectus to be mailed to the stockholders
of the Arcus Parties and, if required by Applicable Law or Schedule D of the
NASD By-Laws, to the stockholders of Acquiror as promptly as practicable after
the Registration Statement is declared effective under the Securities Act.
Acquiror shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or consenting to service of
process in any jurisdiction in which it has not previously so consented in any
action other than one arising out of the offering of the Acquiror Stock in such
jurisdiction) required to be taken to qualify the Acquiror Stock to be issued in
the Merger under any applicable state securities or "blue sky" laws prior to the
Effective Time, and the Arcus Parties shall furnish all information concerning
the Arcus Entities and the holders of the capital stock, Option Securities and
Convertible Securities of the Arcus Parties as may be requested in connection
with any such action.
(b) The Arcus Parties and Acquiror shall cooperate with each other and
provide to each other all information necessary in order to prepare the
Registration Statement. Acquiror shall notify the Arcus Parties promptly of the
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receipt of any comments from the SEC or its staff and of any requests by the SEC
or its staff for amendments or supplements to the Registration Statement or for
additional information and shall supply the Arcus Parties with copies of all
correspondence between Acquiror or any of its Representatives, on the one hand,
and the SEC or its staff, on the other hand, with respect thereto. The Arcus
Parties and Acquiror shall use their respective reasonable best efforts to
respond to any comments of the SEC with respect to the Registration Statement as
promptly as practicable. If at any time prior to the Effective Time there shall
occur any event with respect to the Arcus Entities or Acquiror or any of its
Subsidiaries, as the case may be, or with respect to other information supplied
by the Arcus Parties or Acquiror, as the case may be, for inclusion in the
Registration Statement, in either case which event is required to be described
in an amendment of, or a supplement to, the Prospectus or the Registration
Statement, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the Stockholders. Acquiror shall notify the Arcus Parties promptly upon (i) the
declaration by the SEC of the effectiveness of the Registration Statement, (ii)
the issuance or threatened issuance of any stop order or other order preventing
or suspending the use of any prospectus relating to the Registration Statement,
(iii) any suspension or threatened suspension of the use of any prospectus
relating to the Registration Statement in any state, (iv) any proceedings
commenced or threatened to be commenced by the SEC or any state securities
commission that might result in the issuance of a stop order or other order or
suspension of use or (v) any request by the SEC to supplement or amend the
Prospectus after the effectiveness thereof. Acquiror and, to the extent
applicable, the Arcus Parties, shall use their reasonable best efforts to
prevent or promptly remove any stop order or other order preventing or
suspending the use of any prospectus relating to the Registration Statement and
to comply with any such request by the SEC or any state securities commission to
amend or supplement the Registration Statement or the Prospectus.
(c) None of the information supplied or to be supplied by Acquiror, the
Arcus Parties or any stockholder of any of the Arcus Parties for inclusion in
(i) the Registration Statement will, at the time the Registration Statement is
filed with the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or (ii) the
Prospectus or any other proxy statement or information furnished to the
stockholders of any of the Arcus Parties in connection with the Arcus Special
Meetings will, at the date it is first mailed to such stockholders, at the time
of the Arcus Special Meetings or at the Closing Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Prospectus and
the Registration Statement will comply as to form in all material respects with
the requirements of the Securities Act. Notwithstanding the foregoing, no
representation is made by the Arcus Parties with respect to statements made or
incorporated by reference in the Registration Statement other than with respect
to information which is supplied by the Arcus Parties or any stockholder of any
of the Arcus Parties specifically for inclusion or incorporation by reference in
the Registration Statement.
Section 5.13 Disclosure of Acquisitions. In the event that, between the
date hereof and the Closing, Acquiror or any of its Subsidiaries enters into a
letter of intent or definitive agreement in respect of any potential acquisition
(whether structured as a stock or asset acquisition, business combination or
joint venture and without regard to whether Acquiror is then required to
publicly disclose such agreement, arrangement or understanding) with respect to
which the aggregate consideration (or potential aggregate consideration) is
$5,000,000 or more, Acquiror shall promptly disclose such letter of intent or
agreement and the terms and conditions thereof to the Arcus Parties.
Section 5.14 Amendment to Preserve Tax-Free Transaction. In the event
Dissenting Shares exist and any Party reasonably determines that the existence
of such Dissenting Shares adversely affects the tax-free nature of the Merger,
the Parties shall promptly negotiate in good faith to amend, supplement or
otherwise modify this Agreement and any applicable Collateral Documents to
preserve the tax-free nature of the Transactions.
Section 5.15 Warrant Purchase Agreement, Non-Competition Agreement, Etc.
Following the execution of this Agreement, (a) the Parties shall use their best
efforts to facilitate the execution of a Warrant Purchase Agreement by those
holders of Warrants that have not, as of the date hereof, executed a Warrant
Purchase Agreement, and (b) the Arcus Parties shall use their best efforts (i)
to facilitate the execution of a Non-Competition Agreement by those individuals
and in the form attached as Exhibit 5.15(a) or Exhibit 5.15(b), in each case as
identified in writing by
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Acquiror on the date hereof and (ii) to obtain the resignation (which
resignation shall release Acquiror and its Subsidiaries (including, without
limitation, the Arcus Entities after the Effective Time) from any and all
liabilities, claims and actions, which release shall be in form and substance
reasonably acceptable to Acquiror), effective as of the Closing Date, of those
employees of an Arcus Entity identified in writing by Acquiror on the date
hereof.
Section 5.16 Customers. Between the date hereof and the Closing Date, the
Arcus Entities will continue to enter into customer contracts in the ordinary
course of business; provided that no Arcus Entity will enter into any customer
contract relating to the provision of data protection services or the storage
of, and related services for, computer media or items held for storage or
transport in which the limitation on liability is different from that set forth
in Exhibit 5.16 attached hereto without the prior consent of Acquiror.
ARTICLE 6.
CLOSING CONDITIONS
Section 6.1 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each Party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(a) To the extent required by the DGCL or Schedule D of the NASD By-Laws,
this Agreement and the Merger shall have been approved and adopted in accordance
with the DGCL and, if applicable, Schedule D of the NASD By-Laws by the
affirmative vote of the stockholders of Acquiror holding at least the minimum
number of shares of capital stock of Acquiror then issued and outstanding as are
required by Applicable Law, Acquiror's Organic Documents and, if applicable,
Schedule D of the NASD By-Laws for such approval and adoption;
(b) This Agreement, the Merger and the Transactions for which approval is
required by Applicable Law or as set forth on Schedule C shall have been
approved and adopted in accordance with the DGCL and the NRS, as applicable, or
as set forth on by Schedule C hereto by the affirmative vote or consent of the
stockholders of the Company, UAC and ATSI holding at least the minimum number of
shares of capital stock of the Company, UAC and ATSI, as the case may be, then
issued and outstanding as are required by Applicable Law and the Arcus Parties'
Organic Documents or as otherwise contemplated by Schedule C hereto for such
approval and adoption;
(c) No Legal Action or other Claim (excluding dissenter's rights) shall be
pending or threatened in writing at any time prior to or on the Closing Date
before or by any Authority or by any other Person seeking to restrain or
prohibit, make illegal or delay materially, or seeking material damages or other
relief in connection with, the execution and delivery of this Agreement or the
consummation of the Merger and the Transactions or which might in the reasonable
judgment of Acquiror or the Arcus Parties, as the case may be, have any Adverse
Effect on the Arcus Entities or, assuming consummation of the Merger, Acquiror
and its Subsidiaries taken as a whole;
(d) Other than the filing of the certificate of merger for the Merger and
the other actions contemplated by Schedule C hereto, including other related
filings in accordance with the DGCL and the NRS, all authorizations, consents,
waivers, orders or approvals required to be obtained, and all filings,
submissions, registrations, notices or declarations required to be made, by
Acquiror and the Arcus Parties prior to the consummation of the Merger and the
Transactions shall have been obtained from, and made with, all required
Authorities, except for such authorizations, consents, waivers, orders,
approvals, filings, registrations, notices or declarations the failure to obtain
or make would not, in the reasonable judgment of Acquiror, assuming consummation
of the Merger, have an Adverse Effect on the Arcus Entities;
(e) The filing and waiting period requirements under the HSR Act relating
to the consummation of the Merger shall have been complied with;
(f) The Registration Statement shall have been declared effective, and no
stop order suspending the effectiveness of the Registration Statement shall be
in effect; and
(g) The holders of all Warrants that have accepted Acquiror's offer to
purchase Warrants and executed a Warrant Purchase Agreement as of the date
hereof shall have sold, and Acquiror shall have purchased, all such
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Warrants for a cash purchase price equal to the product of (i) the number of
shares of Company Stock subject to such Warrant and (ii) the difference between
the Share Price and the exercise price per share of Company Stock applicable to
such Warrant (the "Warrant Purchase Price").
Section 6.2 Conditions to Obligations of Acquiror. The obligations of
Acquiror to effect the Merger shall be subject to the satisfaction at or prior
to the Effective Time of the following additional conditions, any or all of
which may be waived, in whole or in part, to the extent permitted by Applicable
Law:
(a) All agreements, certificates, opinions and other documents shall be
reasonably satisfactory in form, scope and substance to Acquiror and its
counsel, and Acquiror and its counsel shall have received all information and
copies of all documents, including records of corporate proceedings, which they
may reasonably request in connection therewith, such documents where appropriate
to be certified by proper corporate officers;
(b) The representations, warranties, covenants and agreements of the Arcus
Parties contained in this Agreement or otherwise made in writing by them or on
their behalf pursuant hereto or otherwise made in connection with the Merger and
the Transactions shall be true and correct in all material respects at and as of
the Closing Date with the same force and effect as though made on and as of such
date except those which speak as of a certain date which shall continue to be
true and correct as of such date on the Closing Date; each and all of the
agreements and conditions to be performed or satisfied by the Arcus Parties or
any stockholders of the Arcus Parties hereunder or under the Stockholders'
Agreement at or prior to the Closing Date shall have been duly performed or
satisfied in all material respects; and the Arcus Parties shall have furnished
Acquiror with such certificates and other documents evidencing the truth of such
representations, warranties, covenants and agreements and the performance of
such covenants, agreements or conditions as Acquiror shall have reasonably
requested;
(c) The Arcus Parties shall have furnished Acquiror and, at Acquiror's
request, any bank or other financial institution providing credit to Acquiror,
with favorable opinions dated the Closing Date of Paul, Hastings, Janofsky &
Walker LLP, counsel for the Arcus Parties, or such other counsel reasonably
acceptable to Acquiror, Neal, Gerber & Eisenberg, special tax counsel for the
Arcus Parties, or such other counsel reasonably acceptable to Acquiror, and
Bible, Hoy & Trachok, special Nevada counsel for the Arcus Parties, or such
other counsel reasonably acceptable to Acquiror, in each case in form and
substance reasonably acceptable to Acquiror;
(d) Each Affiliate of the Company, as identified by the Company to Acquiror
in writing not less than fifteen (15) business days preceding the Closing Date,
shall have executed and delivered an Affiliate Agreement in the form of Exhibit
5.3 hereto;
(e) The Arcus Parties shall have obtained (i) consents to the assignment
and continuation of (A) all Material Agreements listed in Schedule 3.1(d) with
respect to which Acquiror shall have notified the Arcus Parties in writing
within ten (10) days after the date hereof and (B) any Material Agreement the
consent to which is not identified on Schedule 3.1(d) but which, in the
reasonable judgment of Acquiror, requires such consent and with respect to which
Acquiror shall have notified the Arcus Parties in writing within ten (10) days
after such Material Agreement shall have been delivered or otherwise provided to
Acquiror (or, if later, ten (10) days after the date hereof), and (ii)
satisfaction and discharge of all Liens set forth in Section 3.5(a) of the
Disclosure Schedule, but only to the extent that Acquiror elects to repay or
prepay the Indebtedness secured by such Liens from its own funds;
(f) Each of the stockholders agreements listed on Schedule 3.13(d) of the
Disclosure Schedule shall have been, as of the Effective Time, terminated or
otherwise of no further force or effect with no liability to any Arcus Entity;
(g) Each trustee under each Plan and each other officer and director of the
Arcus Entities identified in writing by Acquiror to the Company not less than
ten (10) days prior to the Closing Date shall, if required, have submitted his
or her unqualified written resignation, dated as of the Closing Date, from all
such positions held with the Arcus Entities and as a trustee for each such Plan;
(h) Except for such Contractual Obligations as to which Acquiror has
notified the Arcus Parties that it wants to retain, which notice shall be
delivered not less than thirty (30) days prior to Closing and which Contractual
Obligations shall be effective as of the Effective Time, all Contractual
Obligations set forth in Section 3.9 of the Disclosure Schedule shall have been
satisfied and discharged as of the Closing Date;
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(i) Acquiror shall have received a favorable opinion, dated the Closing
Date, of Sullivan & Worcester LLP, counsel to Acquiror, or such other counsel
reasonably acceptable to the Arcus Parties, to the effect that this Agreement
constitutes a tax-free plan of reorganization in accordance with the provisions
of Section 368(a) of the Code and as to the consequences thereof to Acquiror;
and
(j) The Arcus Parties, the Stockholder Representative and the Escrow Agent
shall have executed and delivered the Escrow Agreement.
Section 6.3 Conditions to Obligations of the Company. The obligations of
the Arcus Parties to effect the Merger shall be subject to the satisfaction at
or prior to the Effective Time of the following additional conditions, any or
all of which may be waived, in whole or in part, to the extent permitted by
Applicable Law:
(a) Acquiror shall have furnished the Arcus Parties with the favorable
opinion, dated the Closing Date, of Sullivan & Worcester LLP, counsel to
Acquiror, or such other counsel reasonably acceptable to the Arcus Parties, in
form and substance reasonably acceptable to the Arcus Parties;
(b) All agreements, certificates, opinions and other documents shall be
reasonably satisfactory in form, scope and substance to the Arcus Parties and
their counsel, and the Arcus Parties and their counsel shall have received all
information and copies of all documents, including records of corporate
proceedings, which they may reasonably request in connection therewith, such
documents where appropriate to be certified by proper corporate officers;
(c) The representations, warranties, covenants and agreements of Acquiror
contained in this Agreement or otherwise made in writing by it or on its behalf
pursuant hereto or otherwise made in connection with the Merger and the
Transactions shall be true and correct in all material respects at and as of the
Closing Date with the same force and effect as though made on and as of such
date except those which speak as of a certain date which shall continue to be
true and correct as of such date on the Closing Date; each and all of the
agreements and conditions to be performed or satisfied by Acquiror hereunder at
or prior to the Closing Date shall have been duly performed or satisfied in all
material respects; and Acquiror shall have furnished the Arcus Parties with such
certificates and other documents evidencing the truth of such representations,
warranties, covenants and agreements and the performance of such covenants,
agreements or conditions as the Arcus Parties shall have reasonably requested;
(d) The Arcus Parties shall have received a favorable opinion, dated the
Closing Date, of Neal, Gerber & Eisenberg, their special tax counsel or such
other counsel reasonably acceptable to Acquiror, to the effect that this
Agreement constitutes a tax-free plan of reorganization in accordance with the
provisions of Section 368(a) of the Code and as to the consequences thereof to
the Stockholders; and
(e) The Escrow Agreement shall have been executed and delivered by Acquiror
and the Escrow Agent.
ARTICLE 7.
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement,
the Merger and the Transactions by the stockholders of the Arcus Parties or the
stockholders of Acquiror:
(a) by mutual consent of Acquiror and the Arcus Parties;
(b) by either Acquiror or the Arcus Parties if any permanent injunction,
decree or judgment by any Authority preventing the consummation of the Merger
shall have become final and nonappealable;
(c) by the Arcus Parties in the event (i) the parties (other than Acquiror)
to this Agreement, the Stockholders' Agreement or a Warrant Purchase Agreement
executed on the date hereof are not in breach of this Agreement, the
Stockholders' Agreement or any such Warrant Purchase Agreement and none of their
representations and warranties shall have become and continue to be untrue in
any material respect, unless such breach or untruth is capable of being cured in
accordance with Section 5.6 (if applicable) by and will not prevent or delay
consummation of the Merger beyond the Termination Date and (ii) either (A)
Acquiror is in breach of this Agreement or any of its
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representations or warranties shall have become and continue to be untrue in any
material respect, unless, in either case such breach or untruth is capable of
being cured in accordance with Section 5.6 (if applicable) by and will not
prevent or delay consummation of the Merger by or beyond the Termination Date,
or (B) the Merger and the Transactions have not been consummated by the
Termination Date;
(d) [Intentionally Omitted];
(e) by the Arcus Parties if the Merger or the Transactions fail to receive
the approval, if any, required by Applicable Law or by Schedule D of the NASD
By-Laws, by vote of the holders of the capital stock of Acquiror;
(f) by Acquiror if the Merger or the Transactions fail to receive the
approval, if any, required by Applicable Law or by Schedule D of the NASD
By-Laws, by vote of the holders of the capital stock of Acquiror unless such
failure resulted from the breach by any stockholder of Acquiror who is a party
to the Acquiror Voting Agreement of the terms of such agreement;
(g) by Acquiror:
(i) in the event (A) Acquiror is not in breach of this Agreement, the
Stockholders' Agreement or one or more Warrant Purchase Agreements, none of
its stockholders is in breach of the Acquiror Voting Agreement and none of
its representations or warranties shall have become and continue to be untrue
in any material respect (but, as to the Acquiror Voting Agreement, only if
the approval of the Merger and the Transactions, or the taking of other
action specified in the Acquiror Voting Agreement, by Acquiror's stockholders
is required), unless such breach or untruth is capable of being cured in
accordance with Section 5.6 (if applicable) by and will not prevent or delay
consummation of the Merger by or beyond the Termination Date, and (B) either
(1) the Arcus Parties are in breach of this Agreement or any of their
representations or warranties shall have become and continue to be untrue in
any material respect, unless, in either case, such breach or untruth is
capable of being cured in accordance with Section 5.6 (if applicable) by and
will not prevent or delay consummation of the Merger beyond the Termination
Date, (2) the Merger and the Transactions have not been consummated prior to
the Termination Date, or (3) any of the parties (other than Acquiror) to the
Stockholders' Agreement or a Warrant Purchase Agreement executed on the date
hereof is in breach thereof or any of their representations or warranties
shall have become and continue to be untrue in any material respect, unless,
in either case, such breach or untruth is capable of being cured in
accordance with Section 5.6 (if applicable) by and will not prevent or delay
consummation of the Merger by or beyond the Termination Date; or
(ii) if (A) the Board of Directors of any Arcus Party shall (1) withdraw,
modify or change its recommendation so that it is not in favor of this
Agreement, the Merger or the Transactions (including, without limitation, if
any one or more members of the Board of Directors of any Arcus Party shall
withdraw, modify or change his or her recommendation so that he or she is not
in favor of this Agreement, the Merger or the Transactions in circumstances
where approval thereof by such member is required (whether pursuant to
Applicable Law, such Arcus Party's Organic Documents or any Contractual
Obligation to which such Arcus Party is a party), or shall have resolved to
do any of the foregoing, or (2) have recommended or resolved to recommend to
the Stockholders any Other Transaction, or (B) any Arcus Party shall have
entered into or agreed to enter into any Other Transaction;
(h) by any Arcus Party, prior to the approval and adoption of this
Agreement by the stockholders of such Arcus Party, if the Board of Directors of
such Arcus Party shall withdraw its recommendation of this Agreement, the Merger
and the Transactions and recommend any Other Transaction to its stockholders;
provided, however, that (i) the Arcus Parties are not then in breach of Section
5.4, (ii) prior to such termination, the Arcus Parties have negotiated with
Acquiror in good faith to make such adjustments in the terms and conditions of
this Agreement as would enable the Arcus Parties to proceed with the
transactions contemplated hereby and (iii) the Board of Directors of such Arcus
Party has determined in good faith (on the basis of the terms of such Other
Transaction and the terms of this Agreement, after giving effect to any
adjustments offered by Acquiror pursuant to clause (ii) above), after receipt of
written advice from the Company's outside legal counsel, that such termination
is required for the Board of Directors to act in a manner consistent with its
fiduciary duties to stockholders under Applicable Law and (iv) the Arcus Parties
shall provide to Acquiror prior written notice of such termination, which notice
shall advise Acquiror of the matters described in clauses (ii) and (iii) above;
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(i) by the Arcus Parties if there is a Change in Control of Acquiror;
(j) by any Party if an adjustment to the Merger Consideration is required
pursuant to Section 2.6 and the Determination Price, calculated without giving
effect to the first proviso in the definition thereof, is $20.00 or less; or
(k) by Acquiror if the independent accountants of the Arcus Entities shall
fail to deliver a Comfort Letter pursuant to the terms of Section 5.2(f);
provided, however, that any such failure shall not constitute a breach by any
Arcus Party of this Agreement if the Arcus Parties shall have complied with the
provisions of Section 5.2(f).
Section 7.2. Effect of Termination. Except as provided in Sections 5.1, 7.2
and 7.5, in the event of the termination of this Agreement pursuant to Section
7.1, this Agreement shall forthwith become void, there shall be no liability on
the part of any Party, or any of their respective officers or directors, to any
other Party and all rights and obligations of any Party shall cease; provided,
however, that such termination shall not prejudice the ability of a Party to
seek damages from any other Party for any breach of this Agreement, including,
without limitation, attorneys' fees and the right to pursue any remedy at law or
in equity.
Section 7.3. Amendment. This Agreement may be amended by the Parties by
action taken by or on behalf of the respective Boards of Directors thereof at
any time prior to the Effective Time; provided, however, that, after approval of
this Agreement and the Merger by the stockholders of the Company or the
stockholders of Acquiror (if such approval is required), no amendment, which
under Applicable Law may not be made without the approval of such stockholders,
may be made without such approval. This Agreement may not be amended except by
an instrument in writing signed by the Parties hereto.
Section 7.4. Waiver. At any time prior to the Effective Time, except to the
extent Applicable Law does not permit, either Acquiror or the Arcus Parties may
extend the time for the performance of any of the obligations or other acts of
the other, subject, however, to the terms and conditions of Section 7.1, waive
any inaccuracies in the representations and warranties of the other contained
herein or in any document delivered pursuant hereto and waive compliance by the
other with any of the agreements, covenants or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an agreement in
writing signed by the Party or Parties to be bound thereby.
Section 7.5. Fees, Expenses and Other Payments.
(a) Except as otherwise set forth in Section 5.2(f), all costs and expenses
incurred in connection with this Agreement, the Merger and the Transactions, and
compliance with Applicable Law and Contractual Obligations as a consequence
hereof and thereof, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred by the Parties shall be
borne solely and entirely by the Party which has incurred such costs and
expenses (with respect to such Party, its "Expenses").
(b) The Arcus Parties agree that if this Agreement shall be terminated by
Acquiror pursuant to Section 7.1(g) (other than a termination by Acquiror
pursuant to Section 7.1(g)(i)(B)(2) unless the reason for the failure to
consummate the Merger prior to the Termination Date is due to any breach by any
party (other than Acquiror) to this Agreement, the Stockholders' Agreement or a
Warrant Purchase Agreement executed on the date hereof of its covenants herein
or therein or the failure of the representations and warranties of such Person
to be true and correct in all material respects, in each case, which breach or
failure has not been cured) or, subject to the proviso below, by an Arcus Party
pursuant to Section 7.1(h), then the Arcus Parties will pay to Acquiror an
amount equal to $5,000,000 (the "Termination Fee"), which amount is in
recognition of, among other things, the out-of-pocket Expenses of Acquiror
related to this Agreement, the reliance of Acquiror on the Arcus Parties'
fulfillment of their obligations hereunder, the costs in delayed opportunity to
Acquiror, and the benefit to the Arcus Parties, which heretofore has been a
private closely-held business, in establishing a market price for it, but which
amount shall not be considered to constitute liquidated damages; provided,
however, that in the event of a termination of this Agreement by Acquiror
pursuant to Section 7.1(g)(ii) or by an Arcus Party pursuant to Section 7.1(h),
the Termination Fee shall be an amount equal to $7,000,000. Any payment required
to be made pursuant to this Section 7.5(b) shall be made as promptly as
practicable but not later than ten (10) business days after termination of this
Agreement and, in any such case, shall be made by wire transfer of immediately
available funds to an account designated by Acquiror.
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(c) Acquiror agrees that if this Agreement shall be terminated by the Arcus
Parties pursuant to Section 7.1(c) (other than a termination by the Arcus
Parties pursuant to Section 7.1(c)(ii)(B) unless the reason for the failure to
consummate the Merger prior to the Termination Date is due to any breach by
Acquiror of any of its covenants herein or in the Stockholders' Agreement or the
Warrant Purchase Agreements, any breach by a stockholder of Acquiror of the
Acquiror Voting Agreement or the failure of the representations and warranties
of Acquiror to be true and correct in all material respects, in each case, which
breach or failure has not been cured), then Acquiror will pay to the Company an
amount equal to $5,000,000, which amount is in recognition of, among other
things, the out-of-pocket Expenses of the Arcus Parties related to this
Agreement, the reliance of the Arcus Parties on Acquiror's fulfillment of its
obligations hereunder, the costs in delayed opportunity to the Arcus Parties,
but which amount shall not be considered to constitute liquidated damages. Any
payment required to be made pursuant to this Section 7.5(c) shall be made as
promptly as practicable but not later than ten (10) business days after
termination of this Agreement and, in any such case, shall be made by wire
transfer of immediately available funds to an account designated by the Company.
Section 7.6. Effect of Investigation. The right of any Party to terminate
this Agreement pursuant to Section 7.1 shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any Party, or
any Person controlling any such Party or any of their respective
Representatives, whether prior to or after the execution of this Agreement.
ARTICLE 8.
INDEMNIFICATION; ADJUSTMENT
Section 8.1. Survival. The representations, warranties, covenants and
agreements of the Arcus Parties contained in or made pursuant to this Agreement
or any Collateral Document shall survive the Closing and shall remain operative
and in full force and effect for a period of eighteen (18) months after the
Closing Date (the "Escrow Indemnity Period"), regardless of any investigation or
statement as to the results thereof made by or on behalf of any Party. No claim
for indemnification may be asserted after the expiration of the Escrow Indemnity
Period. Notwithstanding anything herein to the contrary, any representation,
warranty, covenant and agreement which is the subject of a Claim which is
asserted in writing prior to the expiration of the Escrow Indemnity Period shall
survive with respect to such Claim or any dispute with respect thereto until the
final resolution thereof.
Section 8.2. Escrow; Indemnification.
(a) The Parties hereto agree, and by adopting and approving this Agreement
and the Merger or the ATSI Plan of Merger, the ATSI Merger, the UAC Plan of
Merger or the UAC Merger, as the case may be, the stockholders of the Arcus
Parties shall agree, that an aggregate amount equal to the Common Stock Escrow
Indemnity Contribution will be withheld from the Cash Merger Consideration and,
together with the Warrant Escrow Indemnity Contribution to be withheld pursuant
to the Warrant Purchase Agreements from the Warrant Purchase Price
(collectively, the "Escrow Indemnity Funds"), will be deposited into escrow and
held and disbursed in accordance with the terms of this Article 8 and the Escrow
Agreement in order to provide a fund to indemnify Acquiror and hold Acquiror
harmless from and against any and all damages, claims, losses, expenses, costs,
obligations and liabilities, including without limitation liabilities for all
reasonable attorneys', accountants', and experts' fees and expenses including
those incurred to enforce the terms of this Agreement or any Collateral Document
(collectively, "Loss and Expense"), suffered, directly or indirectly, by
Acquiror by reason of, or arising out of:
(i) any breach of representation or warranty made by the Arcus Parties
pursuant to this Agreement or any Collateral Document or any failure by the
Arcus Parties to perform or fulfill any of their respective covenants or
agreements set forth in this Agreement or any Collateral Document;
(ii) any Legal Action or other Claim by any third party relating to the
Arcus Parties to the extent such Legal Action or other Claim has resulted in
a breach of representation or warranty by the Arcus Parties pursuant to this
Agreement or any Collateral Document;
(iii) the Final Indebtedness Amount exceeding the amount set forth in the
Company Indebtedness Calculation (but only to the extent such Loss or Expense
is not satisfied out of the Combined Escrow Holdback Amount) or the Expenses
of the Arcus Entities exceeding the amount available therefor in the Expense
Fund; or
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(iv) any one or more of the matters listed in Section 8.2(a) of the
Disclosure Schedule.
(b) The Parties hereby appoint, and by adopting and approving this
Agreement and the Merger or the ATSI Plan of Merger, the ATSI Merger, the UAC
Plan of Merger or the UAC Merger, as the case may be, the stockholders of the
Arcus Parties shall appoint, The Bank of New York, or such other entity as is
reasonably satisfactory to the Parties (the "Escrow Agent", with full and
unqualified power to delegate to one or more Persons the authority granted to it
hereunder). The Arcus Parties hereby appoint, and by adopting and approving this
Agreement and the Merger, the stockholders of the Arcus Parties shall appoint,
Mr. Clarke H. Bailey (the "Stockholder Representative"), with full and
unqualified power to delegate (with the approval of Acquiror, which shall not be
unreasonably withheld) to one or more Persons the authority granted to him
hereunder) to act as his, her or its agent and attorney-in-fact, with full power
of substitution, to execute the Escrow Agreement and to take all actions called
for by this Article 8 and the Escrow Agreement on his, her or its behalf, in
accordance with the terms of this Article 8 and the Escrow Agreement.
(c) In the event Acquiror or any of its Representatives determines to
settle, compromise, dispute, commence or join in any legal action or proceeding
relating to, or take any other significant action with respect to, any of the
matters listed in Section 8.2(a) of the Disclosure Schedule (other than the
matters listed in item (4) thereof), Acquiror shall communicate such intended
course of action to the Stockholder Representative on behalf of the Stockholders
and, in the event the Stockholder Representative reasonably disputes such
intended course of action (setting forth the basis of such objection and an
alternative course of action), Acquiror and the Stockholder Representative shall
use their best efforts to agree on a mutually acceptable course of action. In
the event such agreement is not reached within fifteen (15) days following the
date of such dispute notice, then Acquiror and the Stockholder Representative
shall jointly retain an independent third party to review Acquiror's and the
Stockholder Representative's proposed courses of action. Such independent third
party shall select the more appropriate of the two alternative courses of
action, which conclusion shall be binding on Acquiror and the Stockholder
Representative for all purposes hereunder.
(d) The Parties hereto agree, and by adopting and approving this Agreement
and the Merger or the ATSI Plan of Merger, the ATSI Merger, the UAC Plan of
Merger or the UAC Merger, as the case may be, the stockholders of the Arcus
Parties shall agree, that notwithstanding any other provision of this Agreement,
the Stockholder Representative's liability to such Parties or any third party
under this Agreement or the Escrow Agreement shall be limited to any claim or
liability arising as a result of the Stockholder Representative's willful
misconduct or bad faith in performing its specified duties hereunder or under
the Escrow Agreement, and such Parties further agree that any such liability
shall be limited to direct damages resulting from such conduct and that in no
event shall the Stockholder Representative be liable for special, incidental or
consequential damages incurred or suffered by such Parties or any third party.
Section 8.3. Limitation of Liability; Disposition of Escrow Indemnity
Funds.
(a) Notwithstanding the provisions of Section 8.2, after the Closing,
Acquiror's rights to indemnification shall be subject to the following
limitations: (i) Acquiror shall be entitled to recover its Loss and Expense in
respect of any Claim only to the extent the Loss and Expense for all Claims
exceeds, in the aggregate, $200,000 and (ii) in no event shall the aggregate
amount to be paid to Acquiror exceed the Escrow Indemnity Funds. The limitations
in clause (i) of the immediately preceding sentence shall not apply to a claim
pursuant to Section 8.2(a)(iii) of this Agreement.
(b) Anything in this Agreement, including without limitation the provisions
of Sections 8.2 and 8.3(a), to the contrary notwithstanding, the exclusive
recourse of Acquiror with respect to Claims brought after the Effective Time
arising out of the transactions contemplated by this Agreement (other than under
the Stockholders' Agreement and the Non-Competition Agreements) shall be to the
Escrow Indemnity Funds. On or before the Closing Date, Acquiror, the Arcus
Parties, the Stockholder Representative and the Escrow Agent shall execute and
deliver an escrow agreement substantially in the form attached hereto as Exhibit
8.3(b) (the "Escrow Agreement"). Any Claims of Acquiror for indemnification to
be satisfied out of the Escrow Indemnity Funds shall be made in accordance with
the terms of the Escrow Agreement.
(c) In the event there are no Unresolved Claims (as defined in the Escrow
Agreement), on the nine month anniversary of the Closing Date, or the next
business day if such date is not a business day (the "Initial Distribution
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Date"), an aggregate of $3,000,000 of the Escrow Indemnity Funds shall be
distributed to the Stockholder Representative for the benefit of each former
holder of a Share Certificate and each former holder of a Warrant as follows:
(i) to each former holder of a Share Certificate (or his, her or its nominee or
transferee, as set forth in the Transmittal Documents in respect of the Cash
Merger Consideration) an amount equal to $3,000,000 times a fraction, the
numerator of which shall equal the value (calculated based on the Determination
Price) of such former holder's Exchange Common Consideration and the denominator
of which shall equal the Total Primary Equity Base, and (ii) to each former
holder of a Warrant sold pursuant to a Warrant Purchase Agreement an amount
equal to $3,000,000 times a fraction, the numerator of which shall equal the sum
of the Warrant Purchase Price paid to such holder pursuant to a Warrant Purchase
Agreement and the value (calculated based on the Determination Price) of such
holder's Exchange Preferred Consideration and the denominator of which shall
equal the Total Primary Equity Base, as more specifically set forth in the
Warrant Purchase Agreement. In the event one or more Unresolved Claims with
respect to the Escrow Indemnity Funds, if any, shall exist on the Initial
Distribution Date, cash in the amount equal to the sum of (i) $5,000,000, (ii)
the aggregate amount of such Unresolved Claims and (iii) the amount reasonably
estimated by Acquiror to cover the fees, expenses and other costs (including
reasonable counsel fees and expenses) which will be required to resolve such
Unresolved Claims shall be retained as part of the Escrow Indemnity Funds and
the balance thereof, if any, shall be distributed to the Stockholder
Representative for the benefit of the Persons entitled thereto in accordance
with their proportionate interests, calculated in accordance with the first
sentence of this Section 8.3(c). Upon the resolution of all such Unresolved
Claims made prior to the Initial Distribution Date and the payment of all such
fees, expenses and costs with respect thereto out of the Escrow Indemnity Funds,
the balance of the cash, if any, so retained on the Initial Distribution Date
shall be distributed to the Stockholder Representative for the benefit of the
Persons entitled thereto in accordance with their proportionate interests,
calculated in accordance with the first sentence of this Section 8.3(c).
In the event there are no Unresolved Claims on the date which is one day
after the expiration of the Escrow Indemnity Period, or the next business day if
such date is not a business day, the Escrow Indemnity Funds then remaining shall
be distributed to the Stockholder Representative for the benefit of each former
holder of a Share Certificate (or his, her or its nominee or transferee, as set
forth in the Transmittal Documents in respect of the Cash Merger Consideration)
and each former holder of a Warrant sold pursuant to a Warrant Purchase
Agreement in accordance with their proportionate interests, calculated in
accordance with the first sentence of this Section 8.3(c). In the event one or
more Unresolved Claims with respect to the Escrow Indemnity Funds, if any, shall
exist upon the expiration of the Escrow Indemnity Period, cash in the amount
equal to the sum of (i) the aggregate amount of such Unresolved Claims and (ii)
the amount reasonably estimated by Acquiror to cover the fees, expenses and
other costs (including reasonable counsel fees and expenses) which will be
required to resolve such Unresolved Claims shall be retained as part of the
Escrow Indemnity Funds and the balance thereof, if any, shall be distributed to
the Stockholder Representative for the benefit of the Persons entitled thereto
in accordance with their proportionate interests, calculated in accordance with
the first sentence of this Section 8.3(c). Upon the resolution of all such
Claims and the payment of all such fees, expenses and costs out of the Escrow
Indemnity Funds, the balance of the cash, if any, shall be distributed to the
Stockholder Representative for the benefit of the Persons entitled thereto in
accordance with their proportionate interests, calculated in accordance with the
first sentence of this Section 8.3(c).
Section 8.4. Notice of Claims. If Acquiror believes that it has suffered or
incurred any Loss and Expense, it shall notify the Escrow Agent and the
Stockholder Representative promptly in writing, and in any event within the
applicable time period specified in Section 8.1, describing such Loss and
Expense, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such Loss and Expense shall
have occurred. If any Legal Action is instituted by a third party with respect
to which Acquiror intends to claim any liability or expense as Loss and Expense
under this Article, Acquiror shall promptly give written notice (a "Claim
Notice") to notify the Escrow Agent and the Stockholder Representative of such
Legal Action. In any event, the failure to so notify the Escrow Agent and the
Stockholder Representative shall not relieve the Stockholders of their
obligations under this Article, except to the extent such notice is not given
within the applicable time period specified in Section 8.1 or such failure to
notify prejudices their ability to defend against such Claim.
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Section 8.5. Defense of Third Party Claims. The Stockholder Representative
shall have the right to conduct and control, through counsel of his own
choosing, reasonably acceptable to Acquiror, any third party Legal Action or
other Claim (unless the amount claimed under such Legal Action or other Claim
exceeds the Escrow Indemnity Funds, in which case Acquiror shall retain the
right to control such Legal Action or other Claim, but the Stockholder
Representative shall be entitled to participate at his sole cost and expense),
but Acquiror may, at its election, participate in the defense thereof at its
sole cost and expense; provided, however, that if the Stockholder Representative
shall fail to defend any such Legal Action or other Claim, then Acquiror may
defend, through counsel of its own choosing, such Legal Action or other Claim,
and (so long as it gives the Stockholder Representative at least fifteen (15)
days' notice of the terms of the proposed settlement thereof and permits the
Stockholder Representative to then undertake the defense thereof, except as set
forth above) settle such Legal Action or other Claim, and to recover out of the
Escrow Indemnity Funds the amount of such settlement or of any judgment and the
costs and expenses of such defense. The Stockholder Representative shall not
compromise or settle any such Legal Action or other Claim without the prior
written consent of Acquiror. All reasonable costs and expenses defending any
such third party Legal Action or other Claim, including the amount of any
settlement or of any judgment, shall be paid out of the Escrow Indemnity Funds.
Section 8.6. Balance Sheet Adjustment; Arcus Parties' Expenses.
(a) Three business days immediately preceding the Closing Date, the Company
shall prepare and deliver to Acquiror a schedule showing the Company's good
faith estimate of Net Indebtedness as of the Effective Time (the "Company
Indebtedness Calculation"), which schedule shall be accompanied by a letter from
Banque Paribas certifying to Acquiror the entire unpaid balance (principal and
interest) of the Arcus Entities' Indebtedness under the Credit Facility, such
that the payment thereof on the Closing Date would terminate that Indebtedness.
If Acquiror disagrees with such estimate, Representatives of the Company and
Acquiror shall meet to discuss such estimate, and the Company Indebtedness
Calculation shall be revised, to the extent agreed, to reflect such discussion.
Within eighty (80) days subsequent to the Closing Date, Acquiror shall prepare
and deliver to the Stockholder Representative and the Escrow Agent a schedule
showing Acquiror's calculation of the Company's Net Indebtedness as of the
Effective Time. Acquiror's determination of the Company's Net Indebtedness as
set forth in such schedule shall be final, conclusive and binding on the Parties
unless the Stockholder Representative shall, with fifteen (15) days following
receipt of such schedule, notify Acquiror and the Escrow Agent in writing (a
"Dispute Notice") of an objection to such calculation, setting forth with
reasonable specificity the basis of such objection. If a Dispute Notice is
submitted by the Stockholder Representative and if the Stockholder
Representative and Acquiror cannot agree as to the calculation of the Company's
Net Indebtedness as of the Effective Time within fifteen (15) days following
delivery of such Dispute Notice, the determination of the amount of the
Company's Net Indebtedness shall be fully and finally resolved in accordance
with Article 9. The amount of the Company's Net Indebtedness, as finally
determined pursuant to this Section 8.6(a) or, if applicable, Article 9, shall
be referred to herein as the "Final Indebtedness Amount" and the date on which
such final determination is made shall be referred to herein as the "Final
Determination Date."
(b) The Parties hereto agree, and by adopting and approving this Agreement
and the Merger or the ATSI Plan of Merger, the ATSI Merger, the UAC Plan of
Merger or the UAC Merger, as the case may be, the stockholders of the Arcus
Parties shall agree, that cash in the Estimated Expense Amount will be withheld
from the aggregate Cash Merger Consideration and the aggregate Warrant Purchase
Price and deposited into the Expense Fund in order for the Stockholder
Representative, on behalf of former holders of Share Certificates and former
holders of Warrants sold pursuant to one or more Warrant Purchase Agreements, to
have funds available (i) to pay Expenses incurred by the Arcus Parties in
connection with or related to this Agreement, the Merger and the Transactions
and (ii) to pay fees and expenses, if any, incurred by the Stockholder
Representative in connection with the payment of any expense contemplated by
this Agreement or the Escrow Agreement. The Stockholder Representative shall,
upon receipt of invoices or other appropriate documentation detailing the Arcus
Parties' Expenses, be authorized, entitled and directed to make payment of such
Arcus Parties' Expenses out of the Expense Fund. The Stockholder Representative
shall pay (i) on the date that is one hundred eighty (180) days following the
Closing Date, the balance, if any, of any funds on deposit in the Expense Fund
in excess of $500,000 and (ii) on the last date on which the balance of the
Escrow Indemnity Funds may be distributed to the Stockholder Representative
pursuant to Section 8.3(c) (or on such earlier date as the Stockholder
Representative, in its sole discretion, may choose but in no event
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earlier than the Initial Distribution Date), the balance, if any, of any funds
on deposit in the Expense Fund as follows: to (A) each former holder of a Share
Certificate (or his, her or its nominee or transferee, as set forth in the
Transmittal Documents in respect of the Cash Merger Consideration) in an amount
equal to the applicable balance on deposit in the Expense Fund times a fraction,
the numerator of which shall equal the value (calculated based on the
Determination Price) of such former holder's Exchange Common Consideration and
the denominator of which shall equal the Total Primary Equity Base, and (B) each
former holder of a Warrant sold pursuant to a Warrant Purchase Agreement in an
amount equal to the applicable balance on deposit in the Expense Fund times a
fraction, the numerator of which shall equal the sum of the Warrant Purchase
Price paid to such holder pursuant to the Warrant Purchase Agreement and the
value (calculated based on the Determination Price) of such holder's Exchange
Preferred Consideration and the denominator of which shall equal the Total
Primary Equity Base, as more specifically set forth in the Warrant Purchase
Agreement.
(c) The Parties hereto agree, and by adopting and approving this Agreement
and the Merger or the ATSI Plan of Merger, the ATSI Merger, the UAC Plan of
Merger or the UAC Merger, as the case may be, the stockholders of the Arcus
Parties shall agree, that if the Company Indebtedness Calculation reflects a Net
Working Capital Surplus of $300,000 or less, then cash in an aggregate amount
equal to the Escrow Holdback Amount will be withheld from the aggregate Cash
Merger Consideration and, together with the Warrant Escrow Holdback Amount to be
withheld pursuant to the Warrant Purchase Agreements from the Warrant Purchase
Price (collectively, the "Combined Escrow Holdback Amount"), will be deposited
into escrow and held and disbursed in accordance with the terms of this Article
8 and the Escrow Agreement in order to have funds available in the event that
the Final Indebtedness Amount is greater than the Company Indebtedness
Calculation. The Combined Escrow Holdback Amount shall be determined in
accordance with the following schedule:
Amount of Net Combined Escrow Holdback
Working Capital Surplus Amount
- ------------------------------- -------------------------
$300,001 or More $ 0
$250,001--$300,000 $ 50,000
$200,001--$250,000 $100,000
$150,001--$200,000 $150,000
$100,001--$150,000 $200,000
$ 50,001--$100,000 $250,000
$ 0--$50,000 $300,000
In the event that the Final Indebtedness Amount is greater than the Company
Indebtedness Calculation, then on the second business day after the Final
Determination Date, (i) cash in an amount equal to the difference between the
Final Indebtedness Amount and the Company Indebtedness Calculation shall be
distributed to Acquiror out of the Combined Escrow Holdback Amount and, if the
Combined Escrow Holdback Amount is not sufficient to provide for such payments,
out of the Escrow Indemnity Funds pursuant to Section 8.2(a)(iii), and (ii) the
balance, if any, of the Combined Escrow Holdback Amount shall be distributed to
the Stockholder Representative for the benefit of each former holder of a Share
Certificate and each former holder of a Warrant in accordance with their
proportionate interests, calculated in accordance with the first sentence of
Section 8.3(c). In the event that the Final Indebtedness Amount is equal to or
less than the Company Indebtedness Calculation, then on the second business day
after the Final Determination Date the balance of the Combined Escrow Holdback
Amount shall be distributed to the Stockholder Representative for the benefit of
the Persons entitled thereto in accordance with their proportionate interests,
calculated in accordance with the first sentence of Section 8.3(c).
Section 8.7. Exclusive Remedy. The indemnification provided in this Article
shall be the sole and exclusive post-Closing remedy available to Acquiror or any
of its Affiliates against the Arcus Parties, the Stockholders or any of their
respective Affiliates for any Claim under this Agreement or otherwise relating
to the Merger or the Transactions (excluding under the Stockholders' Agreement
and the Non-Competition Agreements).
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ARTICLE 9.
ARBITRATION
Except as otherwise set forth herein, any claim or controversy arising out
of relating to this Agreement, any breach thereof or the transactions
contemplated hereby shall be settled by arbitration before a panel of three (3)
arbitrators in accordance with the procedures set forth in this Article 9. The
venue for any such arbitration shall be Boston, Massachusetts or such other
location as the Parties may mutually agree. Except as expressly set forth
herein, all proceedings under this Article 9 shall be undertaken in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
(the "AAA") then in force. Only individuals who are (i) lawyers engaged
full-time in the practice of law or former judges of a state or federal court of
general or appellate jurisdiction, and (ii) on the AAA register of arbitrators,
shall be selected as arbitrators. Each Party shall select one (1) arbitrator
within thirty (30) days after a demand for arbitration is made hereunder. If any
Party shall fail to select an arbitrator, the arbitrator selected by the other
Party shall proceed to hear and determine the dispute. The two (2) arbitrators
so selected shall select a third arbitrator (the "Neutral"), failing which the
Neutral shall be appointed by the AAA. The three (3) arbitrators so chosen shall
determine any dispute hereunder by not less than a majority vote. Any
arbitration award shall be in writing and signed by not less than two (2) of the
arbitrators. Judgment upon the written award may be entered and enforced in any
court of competent jurisdiction. The written decision of the arbitrators shall
be valid, binding, final and non-appealable except for such grounds as are
specified in 9 U.S.C. [sec][sec]10, 11. The arbitrators shall not be empowered
to award punitive damages against any Party to such arbitration. Nor shall the
arbitrators be empowered to issue any form of injunctive or equitable relief
against any Party, jurisdiction over which shall remain in the courts of
competent jurisdiction. The arbitrators shall require the non-prevailing Party
or Parties to pay the Neutral's reasonable fees and expenses. If, in the opinion
of a majority of the arbitrators, there is no prevailing Party, the Neutral's
reasonable fees and expenses will be borne equally by the Parties to the
arbitration. Notwithstanding anything to the contrary contained in this
Agreement, in the event any action is brought to enforce the provisions of this
Article 9, the non-prevailing Party or Parties shall be required to pay the
reasonable attorneys' fees and expenses of the prevailing Party or Parties,
except that if in the opinion of the court or arbitrator deciding such action
there is no prevailing Party, each Party shall pay its own attorneys' fees and
expenses.
ARTICLE 10.
GENERAL PROVISIONS
Section 10.1. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the Parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) If to Acquiror:
Iron Mountain Incorporated
745 Atlantic Avenue, 10th Floor
Boston, MA 02111
Attention: C. Richard Reese
Telecopier No.: (617) 350-7881 with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: William J. Curry
Telecopier No.: (617) 338-2880
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(b) If to any of the Arcus Parties:
c/o United Acquisition Company
667 Madison Avenue, 25th Floor
New York, NY 10021-8029
Attention: Clarke H. Bailey
Telecopier No.: (212) 758-8531
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue New York, NY 10022
Attention: William F. Schwitter
Telecopier No.: (212) 319-4090
(c) If to the Stockholder Representative:
Mr. Clarke H. Bailey
10 Oxford Road
Larchmont, NY 10538
Telecopier No.: (914) 834-4778
Section 10.2. Headings. The headings contained in this Agreement are for
purposes of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.3. Severability. If any term or provision of this Agreement
shall be held or deemed to be, or shall in fact be, invalid, inoperative,
illegal or unenforceable as applied to any particular case in any jurisdiction
or jurisdictions, or in all jurisdictions or in all cases, because of the
conflicting of any provision with any constitution or statute or rule of public
policy or for any other reason, such circumstance shall not have the effect of
rendering the provision or provisions in question invalid, inoperative, illegal
or unenforceable in any other jurisdiction or in any other case or circumstance
or of rendering any other provision or provisions herein contained invalid,
inoperative, illegal or unenforceable to the extent that such other provisions
are not themselves actually in conflict with such constitution, statute or rule
of public policy, but this Agreement shall be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative, illegal or unenforceable
provision had never been contained herein and such provision reformed so that it
would be valid, operative and enforceable to the maximum extent permitted in
such jurisdiction or in such case. Notwithstanding the foregoing, in the event
of any such determination the effect of which is to Affect Materially and
Adversely any Party, the Parties shall negotiate in good faith to modify this
Agreement as to effect the original intent of the Parties as closely as possible
to the fullest extent permitted by Applicable Law in an acceptable manner to the
end that the Transactions are fulfilled and consummated to the maximum extent
possible.
Section 10.4. Entire Agreement. This Agreement (together with the
Confidentiality Agreement, the Disclosure Schedule, the Acquiror Disclosure
Schedule and the other Collateral Documents delivered in connection herewith)
constitutes the entire agreement of the Parties and supersedes all prior
agreements and undertakings, both written and oral (other than the
Confidentiality Agreement), between the Parties, or any of them, with respect to
the subject matter hereof.
Section 10.5. Assignment. This Agreement shall not be assigned by operation
of law or otherwise and any purported assignment shall be null and void,
provided that after the Effective Time Acquiror may assign its rights under this
Agreement to any Affiliate of Acquiror or any Person who acquires all or
substantially all of the assets of Acquiror (including, without limitation,
through merger or otherwise).
Section 10.6. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each Party, and except for the provisions of
Section 5.5, nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
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Section 10.7. Governing Law; Attorneys Fees. The validity, interpretation,
construction and performance of this Agreement shall be governed by, and
construed in accordance with, the applicable laws of the United States of
America and the laws of the State of New York applicable to contracts made and
performed in such State and, in any event, without giving effect to any choice
or conflict of laws provision or rule that would cause the application of
domestic substantive laws of any other jurisdiction, except to the extent that
the provisions of the DGCL apply to the Merger.
Section 10.8. Enforcement of the Agreement. Subject to Section 8.7 and
Article 9 of this Agreement, each Party recognizes and agrees that each other
Party's remedy at law for any breach of the provisions of this Agreement would
be inadequate and agrees that for breach of such provisions, such Party shall,
in addition to such other remedies as may be available to it at law or in equity
or as provided in this Agreement, be entitled to injunctive relief and to
enforce its rights by an action for specific performance to the extent permitted
by Applicable Law. Each Party hereby waives any requirement for security or the
posting of any bond or other surety in connection with any temporary or
permanent award of injunctive, mandatory or other equitable relief. Subject to
Section 8.7 and Article 9 of this Agreement, nothing herein contained shall be
construed as prohibiting a Party from pursuing any other remedies available to
such Party for any breach or threatened breach hereof or failure to take or
refrain from any action as required hereunder to consummate the Merger and carry
out the Transactions.
Section 10.9. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 10.10. Mutual Drafting. This Agreement is the result of the joint
efforts of Acquiror and the Company, and each provision hereof has been subject
to the mutual consultation, negotiation and agreement of the parties and there
shall be no construction against any Party based on any presumption of that
Party's involvement in the drafting thereof.
ARTICLE 11.
DEFINITIONS
As used herein, unless the context otherwise requires, the following terms
have the following respective meanings. Terms defined in the singular shall have
a comparable meaning when used in the plural, and vice versa, and the reference
to any gender shall be deemed to include all genders. Unless otherwise defined
or the context otherwise clearly requires, terms for which meanings are provided
herein shall have such meanings when used in the Disclosure Schedule, the
Acquiror Disclosure Schedule and each Collateral Document, notice, certificate,
communication, opinion or other document executed or required to be executed
pursuant hereto or thereto or otherwise delivered, from time to time, pursuant
hereto or thereto.
"Acquiror" shall have the meaning given to it in the Preamble.
"Acquiror Disclosure Schedule" shall mean the disclosure schedule dated as
of the date of this Agreement delivered by Acquiror to the Arcus Parties.
"Acquiror Financial Statements" shall have the meaning given to it in
Section 4.4(b).
"Acquiror Optionee" shall have the meaning given to it in Section 2.1(f).
"Acquiror Optionee Aggregate Spread Value" shall mean the sum of the
product of (i) the difference between the Share Price and the exercise price of
each Option Security (whether vested or unvested) as of the Effective Time held
by the Acquiror Optionees and (ii) the number of shares of Company Stock
issuable upon exercise of such Option Securities.
"Acquiror SEC Reports" shall have the meaning given to it in Section
4.4(a).
"Acquiror Stock" shall have the meaning given to it in the Preamble.
"Acquiror Voting Agreement" shall mean the agreement substantially in the
form of Exhibit 7.1(f) hereto.
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"Adjustment Aggregate Spread Value" shall have the meaning given to it in
Section 2.1(f).
"Adverse," "Adversely," when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") shall mean, with
respect to the Arcus Entities or Acquiror, as the case may be, any Event which
could reasonably be expected to (a) adversely affect the validity or
enforceability of this Agreement or any Collateral Document or the likelihood of
consummation of the Merger, (b) adversely affect in any material respect the
business, operations, properties, condition (financial or other), or results of
operation (including without limitation, earnings before interest, taxes,
depreciation and amortization) of the Arcus Entities, or Acquiror and its
Subsidiaries, in each case taken as a whole, as the case may be (it being
understood that a reduction in the market value of Acquiror Stock shall not, in
and of itself, constitute or be deemed to reflect an Adverse Change), (c) impair
in any material respect the Company's or Acquiror's, as the case may be, ability
to fulfill its obligations under the terms of this Agreement or any Collateral
Document, or (d) adversely affect in any material respect the aggregate rights
and remedies of the Arcus Entities or Acquiror, as the case may be, under this
Agreement or any Collateral Document.
"Affiliate," "Affiliated" shall mean, with respect to any Person, (a) any
other Person at the time directly or indirectly controlling, controlled by or
under direct or indirect common control with such Person, (b) any other Person
of which such Person at the time owns, or has the right to acquire, directly or
indirectly, ten percent (10%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, ten percent (10%) or more of any class
of the capital stock or beneficial interest of such Person, (d) any executive
officer or director of such Person, (e) with respect to any partnership, joint
venture or similar Entity, any general partner thereof, and (f) when used with
respect to an individual, shall include any member of such individual's
immediate family or a family trust.
"Affiliate Agreement" shall have the meaning given to it in Section 5.3.
"Aggregate Consideration Amount" shall have the meaning given to it in
Section 2.6.
"Aggregate Spread Value" shall mean the product of (i) the amount of the
difference between the closing price per share of Acquiror Stock on the Nasdaq
National Market System (as provided by the Nasdaq National Market System or, if
unavailable from such source, then as reported in the Wall Street Journal) for
the date of termination of employment of the applicable employee (or, if such
date is not a trading day, then for the trading day immediately preceding such
date of termination) and the exercise price of each Exchange Option immediately
after the Effective Time, as it may be adjusted for stock splits, stock
dividends or similar events and (ii) the number of shares of Acquiror Stock
issuable upon exercise of such Exchange Option.
"Agreement" shall mean this Agreement as originally in effect, including
unless the context otherwise specifically requires, all schedules and exhibits
hereto, as the same may from time to time be supplemented, amended, modified or
restated in the manner herein or therein provided.
"Applicable Law" shall mean any Law of any Authority, whether domestic or
foreign, including without limitation the DGCL and the NRS, all federal and
state securities laws, the Code, ERISA and Environmental Laws, to or by which a
Person or it or any of its business or operations is subject or any of its
property or assets is bound.
"Arcus Entities" means, collectively, the Company, UAC, ATSI and their
respective Subsidiaries.
"Arcus Parties" shall have the meaning given to it in the Preamble.
"Arcus Parties' knowledge" (including the term "to the knowledge of the
Arcus Parties") means the knowledge, information or belief of any director or
executive officer of the Arcus Parties; and, solely in the case of Messrs.
Clarke H. Bailey, Richard A. Drutman, Frank G. Hayes, Julien H. Meyer III,
Thomas H. Seefurth, and G. Theodore Wolf II, that such director or executive
officer, after reasonable investigation (which shall include, without
limitation, interrogation of James Giess, George Groff, Thomas Hammer, James
Leffel, Kathleen Leffel-Perkins and Donald Muskopf but, due to the Parties'
desire and need for secrecy, shall not include interrogation of any other
employee, including, without limitation, any branch manager), shall have reason
to believe and shall believe that the subject representation or warranty is true
and accurate as stated.
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"Arcus Special Meetings" shall have the meaning given to it in Section
1.2(a).
"ATSI" shall have the meaning given to it in the Preamble.
"ATSI Common Stock" shall mean the common stock, par value $.01 per share,
of ATSI.
"ATSI Merger" shall have the meaning given to it in the Preamble.
"ATSI Option Plan" shall have meaning given to it in Section 3.13(c).
"ATSI Plan of Merger" shall have the meaning given to it in the Preamble.
"Authority" shall mean any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or
quasi-governmental agency, authority, board, body, branch, bureau, central bank
or comparable agency or Entity, commission, court, department, instrumentality,
or other political unit or subdivision or other Entity of any of the foregoing,
whether domestic or foreign.
"Balance Sheet Date" means, with respect to the Arcus Entities other than
the Company and UAC, June 30, 1997 and, with respect to the Company and UAC,
December 31, 1996.
"Benefit Arrangement" shall mean any material benefit arrangement that is
not a Plan, including (i) any employment or consulting agreement, (ii) any
arrangement providing for insurance coverage or workers' compensation benefits,
(iii) any incentive bonus or deferred bonus arrangement, (iv) any arrangement
providing termination allowance, severance pay, salary continuation for
disability, or other leave of absence, supplemental unemployment benefits,
lay-off, reduction in force or similar benefits, (v) any stock option or equity
compensation plan, (vi) any deferred compensation plan, (vii) any compensation
policy and practice, (viii) any educational assistance arrangements or policies
and (ix) any change of control arrangements or policies.
"Cash Merger Consideration" shall have the meaning given to it in Section
2.1(a).
"Cause" shall mean if (i) the Person has committed a willful act, such as
fraud, conversion, embezzlement, falsifying records or reports, or a similar act
against Acquiror or any of its Subsidiaries, intending to enrich himself at the
expense of Acquiror or any of its Subsidiaries, (ii) the Person has been guilty
of willful misconduct or gross negligence in carrying out his duties, or (iii)
the Person has been convicted of, or entered a plea of guilty to, a felony crime
involving moral turpitude.
"Certificate" shall have the meaning given to it in Section 2.1(b).
"Change in Control" shall mean (i) the acquisition of, or the commencement
of a tender offer which is being made pursuant to a binding agreement to which
Acquiror is a party or which otherwise has been approved by Acquiror's Board of
Directors for, beneficial ownership of 50% or more of the voting capital stock
of a Person, directly or indirectly, by a Person or group of Persons under
common control (other than Vincent J. Ryan, Schooner Capital Corporation, C.
Richard Reese, Eugene B. Doggett, B. Thomas Golisano and/or any of their
respective Affiliates); (ii) a change in the membership of the Board of
Directors of a Person such that, following such change, at least 50% of the
members were not members on the date of this Agreement; or (iii) approval by the
stockholders of a Person of a sale of the Person's businesses and/or assets
which represent all or substantially all of the Person's total assets.
"Claim Notice" shall have the meaning given to it in Section 8.4.
"Claims" shall mean any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and nature
relating thereto, and all fees, costs, expenses and disbursements (including
without limitation reasonable attorneys' and other legal fees, costs and
expenses) relating to any of the foregoing.
"Closing" shall have the meaning given to it in Section 1.3.
"Closing Date" shall have the meaning given to it in Section 1.3.
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"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, as set forth in Section 4980B of the Code and Part 6 of Title
I of ERISA.
"Code" shall have the meaning given to it in the Preamble.
"Collateral Document" shall mean any agreement, instrument, certificate,
opinion, memorandum, schedule or other document delivered by a Party or a
Stockholder pursuant to this Agreement or in connection with the Merger and the
Transactions.
"Combined Escrow Holdback Amount" shall have the meaning given to it in
Section 8.6(c).
"Comfort Letter" shall mean an accountant's comfort letter to be delivered
to one or more underwriters or initial purchasers (in the case of a financing
under Rule 144A of the Securities Act) of Acquiror's securities; provided that
such underwriter's or initial purchaser's request conforms with AICPA Statement
on Auditing Standards 72, as amended, and is comparable to the information
requested by similarly situated companies in comparable financing transactions.
"Common Cash Amount" shall mean the product of (i) the Fully Diluted Common
Equity Value and (ii) 58%; provided, however, that such amount shall be reduced,
if necessary, consistent with Section 2.6 hereof.
"Common Cash Conversion Number" shall mean the quotient obtained by
dividing (i) the Common Cash Amount by (ii) the number of Fully Diluted Common
Shares.
"Common Equity Value" shall mean an amount equal to the remainder of (A)
the Total Equity Consideration less (B) the Preferred Equity Value.
"Common Stock Amount" shall mean the quotient obtained by dividing (a) the
product of (i) the Fully Diluted Common Equity Value and (ii) 42% by (b) the
Determination Price; provided, however, that the number of shares of Acquiror
Stock resulting from such formula shall be increased, if necessary, consistent
with Section 2.6 hereof.
"Common Stock Conversion Number" shall mean the quotient obtained by
dividing (i) the Common Stock Amount by (ii) the number of Fully Diluted Common
Shares.
"Common Stock Escrow Indemnity Contribution" shall mean Eight Million
Dollars ($8,000,000) times a fraction, the numerator of which shall equal the
aggregate Exchange Common Consideration and the denominator of which shall equal
the Total Primary Equity Base.
"Common Stock Expense Fund Contribution" shall mean an amount equal to the
Estimated Expense Amount times a fraction, the numerator of which shall equal
the aggregate Exchange Common Consideration and the denominator of which shall
equal the Total Primary Equity Base.
"Company" shall have the meaning given to it in the Preamble.
"Company Indebtedness Calculation" shall have the meaning given to it in
Section 8.6(a).
"Company Preferred" shall have the meaning given to it in Section 2.1(b).
"Company Stock" shall have the meaning given to it in Section 2.1(a).
"Confidentiality Agreement" shall have the meaning given to it in Section
5.1(a).
"Contract," "Contractual Obligation" shall mean any term, condition,
provision, representation, warranty, agreement, covenant, undertaking,
commitment, indemnity or other obligation which is outstanding or existing under
any instrument, contract, lease or other contractual undertaking to which the
obligee is a party or by which it or any of its business is subject or property
or assets is bound.
"control" (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement (including credit arrangement) or understanding, or as trustee or
executor or otherwise.
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"Convertible Securities" shall mean any evidences of indebtedness, shares
of capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for shares of capital stock of an
Arcus Entity, whether or not the right to convert or exchange thereunder is
immediately exercisable or is conditioned upon the passage of time, the
occurrence or non-occurrence or existence or non-existence of some other Event,
or both.
"Court" shall have the meaning given to it in Section 3.26.
"Credit Facility" shall mean the Credit Facility, dated as of July 31, 1995
among ATSI, Arcus, Inc., the various financial institutions from time to time
party thereto, and Banque Paribas, as Agent, as amended from time to time in
accordance with the terms thereof.
"Deemed Value" shall mean, with respect to cash and/or shares of Acquiror
Stock delivered pursuant to Section 2.1(f), the sum of (i) any cash so delivered
and (ii) the value of any shares so delivered, assuming such shares were valued
at the closing price per share of Acquiror Stock on the Nasdaq National Market
System (as provided by the Nasdaq National Market System or, if unavailable from
such source, then as reported in the Wall Street Journal) for the trading day
immediately prior to the date such Acquiror Stock is delivered to the
Stockholder Representative pursuant to Section 2.1(f).
"Designated Exercise Date" shall mean the dates (or periods, as applicable)
designated by Acquiror for the exercise of the Minimum Exercise Number in a
written notice delivered by Acquiror to the Arcus Parties not less than thirty
(30) days prior to the Closing Date.
"Determination Price" shall mean the average closing price per share of
Acquiror Stock, based on each day's closing price as provided by the Nasdaq
National Market System or, if unavailable from such source, then as reported in
the Wall Street Journal, for the period of twenty (20) trading days ending on
the third trading day prior to (and not including) the Closing Date; provided,
however, that if the average closing price per share of Acquiror Stock so
calculated is less than $29.00, then the Determination Price shall be $29.00;
and provided, further, that if the average closing price per share of Acquiror
Stock so calculated is greater than $36.00, then the Determination Price shall
be $36.00.
"DGCL" shall have the meaning given to it in the Preamble.
"Disclosure Schedule" shall mean the disclosure schedule dated as of the
date of this Agreement delivered by the Arcus Parties to Acquiror.
"Dispute Notice" shall have the meaning given to it in Section 8.6(a).
"Dissenting Shares" shall have the meaning given to it in Section 2.5(a).
"Distribution" shall mean, with respect to the Arcus Entities: (a) the
declaration or payment of any dividend (except dividends payable in capital
stock of an Arcus Entity) on or in respect of any shares of any class of capital
stock of an Arcus Entity owned by a Person other than an Arcus Entity, (b) the
purchase, redemption or other retirement of any shares of any class of capital
stock of an Arcus Entity, owned by a Person other than an Arcus Entity, and (c)
any other distribution on or in respect of any shares of any class of capital
stock of an Arcus Entity, owned by a Person other than an Arcus Entity.
"Effective Time" shall have the meaning given to it in Section 1.4.
"Employment Arrangement" shall mean, with respect to any Person, any
employment, consulting, retainer or severance contract, agreement, plan,
arrangement or policy (exclusive of any which is terminable within thirty (30)
days without liability, penalty or payment of any kind by such Person or any
Affiliate (other than any such liability, penalty or payment of general
application to all the Arcus Entities' employees)), providing for severance,
termination payments, insurance coverage (including any self-insured
arrangements), workers compensation, disability benefits, life, health, medical,
dental or hospitalization benefits, supplemental unemployment benefits, vacation
or sick leave benefits, pension or retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock purchase or
appreciation rights or other forms of incentive compensation or post-retirement
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insurance, compensation or benefits, or any collective bargaining or other labor
agreement, whether or not any of the foregoing is subject to the provisions of
ERISA.
"Enforceability Exceptions" shall have the meaning set forth in Section
3.1(c).
"Entity" shall mean any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
"Environmental Law" shall mean any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment or occupational health and safety, including without limitation Laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials or other pollutants, contaminants, chemicals, noises, toxic or
hazardous substances, materials or wastes, as matter, into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage, disposal,
cleanup, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances, materials or wastes.
"Environmental Permit" shall mean any Governmental Authorization required
by or pursuant to any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
"ERISA Affiliate" shall mean any Person that is or has ever been treated as
a single employer with the Arcus Entities under Section 414(b), (c), (m) or (o)
of the Code or Section 4001(b)(1) of ERISA.
"Escrow Agent" shall have the meaning given to it in Section 8.2(b).
"Escrow Agreement" shall have the meaning given to it in Section 8.3(b).
"Escrow Holdback Amount" shall mean an amount equal to the Combined Escrow
Holdback Amount times a fraction, the numerator of which shall equal the
aggregate Exchange Common Consideration and the denominator of which shall equal
the Total Primary Equity Base.
"Escrow Indemnity Funds" shall have the meaning given to it in Section
8.2(a).
"Escrow Indemnity Period" shall have the meaning given to it in Section
8.1.
"Estimated Expense Amount" shall mean a cash amount equal to $750,000.
"Event" shall mean the occurrence or existence of any act, action,
activity, circumstance, condition, event, fact, failure to act, omission,
incident or practice, or any set or combination of any of the foregoing.
"Exchange Act" shall mean the Securities Exchange Act of 1934, and the
rules and regulations of the SEC thereunder, all as from time to time in effect,
or any successor law, rules or regulations, and any reference to any statutory
or regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
"Exchange Agent" shall have the meaning given to it in Section 2.2(a).
"Exchange Common Consideration" shall have the meaning given to it in
Section 2.1(a).
"Exchange Fund" shall have the meaning given to it in Section 2.2(a).
"Exchange Option" shall have the meaning given to it in Section 2.4.
"Exchange Preferred Consideration" shall have the meaning given to it in
Section 2.1(b).
"Expense Fund" shall mean that certain account established at or prior to
the Effective Time with a bank or other financial institution reasonably
acceptable to the Parties hereto, which shall be under the dominion and control
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of the Stockholder Representative for the benefit of the former holders of Share
Certificates and former holders of Warrants and into which shall be deposited,
in addition to certain other monies, the Estimated Expense Amount.
"Expenses" shall have the meaning set forth in Section 7.5(a).
"Final Determination Date" shall have the meaning given to it in Section
8.6(a).
"Final Indebtedness Amount" shall have the meaning given to it in Section
8.6(a).
"Financial Statements" shall have the meaning given to it in Section
3.2(a).
"Fully Diluted Common Equity Value" shall mean the sum of (i) the Common
Equity Value, (ii) the aggregate exercise price of all Option Securities
(whether vested or unvested) as of the Effective Time, and (iii) the aggregate
exercise price of all Warrants which are outstanding as of the Effective Time
(without giving effect to Section 2.1(c)).
"Fully Diluted Common Shares" shall mean the sum of (i) the number of
shares of Company Stock issued and outstanding immediately prior to the
Effective Time after giving effect to the Reorganization and including all
shares of Company Stock for which shares of UAC Common Stock or ATSI Common
Stock are exchanged pursuant thereto (except Shares to be canceled pursuant to
Section 2.1(c)), (ii) the number of Shares of Company Stock which would have
been issued as a result of the Reorganization had holders of UAC Common Stock or
ATSI Common Stock not exercised dissenters or appraisal rights in connection
with the UAC Merger or ATSI Merger, as the case may be, (iii) the number of
Shares of Company Stock which may be issued pursuant to Option Securities
(whether vested or unvested) as of the Effective Time, and (iv) the maximum
number of Shares of Company Stock which may be issued pursuant to the Warrants
which are outstanding as of the Effective Time (without giving effect to Section
2.1(c)).
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States of America applied on a basis consistent
with past practice.
"Governmental Authorizations" shall mean all approvals, concessions,
consents, franchises, licenses, permits, plans, registrations and other
authorizations of all Authorities.
"Governmental Filings" shall mean all filings, including franchise and
similar Tax filings, and the payment of all fees, assessments, interest and
penalties associated with such filings, with all Authorities.
"Guaranty" or "Guaranteed" shall mean any agreement, undertaking or
arrangement by which any of the Arcus Entities guarantees, endorses or otherwise
becomes or is liable, directly or indirectly, contingently or otherwise, upon
any indebtedness of any other Person including without limitation the payment of
amounts drawn down by beneficiaries of letters of credit (other than by
endorsements of negotiable instruments for deposit or collection in the ordinary
course of business). The amount of the obligor's obligation under any Guaranty
shall be deemed to be the outstanding amount (or maximum permitted amount, if
larger) of the indebtedness directly or indirectly guaranteed thereby (subject
to any limitation set forth therein).
"Hazardous Materials" shall mean any substance (in whatever state of
matter): (a) the presence of which requires investigation or remediation under
any Environmental Law; (b) that is defined as a "hazardous waste","hazardous
material" or "hazardous substance" under any Environmental Law; (c) that is
toxic, explosive, corrosive, infectious, radioactive, carcinogenic, mutagenic or
otherwise hazardous and is regulated by any Authority; or (d) that contains or
consists of petroleum or petroleum products, polychlorinated biphenyls,
asbestos, or urea formaldehyde foam insulation.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvement Act of
1976, and the rules and regulations thereunder, all as from time to time in
effect, or any successor law, rules or regulations, and any reference to any
statutory or regulatory provision shall be deemed to be a reference to any
successor statutory or regulatory provision.
"Indebtedness" shall mean, with respect to the Arcus Entities, the sum of
(i) all obligations, contingent or otherwise, in respect of borrowed money,
notes or similar interests and all guarantees, endorsements and other contingent
obligations in respect of Indebtedness of others (it being understood that
obligations of the Arcus Entities
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in respect of trade payables incurred in the ordinary course of business shall
not constitute Indebtedness) and (ii) any Net Working Capital Deficit.
"Indemnified Parties" shall have the meaning given to it in Section 5.5.
"Initial Distribution Date" shall have the meaning given to it in Section
8.3(c).
"Intangible Assets" shall mean all assets and property lacking physical
properties the evidence of ownership of which must customarily be maintained by
independent registration, documentation, certification, recordation or other
means.
"Law" shall mean (a) any administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, guideline, law, injunction, interpretation, judgment, order, ordinance,
policy statement, proclamation, promulgation, regulation, requirement, rule,
rule of law, rule of public policy, settlement agreement, statute, or writ of
any Governmental Authority, domestic or foreign; or (b) the common law, or other
legal precedent; including, in each such case or instance, any interpretation or
directive, whether or not having the force of law including, in all cases,
without limitation any particular section, part or provision thereof.
"Lease" shall mean any lease of property, whether real, personal or mixed,
and all amendments thereto.
"Legal Action" shall mean any litigation or legal or other actions,
arbitrations, counterclaims, proceedings, requests for material information by
or pursuant to the order of any Authority, or suits, at law or in arbitration,
equity or admiralty commenced by any Person, whether or not purported to be
brought on behalf of a party hereto affecting such party or any of such party's
business, property or assets.
"Lien" shall mean any of the following: mortgage; lien (statutory or
other); preference, priority or other security agreement, arrangement or
interest; hypothecation, pledge or other deposit arrangement; assignment;
charge; levy; executory seizure; attachment; garnishment; encumbrance (including
any easement, exception, variance, reservation or limitation, right of way,
zoning restriction, building or use restriction, and the like, which would
adversely affect any party's ability to use the affected property as it is
currently used by an Arcus Entity); conditional sale, title retention or other
similar agreement, arrangement, device or restriction; preemptive or similar
right; any financing lease involving substantially the same economic effect as
any of the foregoing; the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction; restriction on sale,
transfer, assignment, disposition or other alienation; or any option, equity,
claim or right of or obligation to, any other Person, of whatever kind and
character.
"Loss and Expense" shall have the meaning given to it in Section 8.2(a).
"Material" or "materiality" for the purposes of this Agreement, shall,
unless specifically stated to the contrary, be determined without regard to the
fact that various provisions of this Agreement set forth specific dollar
amounts.
"Material Agreement" or "Material Commitment" shall mean, with respect to
the Arcus Entities or Acquiror, as the case may be, any Contractual Obligation
(a) which involves the purchase, sale or lease of goods or materials or
performance of services aggregating more than $100,000 (other than those
relating to billable consulting staff), or (b) which involves indebtedness for
money borrowed in excess of $100,000 or (c) which is or otherwise constitutes a
written agency, dealer, license, distributorship, sales representative or
similar written agreement involving more than $100,000.
"Merger" shall have the meaning given to it in the Preamble.
"Merger Consideration" shall mean the Exchange Common Consideration and
the Exchange Preferred Consideration.
"Minimum Exercise Number" shall mean the aggregate number of Option
Securities vested as of the Effective Time and Option Securities that vest on or
before June 30, 1998, or such other number as the Parties shall reasonably agree
not less than thirty (30) days prior to the Closing Date.
"Multiemployer Plan" shall mean a "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA.
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"Net Indebtedness" shall mean with respect to Arcus Entities, the
difference of (A) the sum of (without duplication) (a) all Indebtedness, (b) all
obligations, contingent or otherwise, (i) under leases which are capitalized on
the consolidated balance sheet of the Arcus Entities, (ii) in respect of the
deferred purchase price of property (excluding any amounts held in or payable
from that certain escrow account established in connection with the acquisition
of Wolf Advisory International, Inc. and Wolf Advisory International, Ltd. and
certain assets of Computer Plus Temporaries, Inc. on or about June 19, 1996) and
(iii) in respect of any deferred compensation plan or arrangement (other than
any 401(K) plan) and all guarantees, endorsements and other contingent
obligations in respect of obligations of the type referred in this clause (b) of
others, (c) the aggregate full amount of all installment sales amounts,
contingent payments or "earnouts" that an Arcus Entity may be required to pay
under any agreements pursuant to which such Arcus Entity acquired the
outstanding capital stock or assets of another Person (other than (A) contingent
payments in an amount not to exceed $750,000 payable in respect of the PSI
Acquisition and (B) contingent payments payable by Arcus Data Security, Inc.
pursuant to Section 4.01(b) and Section 4.01(c) of that certain Purchase
Agreement dated as of October 31, 1996 among Towler Companies, Inc. d/b/a/ The
Rock Island Group, William A. Towler and Arcus Data Security, Inc.) and (d)
accrued interest to the date of the Merger in respect of Indebtedness or the
obligations of the type referred to in clause (b) of this definition and all
fees, expenses and other amounts (including so-called "breakage" amounts) due in
connection with the prepayment in full of such Indebtedness which will be
prepaid at Closing; minus (B) (i) cash and cash equivalents, (ii) the lesser of
$150,000 or the principal amount outstanding as of the Effective Time of the
promissory note payable to an Arcus Entity by TPI Acquisition Corp., (iii) the
principal amount outstanding in an amount not to exceed $26,000 of a promissory
note payable to an Arcus Entity by an employee), (iv) obligations under
performance bonds and reimbursement obligations under letters of credit and (v)
any amounts otherwise included within clauses (b) and (c) above to the extent
that such obligations have been fully funded or otherwise cash collateralized,
so long as the cash which has funded or collateralized such obligation is not
considered a reduction in calculating Net Indebtedness.
"Net Preferred Shares" shall have the meaning given to it in Section
2.2(a).
"Net Shares" shall have the meaning given to it in Section 2.2(a).
"Net Working Capital" shall mean (x) the sum of accounts receivable (less
allowance for doubtful accounts), inventory and prepaid expenses and other
current assets (excluding cash, notes receivable and deferred income taxes) of
ATSI, in each case as recorded in accordance with GAAP consistently applied,
minus (y) the sum of deferred revenue, state income taxes payable, accounts
payable, accrued payroll and other accrued liabilities (including reserves but
excluding amounts due to parent, deferred compensation and liabilities related
to debt, including, without limitation, accrued interest) of ATSI, in each case
as recorded in accordance with GAAP consistently applied; provided, however,
that (a) any effect on Net Working Capital resulting from the exercise of any
Option Security between the Balance Sheet Date and the Effective Time shall be
excluded from the calculation thereof and (b) Expenses of the Arcus Parties in
respect of the Transactions shall not be included in calculating Net Working
Capital.
"Net Working Capital Deficit" shall mean, as of the Effective Time, the
excess, if any, of (x) Net Working Capital as derived from the ATSI Financial
Statements at June 30, 1997 (which amount equals $4,986,429), over (y) Net
Working Capital immediately prior to the ATSI Merger.
"Net Working Capital Surplus" shall mean, as of the Effective Time, the
excess, if any, of (x) Net Working Capital immediately prior to the ATSI Merger
over (y) Net Working Capital as derived from the ATSI Financial Statements at
June 30, 1997 (which amount equals $4,986,429).
"Non-Competition Agreements" shall mean the several agreements between an
Arcus Entity or Acquiror, on the one hand, and another Person, on the other
hand, in the form attached as Exhibit 5.15(a) or Exhibit 5.15(b), as applicable.
"NRS" shall have the meaning given to it in the Preamble.
"Option Securities" shall mean all rights, options and warrants, and calls
or commitments evidencing the right, to subscribe for, purchase or otherwise
acquire shares of an Arcus Entity's capital stock or Convertible Securities,
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whether or not the right to subscribe for, purchase or otherwise acquire is
immediately exercisable or is conditioned upon the passage of time, the
occurrence or non-occurrence or the existence or non-existence of some other
Event or both.
"Organic Documents" shall mean the Arcus Parties' or Acquiror's, as the
case may be, Articles of Incorporation, Certificate of Incorporation, its
by-laws and all stockholder agreements, voting trusts and similar arrangements
applicable to any of its capital stock, each as in effect from time to time.
"Other Transaction" shall mean a transaction or series of related
transactions (other than the Merger and the Reorganization) resulting in (a) any
change in control of an Arcus Entity, (b) any merger or consolidation of an
Arcus Entity, regardless of whether such Arcus Entity is the surviving Entity,
(c) any tender offer or exchange offer for, or any acquisition of, any
securities of any Arcus Entity (other than the issuance of shares in accordance
with the terms of Option Securities outstanding on the date hereof), (d) any
sale or other disposition of assets of an Arcus Entity not otherwise permitted
under Section 3.16 hereof, or (e) so long as this Agreement remains in effect,
any issue or sale, or any agreement to issue or sell, any capital stock,
Convertible Securities or Option Securities of any Arcus Entity (other than (i)
pursuant to the Transactions and (ii) the issuance of shares in accordance with
the terms of Option Securities outstanding on the date hereof).
"Party" shall mean a signatory to this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean any natural individual or any Entity.
"Plan" shall mean, with respect to the Arcus Entities and at a particular
time, any employee benefit plan which is covered by ERISA and in respect of
which the Arcus Entities, or,in the case of any such plan subject to Title IV of
ERISA, an ERISA Affiliate 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, other than a Multiemployer Plan.
"Plan of Reorganization" shall have the meaning given to it in Section
3.26.
"Preferred Cash Amount" shall mean the product of (i) the Preferred Equity
Value and (ii) 5%; provided, however, that such amount shall be reduced, if
necessary, consistent with Section 2.6 hereof.
"Preferred Cash Conversion Number" shall mean the quotient obtained by
dividing (i) the Preferred Cash Amount by (ii) the sum of (a) the number of
Preferred Shares issued and outstanding immediately prior to the Effective Time
(except Preferred Shares to be cancelled pursuant to Section 2.1(c)) and (b) the
number of Preferred Shares which would have been issued as a result of the UAC
Merger had holders of UAC Preferred Stock not exercised appraisal rights.
"Preferred Certificate" shall have the meaning given to it in Section
2.1(b).
"Preferred Equity Value" shall mean the aggregate liquidation preference of
the Company Preferred, calculated in accordance with the Amended and Restated
Certificate of Incorporation of the Company to be filed with the Secretary of
State of the State of Delaware immediately prior to the Effective Time in
connection with the UAC Merger (including Preferred Shares which would have been
issued as a result of the UAC Merger had holders of UAC Preferred Stock not
exercised appraisal rights).
"Preferred Exchange Fund" shall have the meaning given to it in Section
2.2(a).
"Preferred Shares" shall have the meaning given to it in Section 2.1(b).
"Preferred Stock Amount" shall mean the quotient obtained by dividing (a)
the product of the Preferred Equity Value and 95% by (b) the Determination
Price; provided, however, that such amount shall be increased, if necessary,
consistent with Section 2.6 hereof.
"Preferred Stock Conversion Number" shall mean the quotient obtained by
dividing (i) the Preferred Stock Amount by (ii) the sum of (a) the number of
shares of Company Preferred issued and outstanding immediately
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prior to the Effective Time (except Preferred Shares to be cancelled pursuant to
Section 2.1(c)) and (b) the number of Preferred Shares which would have been
issued as a result of the UAC Merger had holders of UAC Preferred Stock not
exercised appraisal rights.
"Preferred Stock Merger Consideration" shall have the meaning given to it
in Section 2.1(b).
"Principal Stockholders" shall mean GKH Investments, L.P., GKH Partners
L.P., GKH Partners L.P. as nominee of GKH Private Limited, Hudson River Capital
LLC and Clarke H. Bailey.
"Private Authorizations" shall mean all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than Authorities) including without limitation those with respect to patents,
trademarks, service marks, trade names, copyrights, computer software programs,
technology and know-how, but not including those with respect to Leases and
other general contract rights.
"Prospectus" shall mean the form of prospectus included in the
Registration Statement.
"PSI Acquisition" shall mean the acquisition by Arcus Staffing Resources,
Inc. of all of the assets of Image Solutions, Inc. (d/b/a Professional
Solutions, Inc.) pursuant to that certain Asset Purchase Agreement dated as of
August 20, 1997 by and among Image Solutions, Inc., Pam Kunhart, John Kunhart,
Arcus Technology Services, Inc. and Arcus Staffing Resources, Inc., and all
related transactions.
"Qualified Plan" shall have the meaning given to it in Section 5.8(b).
"Registered Stock" shall mean that portion of the Stock Merger
Consideration and Preferred Stock Merger Consideration consisting of shares of
Acquiror Stock to be registered pursuant to the Securities Act.
"Registration Statement" shall mean the registration statement (including
the Prospectus, exhibits, financial statements and schedules included therein),
and all amendments thereof (including post-effective amendments) and supplements
to the Prospectus which are a part thereof, filed under the Securities Act
registering the Registered Stock.
"Reorganization" shall have the meaning given to it in the Preamble.
"Representatives" of a Party shall mean the officers, directors, employees,
accountants, counsel, financial advisors, consultants and other representatives
of such Party.
"Required Disclosure" shall have the meaning given to it in Section 5.7.
"SEC" shall mean the Securities and Exchange Commission of the United
States or any successor Authority.
"Securities Act" shall mean the Securities Act of 1933, and the rules and
regulations of the SEC thereunder, all as from time to time in effect, or any
successor law, rule or regulation, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
"Share Certificate" shall have the meaning given to it in Section 2.1(a).
"Share Exchange Fund" shall have the meaning given to it in Section
2.2(a).
"Share Price" equals the quotient of the Fully Diluted Common Equity Value
divided by the Fully Diluted Common Shares.
"Shares" shall have the meaning given to it in Section 2.1(a).
"Stockholders" shall mean all Persons entitled to receive Merger
Consideration (or who would be entitled thereto but for their dissent from the
Merger or the Reorganization) pursuant to Sections 2.1(a) and 2.1(b).
"Stockholders' Agreement" shall mean that certain Stockholders' Agreement
of even date herewith among the Principal Stockholders and Acquiror, as the same
may from time to time be supplemented amended, modified or restated in the
manner therein provided.
"Stock Merger Consideration" shall have the meaning given to it in Section
2.1(a).
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"Subsidiary" shall mean, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
"Surviving Corporation" shall have the meaning given to it in Section 1.1.
"Tax" (and "Taxable", which shall mean subject to Tax), shall mean (a) all
taxes (domestic or foreign), including without limitation any income (net, gross
or other, including recapture of any tax items such as investment tax credits),
alternative or add-on minimum tax, gross income, gross receipts, gains, sales,
use, leasing, lease, user, ad valorem, transfer, recording, franchise, profits,
property (real or personal, tangible or intangible), fuel, license, withholding
on amounts paid to or by the Arcus Entities or Acquiror, as the case may be,
payroll, employment unemployment, social security, excise, severance, stamp,
occupation, premium, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, levies, assessments, charges, penalties, addition to
tax or additional amount imposed by any Taxing Authority, (b) any joint or
several liability of any Arcus Entity or Acquiror, as the case may be with any
other Person for the payment of any amounts of the type described in (a), and
(c) any liability of any Arcus Entity or Acquiror, as the case may be for the
payment of any amounts of the type described in (a) as a result of any express
or implied obligation to indemnify any other Person.
"Tax Return" or "Returns" shall mean all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
"Taxing Authority" shall mean any Authority responsible for the imposition
of any Tax.
"Termination" shall have the meaning given to it in Section 2.1(f).
"Termination Date" shall mean March 31, 1998 or such other date as the
Parties may, from time to time, mutually agree.
"Termination Fee" shall have the meaning given to it in Section 7.5(b).
"Threshold Percentage" shall have the meaning given to it in Section 2.6.
"Total Common Equity Base" shall have the meaning given to it in Section
2.1(f).
"Total Consideration" shall mean One Hundred Sixty Million Dollars
($160,000,000).
"Total Equity Consideration" shall mean the difference between the Total
Consideration and Net Indebtedness as of the Effective Time.
"Total Primary Equity Base" shall mean the sum of (1) the value (calculated
based on the Determination Price) of the aggregate Exchange Common
Consideration, (2) the aggregate Warrant Purchase Price and (3) the value
(calculated based on the Determination Price) of the aggregate Exchange
Preferred Consideration.
"Transactions" shall mean the transactions contemplated by this Agreement
or the Merger or by any Collateral Document executed or required to be executed
in connection herewith or therewith including, without limitation, the
transactions comprising the Reorganization.
"Transmittal Documents" shall have the meaning given to it in Section
2.2(b).
"UAC" shall have the meaning given to it in the Preamble.
"UAC Common Stock" shall mean the common stock, par value $.01 per share,
of UAC.
"UAC Merger" shall have the meaning given to it in the Preamble.
"UAC Option Plan" shall have the meaning given to it in Section 3.13(b).
"UAC Plan of Merger" shall have the meaning given to it in the Preamble.
"UAC Preferred Stock" shall mean the Series A preferred stock, par value
$.01 per share, of UAC.
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"Warrant Escrow Holdback Amount" shall have the meaning given to it in the
Warrant Purchase Agreement.
"Warrant Escrow Indemnity Contribution" shall have the meaning given to it
in the Warrant Purchase Agreement.
"Warrant Purchase Agreement" shall mean a Warrant Purchase Agreement
between Acquiror and one or more holders of the Warrants, substantially in the
form of Exhibit 6.1(g) hereto, as such agreement may be amended, supplemented or
otherwise modified in accordance with the terms thereof and hereof.
"Warrant Purchase Price" shall have the meaning given to it in Section
6.1(g).
"Warrants" shall have the meaning given to it in Section 2.1(c).
"ZDC Warrant" shall mean the warrant to purchase 10,000 shares of ATSI
Common Stock held by Zurich Depository Corporation or its assignee.
IN WITNESS WHEREOF, Acquiror, the Company, UAC and ATSI have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
IRON MOUNTAIN INCORPORATED
By: /s/ C. Richard Reese
--------------------------------------
Name: C. Richard Reese
Title: Chairman and Chief Executive
Officer
ARCUS GROUP, INC.
By: /s/ Clarke H. Bailey
--------------------------------------
Name: Clarke H. Bailey
Title: Chairman
UNITED ACQUISITION COMPANY
By: /s/ Clarke H. Bailey
--------------------------------------
Name: Clarke H. Bailey
Title: Chairman
ARCUS TECHNOLOGY SERVICES, INC.
By: /s/ Clarke H. Bailey
--------------------------------------
Name: Clarke H. Bailey
Title: Chairman
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Schedule A
AGREEMENT AND PLAN OF MERGER
OF UAC AND AGI
THIS AGREEMENT AND PLAN OF MERGER (this "UAC Merger Agreement") is made and
entered into as of ___ day of ________, 1997, by and between United Acquisition
Company, a Nevada corporation whose address is 232 Court Street, Reno, Nevada
89501 ("UAC"), and Arcus Group, Inc., a Delaware corporation whose address is
901 Main Street, Suite 6100, Dallas, Texas 75202 ("AGI") (UAC and AGI are
individually referred to as a "Constituent Corporation" and together referred to
as "Constituent Corporations"). All capitalized terms used herein shall have the
meanings ascribed to them in the IM Merger Agreement, as hereafter defined,
unless otherwise specified herein.
W I T N E S S E T H:
WHEREAS, UAC is a corporation duly organized and existing under the laws of
the State of Nevada;
WHEREAS, AGI is a corporation duly organized and existing under the laws
of the State of Delaware;
WHEREAS, as of the date of this UAC Merger Agreement (except as specified
below), UAC has the authority to issue (i) Three Million (3,000,000) shares of
Common Stock, par value $0.01 per share (the "UAC Common"), One Million One
(1,000,001) shares of which are issued and outstanding; (ii) Two Hundred
Thousand (200,000) shares of undesignated Preferred Stock, no shares of which
are issued and outstanding, and (iii) Fifty Thousand (50,000) shares of Series A
Preferred Stock, par value $0.01 per share (the "UAC Preferred"),
____________________ shares of which are issued and outstanding after giving
effect to the payment of payment-in-kind dividends through _____________, 1997,
as if such payments had occurred;
WHEREAS, on the date of this UAC Merger Agreement (before giving effect to
the amendments to the Certificate of Incorporation of AGI, discussed below), AGI
has the authority to issue Eleven Million, Six Hundred Sixty-One Thousand, Two
Hundred Ninety (11,661,290) shares of Common Stock, par value $0.0001 per share
(the "AGI Common"), Eleven Million, Four Hundred Twenty-Six Thousand, Five
Hundred Twenty-Five (11,426,525) shares of which are issued and outstanding;
WHEREAS, following the merger of UAC into AGI, AGI will merge with and into
Iron Mountain Incorporated, a Delaware corporation ("IM") pursuant to the
Agreement and Plan of Merger (the "IM Merger Agreement") by and among IM, AGI,
UAC and Arcus Technology Services, Inc., dated as of September 26, 1997, a true
and correct copy of which is attached hereto as Appendix A (the "IM Merger");
WHEREAS, the Board of Directors of each Constituent Corporation has
determined that it is advisable and to the advantage of such Constituent
Corporation and its Shareholders that UAC merge with and into AGI, upon the
terms and conditions herein provided; and
WHEREAS, the Board of Directors of each Constituent Corporation has adopted
this UAC Merger Agreement and has directed that this UAC Merger Agreement be
submitted to a vote of such Constituent Corporation's shareholders;
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, UAC and AGI hereby agree to merge as follows:
1. Merger. UAC shall be merged with and into AGI, and AGI shall survive the
merger ("UAC Merger"), effective upon the date when this UAC Merger Agreement is
made effective in accordance with applicable law (the "UAC Effective Time").
2. Directors and Officers and Governing Documents. The directors and
officers of AGI shall be the same at the UAC Effective Time as they are
immediately prior thereto. The Certificate of Incorporation of AGI, as amended
and restated and in effect at the UAC Effective Time, shall continue to be the
certificate of incorporation of AGI as the surviving corporation, as amended in
accordance with Section 3 hereto, until further amended in
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accordance with the provisions thereof and applicable laws. The bylaws of AGI,
as amended and in effect at the UAC Effective Time, shall continue to be the
bylaws of AGI as the surviving corporation without change or amendment until
further amended in accordance with the provisions thereof and applicable laws.
3. Changes in the Certificate of Incorporation To Be Effected By the
Merger. Prior to the UAC Effective Time AGI will amend its Certificate of
Incorporation (i) to create a class of Preferred Shares of which 50,000 shares
shall be authorized for issuance by the Board of Directors with identical
rights, preferences and privileges applicable to the UAC Preferred, after giving
effect to the amendment to the Articles of Incorporation of UAC on the Closing
Date prior to the UAC Effective Time ("UAC Charter Amendments") and (ii) to
increase the number of authorized shares of common stock from 11,661,290 to
100,000,000.
4. Effect of Merger. From and after the UAC Effective Time, AGI as the
surviving corporation shall possess all rights, privileges, powers and
franchises and be subject to all restrictions, disabilities and duties of UAC
and AGI, including without limitation, any duties to stockholders who exercise
appraisal rights in connection with the UAC Merger, and the UAC Merger shall
have all other effects, as provided under Section 259 of the DGCL. Pursuant to
NRS [sec][sec] 92A.250(e) and (f), all ownership rights in UAC shares prior to
the UAC Merger will cease to exist at the UAC Effective Time except as provided
by law.
5. Stock Transfer Books. At the UAC Effective Time, the stock transfer
books of UAC shall be closed, and there shall be no further registrations or
transfers of UAC Common or UAC Preferred thereafter on the records of UAC other
than to AGI.
6. Further Assurances. From time to time, as and when required by AGI or by
its successors and assigns, there shall be executed and delivered on behalf of
UAC such deeds and other instruments, and there shall be taken or caused to be
taken by it such further and other action, as shall be appropriate or necessary
in order to vest, perfect or confirm, of record or otherwise, in AGI the title
to and possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of UAC and otherwise to carry out
the purposes of this UAC Merger Agreement, and the officers and directors of AGI
are fully authorized in the name and on behalf of UAC or otherwise to take any
and all such action and to execute and deliver any and all such deeds and other
instruments.
7. Merger Consideration. At the UAC Effective Time, by virtue of the UAC
Merger and without any action on the part of any shareholder thereof, (i) each
share of AGI Common Stock issued and outstanding immediately prior to the UAC
Effective Time (other than Dissenting Shares) shall continue to remain
outstanding, (ii) except as otherwise set forth in clause (iv) below, each share
of the UAC Common outstanding immediately prior to the UAC Effective Time (other
than Dissenting Shares) shall be changed and converted into that number ("UAC
Common Conversion Number") of fully paid and nonassessable shares of AGI Common
that is equal to the quotient of the UAC Equity Value Per Share, as hereafter
defined, divided by the AGI Equity Value Per Share, as hereafter defined; (iii)
each share of the UAC Preferred outstanding immediately prior thereto, together
with any accrued and unpaid dividends thereon, shall be changed and converted
into one (1) fully paid and nonassessable share of AGI Preferred with the same
rights, preferences and privileges as applicable to the UAC Preferred Stock
after giving effect to the UAC Charter Amendments and the AGI Charter Amendments
with an equal amount of accrued and unpaid dividends thereon and (iv) each share
of the UAC Common outstanding immediately prior to the UAC Effective Time and
owned of record by AGI shall be cancelled.
7.1 UAC Equity Value Per Share. The UAC Equity Value Per Share shall mean
(a) the Total UAC Equity Value as of the time on the Closing Date under the IM
Merger Agreement immediately prior to the purchase of warrants to acquire UAC
Common by IM pursuant to the Warrant Purchase Agreements, (the "Determination
Time") divided by (b) the sum of (i) the total number of shares of UAC Common
issued and outstanding at the Effective Time, plus (ii) the number of shares of
UAC Common which, as of the Determination Time, may be issued pursuant to
options to purchase or otherwise acquire shares of UAC Common whether or not
such options are immediately exercisable, plus (iii) the number of shares of UAC
Common which, as of the Determination Time, may be issued pursuant to Warrants
to purchase or otherwise acquire shares of UAC Common whether or not such
warrants are immediately exercisable.
(a) Total UAC Equity Value. The Total UAC Equity Value shall mean, as
determined in good faith by the Chief Executive Officer of UAC based on (i) the
Total ATSI Equity Value, (ii) the number of fully diluted
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shares of UAC Common as of the Determination Time (assuming the exercise of all
Warrants and options to acquire shares of ATSI Common Stock) and the number of
such shares held by UAC, (iii) cash and cash equivalents of UAC (assuming the
deemed exercise of all outstanding Warrants and options to acquire shares of UAC
Common), (iv) the value of the Connected Stock as of the Determination Time, and
(v) the Preferred Equity Value (as defined in the IM Merger Agreement) as of the
Determination Time.
(b) Total ATSI Equity Value. Total ATSI Equity Value shall mean the
total common equity value of ATSI at the Determination Time as determined in
good faith by the Chief Executive Officer of ATSI based on the (i) Total
Consideration to be paid by IM in the Merger, and (ii) the Net Indebtedness
(excluding cash and cash equivalents held by AGI and UAC, but assuming the
deemed exercise of all outstanding warrants and options to acquire ATSI Common
Stock) at the Determination Time.
7.2 AGI Equity Value Per Share. The AGI Equity Value Per Share shall mean
(a) the total common equity value of AGI as of the Determination Time as
determined in good faith by the Chief Executive Officer of AGI based on (i) the
Total UAC Equity Value, (ii) the number of fully diluted shares of UAC Stock as
of the Determination Time (assuming the exercise of the Warrants and outstanding
options to acquire UAC Common Stock) and the number of such Shares held by AGI,
(iii) the cash and cash equivalents of AGI and (iv) the value of the Damson
Interest, valued by AGI at its fair value, as of the Determination Time divided
by (b) the total number of shares of AGI Common issued and outstanding as of the
Determination Time.
8. Stock Certificates. At the UAC Effective Time, all of the outstanding
certificates which prior to that time represented shares of UAC Common shall for
all purposes evidence ownership of and represent the shares of AGI Common into
which the shares of UAC Common represented by such certificates have been
converted as herein provided.
9. Warrants. At the UAC Effective Time, each outstanding Warrant (if any)
to purchase one share of UAC Common shall be converted into and become a warrant
to purchase the UAC Warrant Conversion Number of Shares of AGI Common as
hereafter defined, at the UAC Warrant Conversion Price, as hereafter defined,
and otherwise upon the same terms and subject to the same conditions as set
forth in the award and agreement pursuant to which the warrant in question was
issued. A sufficient number of shares of AGI Common shall be reserved for
purposes of any outstanding warrants as of the UAC Effective Time. As of the UAC
Effective Time, AGI hereby assumes all obligations of UAC under the awards and
agreements pursuant to which any outstanding UAC warrants were issued.
9.1 UAC Warrant Conversion Number. The UAC Warrant Conversion Number
shall mean (a) the UAC Equity Value Per Share multiplied by the total number of
shares for which the warrant in question may be exercised (whether or not such
warrant is immediately exercisable), divided by (b) the AGI Equity Value Per
Share.
9.2 UAC Warrant Conversion Price. The UAC Warrant Conversion Price shall
mean (a) the per share price for which the warrant in question may be exercised
(whether or not such warrant is immediately exercisable) multiplied by the AGI
Equity Value Per Share at the UAC Effective Time, divided by (b) the UAC Equity
Value Per Share.
10. Stock Options. At the UAC Effective Time, each option ("Plan Option" or
"Options") to purchase shares of UAC Common granted under the UAC 1995 Stock
Option Plan (the "UAC Stock Option Plan") that is outstanding at the
Determination Time shall automatically be converted into and become an option to
purchase the UAC Option Conversion Number, as hereafter defined, at the UAC
Option Conversion Price, as hereafter defined, and otherwise upon the same terms
and subject to the same conditions as set forth in the UAC Stock Option Plan. A
sufficient number of shares of AGI Common shall be reserved for purposes of the
UAC Stock Option Plan as of the UAC Effective Time. As of the UAC Effective
Time, AGI hereby assumes all obligations of UAC under the UAC Stock Option Plan,
the outstanding Plan Options or portions thereof granted pursuant to the UAC
Stock Option Plan. The UAC Option Conversion Number shall be (a) the UAC Equity
Value Per Share multiplied by the total number of shares for which the option in
question may be exercised as of the UAC Effective Time (whether or not such
option is immediately exercisable), divided by (b) the AGI Equity Value Per
Share. The UAC Option Conversion Price shall mean (a) the per share price for
which the option in question may be exercised at the UAC
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Effective Time (whether or not such option is immediately exercisable)
multiplied by the AGI Equity Value Per Share, divided by (b) the UAC Equity
Value Per Share.
11. Other Employee Benefit Plans. As of the UAC Effective Time, AGI hereby
assumes all obligations of UAC under and undertakes sponsorship of any and all
employee benefit plans in effect as of said date or with respect to which
employee rights or accrued benefits are outstanding as of said date.
12. Termination. Subject to the terms and conditions of the IM Merger
Agreement, this UAC Merger Agreement may be terminated and abandoned whether
before or after approval of this Agreement by the stockholders of UAC or AGI, or
both, by mutual consent of the Boards of Directors of both Constituent
Corporations at any time prior to the UAC Effective Time.
13. Amendment. Subject to the terms and conditions of the IM Merger
Agreement, this UAC Merger Agreement may be amended by the Boards of Directors
of both Constituent Corporations at any time prior to the UAC Effective Time;
provided, however, that after approval of this Agreement by the stockholders of
UAC, no amendment which, under Delaware or Nevada law, would have required
approval of the UAC stockholders or AGI stockholders, respectively if made
before approval, may be made after approval without the approval of the UAC
stockholders or AGI stockholders, respectively. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
14. Counterparts. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
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IN WITNESS WHEREOF, this UAC Merger Agreement, having first been duly
approved by resolution of the boards of directors of UAC and AGI is hereby
executed on behalf of each said two corporations by their respective officers
thereunto duly authorized.
UNITED ACQUISITION COMPANY,
A Nevada corporation
By:-----------------------------------
Clarke H. Bailey
President and Chief
Executive Officer
By:-----------------------------------
Richard S. Meller
Secretary
ARCUS GROUP, INC.,
a Delaware corporation
By:-----------------------------------
Clarke H. Bailey
President and Chief
Executive Officer
By:-----------------------------------
Richard S. Meller
Secretary
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Schedule B
AGREEMENT AND PLAN OF MERGER
OF ATSI AND AGI
THIS AGREEMENT AND PLAN OF MERGER (this "ATSI Merger Agreement") is made
and entered into this day of , 1997, by and between Arcus Technology Services,
Inc., a Delaware corporation, ("ATSI"), and Arcus Group, Inc., a Delaware
corporation ("AGI") (ATSI and AGI are individually referred to as a "Constituent
Corporation" and together referred to as "Constituent Corporations"). All
capitalized terms used herein shall have the meanings ascribed to them in the IM
Merger Agreement, as hereafter defined, unless otherwise specified herein.
W I T N E S S E T H:
WHEREAS, ATSI is a corporation duly organized and existing under the laws
of the State of Delaware;
WHEREAS, AGI is a corporation duly organized and existing under the laws
of the State of Delaware;
WHEREAS, on the date of this ATSI Merger Agreement, ATSI has the authority
to issue Five Million (5,000,000) shares of Common Stock, par value $0.01 per
share (the "ATSI Common"), Three Million, Three Hundred Twenty-Five Thousand,
Two Hundred Twenty-Nine (3,325,229) shares of which are issued and outstanding;
WHEREAS, as of the date of this ATSI Merger Agreement, AGI has the
authority to issue (i) Eleven Million, Six Hundred Sixty-One Thousand, Two
Hundred Ninety (11,661,290) shares of Common Stock, par value $0.0001 per share
(the "AGI Common"), ___________________________ shares of which are issued and
outstanding after giving effect to the payment of payment-in-kind dividends
through _____________, as if such payments had occurred;
WHEREAS, as of the ATSI Effective Time, as defined below, AGI will have
amended its Certificate of Incorporation to increase the authorized number of
shares of AGI Common from Eleven Million Six Hundred Sixty-One Thousand, Two
Hundred Ninety (11,661,290) to One Hundred Million (100,000,000) and create a
class of preferred shares of which there will be authorized Fifty Thousand
(50,000) shares, par value $0.0001 per share (the "AGI Preferred") with the same
rights, preferences and privileges applicable to shares of Series A Preferred
Stock of UAC, after giving effect to the amendments to the Articles of
Incorporation of UAC as contemplated by the IM Merger Agreement (including
Schedule C thereto);
WHEREAS, following the merger of ATSI with and into AGI, AGI will merge
with and into Iron Mountain Incorporated, a Delaware corporation ("IM") pursuant
to the Agreement and Plan of Merger (the "IM Merger Agreement") by and among IM,
AGI, United Acquisition Company, a Delaware corporation ("UAC") and ATSI, dated
as of September 26, 1997, a true and correct copy of which is attached hereto as
Appendix A (the "IM Merger");
WHEREAS, the Board of Directors of each Constituent Corporation has
determined that it is advisable and to the advantage of such Constituent
Corporation and its Shareholders that ATSI merge with and into AGI, upon the
terms and conditions herein provided; and
WHEREAS, the Board of Directors of each Constituent Corporation has adopted
this ATSI Merger Agreement and has directed that this ATSI Merger Agreement be
submitted to a vote of such Constituent Corporation's shareholders;
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, ATSI and AGI hereby agree to merge as follows:
1. Merger. ATSI shall be merged with and into AGI, and AGI shall survive
the merger ("ATSI Merger"), effective on the date and at the time when this ATSI
Merger Agreement is made effective in accordance with applicable law (the "ATSI
Effective Time").
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2. Directors and Officers and Governing Documents. The directors and
officers of AGI shall be the same at the ATSI Effective Time as they are
immediately prior thereto. The Certificate of Incorporation of AGI, as amended
and restated and in effect at the ATSI Effective Time, shall continue to be the
certificate of incorporation of AGI as the surviving corporation, until further
amended in accordance with the provisions thereof and applicable laws. The
bylaws of AGI, as amended and in effect at the ATSI Effective Time, shall
continue to be the bylaws of AGI as the surviving corporation without change or
amendment until further amended in accordance with the provisions thereof and
applicable laws.
3. Effect of Merger. From and after the ATSI Effective Time, AGI as the
surviving corporation shall possess all rights, privileges, powers and
franchises and be subject to all restrictions, disabilities and duties of ATSI
and AGI, including without limitation, any duties to stockholders who exercise
appraisal rights in connection with the ATSI Merger, and the ATSI Merger shall
have all other effects, as provided under Section 259 of the DGCL. All ownership
rights in ATSI shares prior to the ATSI Merger will cease to exist at the ATSI
Effective Time except as provided by law.
4. Stock Transfer Books. At the ATSI Effective Time, the stock transfer
books of ATSI shall be closed, and there shall be no further registrations or
transfers of ATSI Common thereafter on the records of ATSI other than to AGI.
5. Further Assurances. From time to time, as and when required by AGI or by
its successors and assigns, there shall be executed and delivered on behalf of
ATSI such deeds and other instruments, and there shall be taken or caused to be
taken by it such further and other action, as shall be appropriate or necessary
in order to vest, perfect or confirm, of record or otherwise, in AGI the title
to and possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of ATSI and otherwise to carry out
the purposes of this ATSI Merger Agreement, and the officers and directors of
AGI are fully authorized in the name and on behalf of ATSI or otherwise to take
any and all such action and to execute and deliver any and all such deeds and
other instruments.
6. Merger Consideration. At the ATSI Merger Effective Time, by virtue of
the ATSI Merger and without any action on the part of any shareholder thereof,
(i) each share of AGI Common issued and outstanding immediately prior to the
ATSI Effective Time (other than Dissenting Shares) shall continue to remain
outstanding, (ii) except as set forth in clause (iii) below, each share of the
ATSI Common outstanding immediately prior to the ATSI Effective Time (other than
Dissenting Shares) shall be changed and converted into that number ("ATSI Common
Conversion Number") of fully paid and nonassessable shares of AGI Common that is
equal to the quotient of the ATSI Equity Value Per Share, as hereafter defined,
divided by the AGI Equity Value Per Share, as hereafter defined and (iii) each
share of the ATSI Common outstanding immediately prior to the ATSI Effective
Time and owned of record by AGI shall be cancelled.
6.1 ATSI Equity Value Per Share. The ATSI Equity Value Per Share shall
mean (a) the Total Equity Value of ATSI as of the time on the Closing Date
immediately prior to the Iron Mountain Warrant Purchase (the "Determination
Time") divided by (b) the sum of (i) the total number of shares of ATSI Common
issued and outstanding as of the Determination Time, plus (ii) the number of
shares of ATSI Common which, as of the Determination Time, may be issued
pursuant to options to purchase or otherwise acquire shares of ATSI Common
whether or not such options are vested or immediately exercisable, plus (iii)
the number of shares of ATSI Common which, as of the Determination Time, may be
issued pursuant to any warrants to purchase or otherwise acquire shares of ATSI
Common whether or not such warrant is immediately exercisable.
6.2 Total ATSI Equity Value. The Total ATSI Equity Value shall mean, as
determined in good faith by the Chief Executive Officer of ATSI based on the (i)
Total Consideration to be paid by IM in the Merger, and (ii) the Net
Indebtedness (excluding cash and cash equivalents held by AGI and UAC, but
assuming the deemed exercise of all outstanding warrants and options to acquire
shares of ATSI Common) as of the Determination Time.
6.3 AGI Equity Value Per Share. The AGI Equity Value Per Share shall mean
(a) the total common equity value of AGI as of the Determination Time as
determined in good faith by the Chief Executive Officer of AGI based on (i) the
Total UAC Equity Value, (ii) the number of fully diluted shares of UAC Common as
of the
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Determination Time (assuming the exercise of the Warrants and outstanding
options to acquire UAC Common) and the number of such shares held by AGI, (iii)
the cash and cash equivalents of AGI and (iv) value of the Damson Interest,
valued by AGI at its fair value, as of the Determination Time divided by (b) the
total number of shares of AGI Common issued and outstanding as of the
Determination Time.
7. Stock Certificates. On and after the UAC Effective Time, all of the
outstanding certificates which prior to that time represented shares of ATSI
Common shall for all purposes evidence ownership of and represent the shares of
AGI Common into which the shares of ATSI Common represented by such certificates
have been converted as herein provided.
8. Warrants. At the ATSI Effective Time, each outstanding warrant (if any)
to purchase one share of ATSI Common shall be converted into and become a
warrant to purchase the AGI Warrant Conversion Number of shares of AGI Common,
as hereafter defined, at the AGI Warrant Conversion Price, as hereafter defined,
and otherwise upon the same terms and subject to the same conditions as set
forth in the award and agreement pursuant to which the warrant in question was
issued. A sufficient number of shares of AGI Common shall be reserved for
purposes of any outstanding warrants as of the ATSI Effective Time. As of the
ATSI Effective Time, AGI hereby assumes all obligations of ATSI under the awards
and agreements pursuant to which any outstanding ATSI warrants were issued. The
ATSI Warrant Conversion Number shall mean the (a) the ATSI Equity Value Per
Share less the exercise price of such warrant (b) multiplied by the total number
of shares for which the warrant in question may be exercised (whether or not
such warrant is immediately exercisable), (c) divided by the AGI Equity Value
Per Share. The ATSI Warrant Conversion Price shall be one thousandth of one cent
($0.0001).
9. Stock Options. At the ATSI Effective Time, each outstanding option
("Plan Option" or "Options") to purchase shares of ATSI Common granted under the
UAC Holdings Corporation 1995 Stock Option Plan (the "ATSI Stock Option Plan")
shall automatically be converted into and become an option to purchase the ATSI
Option Conversion Number of shares of AGI Common at the ATSI Option Conversion
Price and otherwise upon the same terms and subject to the same conditions as
set forth in the ATSI Stock Option Plan. A sufficient number of shares of AGI
Common shall be reserved for purposes of the ATSI Stock Option Plan as of the
ATSI Effective Time. As of the ATSI Effective Time, AGI hereby assumes all
obligations of ATSI under the ATSI Stock Option Plan, the outstanding Plan
Options or portions thereof granted pursuant to the ATSI Stock Option Plan. The
ATSI Option Conversion Number shall mean (a) the ATSI Equity Value Per Share
multiplied by the total number of shares for which the option in question may be
exercised as of the Determination Time (whether or not such option is vested and
whether or not such option is immediately exercisable), divided by (b) the AGI
Equity Value Per Share. The ATSI Option Conversion Price shall mean (i) the per
share price for which the option in question may be exercised as of the
Determination Time (whether or not such option is vested and whether or not such
option is immediately exercisable) multiplied by the AGI Equity Value Per Share,
divided by (ii) the ATSI Equity Value Per Share.
10. Other Employee Benefit Plans. As of the ATSI Effective Time, AGI hereby
assumes all obligations of UAC under and undertakes sponsorship of any and all
employee benefit plans in effect as of said date or with respect to which
employee rights or accrued benefits are outstanding as of said date.
11. Termination. Subject to the terms and conditions of the IM Merger
Agreement, this ATSI Merger Agreement may be terminated and abandoned whether
before or after approval of this Agreement by the stockholders of ATSI or AGI,
or both, by mutual consent of the Boards of Directors of both Constituent
Corporations at any time prior to the UAC Effective Time.
12. Amendment. Subject to the terms and conditions of the IM Merger
Agreement, this ATSI Merger Agreement may be amended by the Boards of Directors
of both Constituent Corporations at any time prior to the ATSI Effective Time;
provided, however, that after approval of this Agreement by the stockholders of
ATSI, no amendment which, under Delaware law, would have required approval of
the ATSI stockholders or AGI stockholders, respectively if made before approval,
may be made after approval without the approval of the ATSI stockholders or AGI
stockholders, respectively. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
13. Counterparts. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
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IN WITNESS WHEREOF, this ATSI Merger Agreement, having first been duly
approved by resolution of the boards of directors of ATSI and AGI is hereby
executed on behalf of each said two corporations by their respective officers
thereunto duly authorized.
[SIGNATURES FOLLOW]
ARCUS TECHNOLOGY SERVICES, INC.
A Delaware corporation
By:-----------------------------------
Clarke H. Bailey
President and Chief
Executive Officer
By:-----------------------------------
Julien H. Meyer, III
Secretary
ARCUS GROUP, INC.,
a Delaware corporation
By:-----------------------------------
Clarke H. Bailey
President and Chief
Executive Officer
By:-----------------------------------
Secretary
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Schedule C
DESCRIPTION OF REORGANIZATION
Step 1: Acquiror Purchases Warrants to Purchase Approximately 1,467,207
Shares of UAC Common for Cash in the Amount of Approximately
$29,842,000.
1. Acquiror Board authorizes purchase of warrants and adoption of Warrant
Purchase Agreement pursuant to Board Resolutions. (Satisfied as of September 26,
1997, which date is hereafter referred to as the "Execution Date".)
2. Acquiror and selling Warrant Holders enter into Warrant Purchase
Agreement. Pursuant to Section 4.05 of Warrant Agreements, UAC gives prior
written consent to transfer of warrants.
3. Selling Warrant Holders execute forms of Assignment of Warrant, attached
to Warrant Agreements.
4. All UAC shareholders waive rights of first refusal, inclusion, notice of
transfer and right to require sale of not less than all "Stock" under Article
III of UAC Shareholders Agreement and consent to sale of warrants to Acquiror.
(Satisfied as of the Execution Date.)
Step 2: UAC Repurchases Warrants to Purchase Approximately 32,793
Shares of UAC Common In Exchange for Connected Stock
1. UAC Board waives notice of special meeting. Satisfied as of the
Execution Date.
2. By unanimous vote of all UAC directors (in light of waiver of prior
notice of meeting and UAC Shareholders Agreement [sec]2.5) , UAC Board takes
following actions (each of which satisfied as of the Execution Date):
A. Determines that repurchase (i.e., distribution) is authorized under
Nevada law in that after giving effect to the distribution, UAC will be able
to pay its debts as they become due in the usual course of business.
(NRS 78.191).
B. Approves Warrant Repurchase and, subject to Series A Preferred
Shareholder approval by vote of 66-2/3%, form of Warrant Repurchase
Agreement.
C. Approves, subject to Series A Preferred Shareholder approval by vote of
66-2/3%, amendment to UAC articles of incorporation to provide that
prohibition under Article VI, Section 2(b) of UAC Articles of Incorporation
on payment of distributions or dividends or redemption of shares of any other
class or series of UAC stock until all accrued and unpaid dividends on Series
A Preferred shares have been fully paid and until all PIK shares have been
redeemed shall not apply to transactions in connection with merger of AGI
into UAC, including each aspect of this Schedule C.
D. Calls special meeting of UAC Series A Preferred Shareholders for purpose
of approving warrant repurchase and distribution pursuant to Repurchase
Agreement and voting on amendment.
E. Sets record date for Series A Preferred Shareholders entitled to notice
and vote. Record date must be not more than 60 nor less than 10 days before
the meeting. (NRS 78.350.2; UAC Bylaws, [sec]1.6)
3. UAC sends Notice of Special Meeting of Holders of Series A Preferred
shares which sets forth place, date, hour, and specific purpose of special
meeting (NRS 78.370). Notice must be delivered personally or mailed no more than
60 nor less than 10 days before the meeting. Notice to be signed by president,
vice president, secretary or assistant secretary. (NRS 78.370; UAC Bylaws,
[sec]1.8.4)
4. All UAC shareholders waive, in writing, rights of first refusal,
inclusion, notice of transfer and right to require sale of not less than all
"Stock" under Article III of UAC Shareholders Agreement and consent to sale of
warrants to UAC. (Satisfied as of the Execution Date)
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5. Warrant Holders receive, in writing, under Section 3.07 of Warrant
Agreements 15 days' prior notice of the record date, distribution, effective
date, and the effect of the distribution on the Exercise Price and the kind and
amount of the shares of stock or other securities or property deliverable upon
the exercise of the Warrants.
6. Series A Preferred Shareholders vote to approve Warrant repurchase and
amend UAC Articles of Incorporation, in accordance with commitment to vote
Series A Preferred shares pursuant to Stockholders Agreement among IM and
certain stockholders of UAC and AGI.
7. Actions to be taken at special meeting of Series A Preferred
Shareholders, or by proxy: Series A Preferred Shareholders approve warrant
repurchase by 66-2/3% vote.
8. Under Section 4.1(c) of Connected Stock Purchase Agreement, UAC notifies
Connected Corporation of proposed disposition of Connected Stock and provides
statement of surrounding circumstances. If reasonably requested by Connected
Corporation, UAC must furnish Connected Corporation with legal opinion that
disposition will not require registration and appropriate action necessary for
compliance with all applicable securities laws has been taken.
9. Selling Warrant Holders agree to be bound by terms and conditions of
Connected Rights Agreement in order to be assignees of registration rights
thereunder, pursuant to Section 1.11 of Connected Rights Agreement. (Satisfied
as of the Execution Date)
10. UAC assigns to selling Warrant Holders rights under Connected Co-Sale
Agreement.
Step 2a: Thomas Seefurth Transfers Single share of Arcus Data Security Ltd.
(U.K.) to Arcus Data Security, Inc. or IM's designee, whichever IM
Directs. UAC Assigns ATI Stock Purchase Agreement to Wholly Owned
Subsidiary of UAC. ATSI Assigns ATI Environmental Agreement to IM.
Step 3: UAC Merges into AGI. UAC Shareholders Receive AGI Stock at the
Exchange Ratio Set Forth in Schedule A to the Merger Agreement. UAC
Option Holders receive Similar Options in AGI on Tax Free Basis.
Holders of UAC Preferred Receive Similar Preferred Stock in AGI.
UAC Warrant Holders Receive AGI Warrants. UAC Shares Held by AGI
are canceled.
Actions by AGI
1. AGI Board waives in writing notice of special meeting. (Satisfied as of
the Execution Date)
2. By unanimous vote of all AGI directors, AGI Board takes following
actions at special meeting: (Satisfied as of the Execution Date)
A. Adopts, subject to shareholder approval, an amendment to articles of
incorporation (i) to authorize a class of 50,000 shares of Preferred Stock,
(ii) to increase the number of shares of common stock from 11,661,290 to
100,000,000 and (iii) to remove restriction of Section 11.01 on transfer by
operation of merger that would otherwise preclude IM Merger. (DGCL 242)
B. Adopts, subject to shareholder approval, agreement and plan of merger
of UAC into AGI.
C. Reserves AGI stock for all holders of former UAC options and holders
of outstanding former UAC warrants.
D. Calls special meeting of AGI Shareholders for purpose of approving
amendments to articles of incorporation and agreement and plan of merger of
UAC into AGI.
E. Sets record date for Shareholders entitled to notice and vote. Record
date must be not more than 60 nor less than 10 days before the meeting.
(DGCL 213)
3. AGI gives Notice of Special Meeting to AGI Shareholders at address on
AGI's records, which sets forth place, date and hour of special meeting and
specific purpose of meeting (DGCL 222). Notice must be delivered personally or
deposited in mail no more than 60 nor less than 20 days before the meeting.
Notice must contain
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a copy of the merger agreement or a brief summary thereof, and notice must be
signed by president, vice president, secretary or assistant secretary. (DGCL
222, 251(c), 252(c))
4. AGI gives AGI Shareholders notice of appraisal rights under DGCL 262,
together with a copy of Section 262, together with the notice of Special
Meeting.
5. AGI shareholders approve amendments to articles of incorporation and
merger of UAC into AGI by vote of holders of majority of shares.
6. AGI agrees in writing to be bound by terms of Series A Preferred Stock
as set forth in UAC Articles, as required under Article VI.7 of UAC Articles.
7. AGI files certificate of amendment with Delaware Secretary of State.
8. AGI files certificate of merger with Delaware Secretary of State.
9. Merger of UAC into AGI may be regarded as "Change of Control" under
[sec]3.05 of UAC Warrant Agreements triggering right to exercise warrants for
shares of AGI.
10. Since merger of UAC into AGI may be treated as "Capital Change" under
[sec]3.05 of the Warrant Agreements, then AGI must, prior to, or concurrent
with, the effectiveness of the UAC Merger, assume in writing the obligation to
deliver to each Warrant Holder such shares of stock, securities or other
property (including cash) as the Warrant Holders may be entitled to receive upon
exercise of the warrants. (Satisfied as of the Execution Date)
11. Each UAC Warrant Holder receives, in writing, under [sec]3.07 of the
Warrant Agreement notice of the "Capital Change" not less than 15 days prior to
the record date for such Capital Change.
12. AGI shareholders who do not vote for merger have appraisal rights under
Delaware law. Following the merger of AGI into Acquiror, the obligations of AGI
described below will rest with Acquiror.
A. Each shareholder electing to demand appraisal must deliver to AGI
before the taking of a vote on the merger a written demand for appraisal.
B. Within 10 days after effective date of UAC Merger, AGI must notify
each shareholder who submitted written appraisal demand of the date the
merger became effective.
C. With 120 days after effective date, AGI as survivor or any
shareholder seeking appraisal may file petition in Court of Chancery.
D. Any stockholder of AGI may withdraw appraisal demand within 60 days
after effective date.
E. Within 120 days after the UAC Merger's effective date, any
shareholder who has complied with foregoing requirements has right to
receive from AGI a statement setting forth the aggregate number of shares
that did not approve the merger and with respect to which appraisal demands
have been received and the aggregate number of holders of such shares. The
statement must be mailed to the requesting shareholder within ten days
after his written request is received by AGI or within ten days after
expiration of the period for delivery of demands, whichever is later.
F. Upon a shareholder filing an appraisal petition, AGI shall be served
with a copy and, within 20 days of service, file in the office of the
Register in Chancery where the petition was filed a duly verified list of
names and address of all shareholders who have demanded appraisal and with
whom agreements as to the value of their shares have not been reached. If
AGI files an appraisal petition, it must accompany the petition with this
list. If ordered by the court, the Register in Chancery must give notice of
the time and place for the hearing of the petition as described in Section
262(f) of the DGCL.
G. After determining the shareholders entitled to appraisal, the Court
will appraise the shares, determining their fair value exclusive of any
element of value arising from the merger, together with a fair rate of
interest, if any, to be paid on the fair value. In determining the fair
value and fair rate of interest, the court may consider "all relevant
factors". The court may permit discovery and other pretrial proceedings and
proceed to trial on the appraisal.
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H. The court shall direct AGI to pay the fair value of the shares,
together with interest, to the shareholders entitled thereto. The court
decides who pays what amount to cover the cost of the proceedings.
Actions by UAC
1. UAC Board waives in writing notice of special meeting. (UAC Bylaws,
[sec]2.4.4) (Satisfied as of the Execution Date).
2. By unanimous vote of all UAC directors (see UAC Shareholders Agreement,
[sec]2.5), UAC Board takes following actions at special meeting (satisfied as of
the Execution Date):
A. Adopts, subject to approval of holders of 662/3% of Series A
Preferred Shares and majority of Common Shares, amendment to articles of
incorporation to clarify that merger of UAC into controlling shareholder
shall not be treated as liquidation if the surviving corporation is
controlled by shareholders who, immediately prior to the merger,
controlled, directly or indirectly, all of the voting shares of UAC. (See
UAC Articles, IV.3(a), (b).)
B. Adopts, subject to approval of holders of 662/3% of Series A
Preferred Shares and majority of Common Shares, agreement and plan of
merger of UAC into AGI.
C. Adopts, through Option Plan Committee, resolution providing for
assumption by AGI, of UAC options and authorizes any amendments to option
award agreements which would specifically require Acquiror to deliver stock
certificates to option holders and providing that there shall be no
acceleration of options except as required or contemplated by the merger
transactions.
D. Calls special meeting of UAC Series A Preferred Stockholders and
Common Stockholders for purpose of approving amendment to articles and
agreement and plan of merger of UAC and AGI.
E. Sets record date for Series A Preferred Stockholders and Common
Stockholders entitled to notice and vote. Record date must be not more than
60 days nor less than 10 days before the meeting. (NRS 78.350.2; UAC Bylaws
[sec]1.6)
3. UAC gives Notice of Special Meeting to all holders of Series A Preferred
Stock and Common Stock, which sets forth place, date and hour of special meeting
and specific purpose of meeting (NRS 78.370). Notice must be delivered
personally or mailed not more than 60 nor less than 10 days before the meeting.
Notice must be accompanied by copy or summary of merger plan. (NRS 92A.120)
4. UAC gives holders of Series A Preferred Shares at least ten days prior
notice of (i) effective date of UAC merger, and (ii) the time, if any, that is
to be fixed, as to when the holders of record of Common Stock or Series A
Preferred shall be entitled to exchange their shares. (UAC Articles IV.8).
5. All UAC shareholders waive rights of first refusal, inclusion, notice of
transfer and right to require sale of not less than all "Stock" under Article
III of UAC Shareholders Agreement. (Satisfied as of Execution Date)
6. Actions to be taken at special meeting of Series A Preferred
Stockholders and Common Stockholders or by proxy:
A. Holders of Series A Preferred Shares approve amendment to articles
and merger by 662/3% vote.
B. Holders of Common Stock approve amendment to articles and agreement
and plan of merger of UAC into AGI by majority vote.
7. UAC files certificates of amendment of articles with Nevada Secretary of
State.
8. UAC files articles of merger with Nevada Secretary of State.
9. UAC Series A Preferred Shareholders and Common Stockholders who do not
approve merger (and who had right to vote thereon) have dissenters rights under
Nevada law. (NRS 92A-380) From and after the merger of AGI into Acquiror, the
obligations of AGI set forth below, will rest with Acquiror.
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A. The Prospectus will contain a notice ("Dissenter's Notice") from AGI
to all UAC Series A Preferred and Common Stockholders who have right to
vote on merger Dissenter's Notice must (a) state where demand for payment
must be sent and where and when certificates, if any, for shares must be
deposited; (b) supply a form for demanding payment that includes the date
of the first announcement to the news media or stockholders of the terms of
the proposed action and requires that the person asserting dissenter's
rights certify whether or not he acquired beneficial ownership of the
shares before that date; (c) set a date by which AGI must receive the
demand for payment (the "Demand Date"), which may not be less than 30 nor
more than 60 days after the date the notice is delivered; and (d) be
accompanied by a copy of NRS Sections 92A.300 to 92A.500, inclusive. (NRS
[sec]92A.430).
B. Stockholders receiving Dissenter's Notice who wish to receive payment
must (a) demand payment on or before the Demand Date; (b) certify whether
he acquired beneficial ownership of shares before date required to be set
forth in dissenter's notice for this certification; and (c) deposit
certificates in accordance with terms of notice. (NRS [sec]92A.440).
C. Upon receiving demand for payment, AGI Board determines "fair value"
of UAC common shares, meaning the value of the shares immediately before
the effectuation of the merger of UAC into AGI, excluding appreciation or
depreciation in anticipation of the merger unless the exclusion would be
"inequitable."
D. Within 30 days after demand for payment, AGI must pay each dissenter
who complied with foregoing requirements the amount AGI estimates to be the
fair value of the dissenter's shares plus accrued interest. Payment must be
accompanied by (a) AGI's balance sheet as of end of fiscal year ending not
more than 16 months before date of payment, statement of income for that
year, statement of changes in stockholders' equity for that year and latest
available interim financial statements, if any; (b) statement of AGI's
estimate of the fair value of the shares; (c) explanation of how fair value
was calculated; (d) statement of dissenter's rights to demand payment under
Section 92A.480; and (e) copy of NRS Sections 92A.300 to 92A.500,
inclusive. (NRS [sec]92A.460).
E. Within 30 days after AGI made or offered payment, each dissenter may
notify AGI in writing of his own estimate of the fair value of his shares
and the amount of interest due, and demand payment thereof, less any
payment made; or reject the offer and demand payment of fair value and
interest due, if he believes amount offered is less than fair value of his
shares or that interest due is incorrectly calculated. (NRS [sec]92A.480).
F. If demand for payment remains unsettled, AGI must commence proceeding
within 60 days after receiving demand above and petition court to determine
fair value and accrued interest. If AGI does not commence proceeding within
60 days, it must pay dissenter amount demanded. See Sections 92A.490 and
92A.500 for detail concerning judicial procedure and payment of costs
therefor.
10. Merger of UAC into AGI triggers right of Zurich Depository Corporation
to exercise warrant for up to 10,000 shares of ATSI common stock at exercise
price of $8.00 per share pursuant to Section 2 of Zurich Warrant Certificate.
AGI or UAC sends notice of merger to Zurich Depository Corporation, c/o CGI
Organization, Inc., 41 Highway 34 South, Colts Towne Plaza, Colts Neck, NJ
07972; with a copy to Bathgate, Wegener & Wolf P.C., One Airport Road, P.O. Box
2043, Lakewood, NJ 08701, Attn: Lawrence Bathgate, II.
11. Zurich surrenders warrant to ATSI at 667 Madison Avenue, 25th Floor,
New York, New York 10021, together with Subscription form attached to Zurich
Warrant Certificate filled out to evidence intent to purchase 10,000 shares.
Zurich receives AGI shares as a result of the ATSI/AGI merger or exchange ratio
set forth in the ATSI/AGI merger agreement for nominal exercise price.
Step 4: ATSI Merges into AGI. ATSI Options are Converted into AGI
Options. Minority ATSI Shareholders Receive AGI Common Stock at
the Exchange Ratio Set Forth in Schedule B to the Merger
Agreement. ATSI Shares Held by AGI are Canceled.
Actions by AGI
1. AGI Board waives in writing notice of special meeting. (Satisfied as of
the Execution Date)
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2. By unanimous vote of all AGI directors, AGI Board takes following
actions at special meeting (which actions are taken as of the Execution Date):
A. Adopts, subject to shareholder approval, agreement and plan of merger
of ATSI into AGI.
B. Reserves AGI stock for holders of former ATSI options.
C. Authorizes officers to require exercise of former ATSI options that
are vested and UAC options that are non-qualified.
D. Calls special meeting of holders of AGI Preferred and Common Shares
for purpose of approving agreement and plan of merger of ATSI into AGI.
E. Sets record date for Shareholders entitled to notice and vote. Record
date must be not more than 60 nor less than 10 days before the meeting.
(DGCL 213)
3. AGI gives Notice of Special Meeting to AGI Common Stockholders at
address on AGI's records, which sets forth place, date and hour of special
meeting and specific purpose of meeting (DGCL 222). Notice must be delivered
personally or deposited in mail no more than 60 nor less than 20 days before the
meeting. Notice must contain a copy of the merger agreement or a brief summary
thereof, and notice must be signed by president, vice president, secretary or
assistant secretary. (DGCL 222, 251(c), 252(c))
4. AGI gives all shareholders notice of appraisal rights under DGCL 262
together with a copy of Section 262 not less than before the meeting.
5. AGI shareholders approve amendments to articles of incorporation and
merger of ATSI into AGI by vote of holders of majority of Common Shares.
6. AGI files certificate of merger with Delaware Secretary of State.
7. AGI holders of Common Stock who do not vote for merger have appraisal
rights under Delaware law. Following the merger of AGI into Acquiror, the
obligations of AGI described below will rest with Acquiror.
A. Each shareholder electing to demand appraisal must deliver to AGI
before the taking of a vote on the merger a written demand for appraisal.
B. Within 10 days after effective date of merger, AGI must notify each
shareholder who submitted written appraisal demand of the date the merger
became effective.
C. With 120 days after effective date, AGI as survivor or any
shareholder seeking appraisal may file petition in Court of Chancery.
D. Any stockholder of AGI may withdraw appraisal demand within 60 days
after effective date.
E. Within 120 days after merger's effective date, any shareholder who
has complied with foregoing requirements has right to receive from AGI a
statement setting forth the aggregate number of shares that did not approve
the merger and with respect to which appraisal demands have been received
and the aggregate number of holders of such shares. The statement must be
mailed to the requesting shareholder within ten days after his written
request is received by AGI or within ten days after expiration of the
period for delivery of demands, whichever is later.
F. Upon a shareholder filing an appraisal petition, AGI shall be served
with a copy and, within 20 days of service, file in the office of the
Register in Chancery where the petition was filed a duly verified list of
names and address of all shareholders who have demanded appraisal and with
whom agreements as to the value of their shares have not been reached. If
AGI files an appraisal petition, it must accompany the petition with this
list. If ordered by the court, the Register in Chancery must give notice of
the time and place for the hearing of the petition as described in Section
262(f) of the DGCL.
G. After determining the shareholders entitled to appraisal, the Court
will appraise the shares, determining their fair value exclusive of any
element of value arising from the merger, together with a fair
74
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rate of interest, if any, to be paid on the fair value. In determining the
fair value and fair rate of interest, the court may consider "all relevant
factors". The court may permit discovery and other pretrial proceedings and
proceed to trial on the appraisal.
H. The court shall direct AGI to pay the fair value of the shares,
together with interest, to the shareholders entitled thereto. The court
decides who pays what amount to cover the cost of the proceedings.
Actions by ATSI
1. ATSI Board waives in writing notice of special meeting. (Satisfied as of
Execution Date)
2. By unanimous vote of all ATSI directors, ATSI Board takes following
actions:
A. Adopts, subject to shareholder approval, agreement and plan of merger
of ATSI into AGI.
B. Adopts through Plan Committee, resolution providing for assumption of
ATSI options by AGI and providing that there shall be no acceleration of
vesting unless Board, acting through the Committee or as provided in the IM
Merger Agreement provides otherwise.
C. Calls special meeting of ATSI shareholders for purpose of approving
agreement and plan of merger of ATSI into AGI.
D. Sets record date for shareholders entitled to notice and vote. Record
date must be not more than 60 nor less than 10 days before meeting. (DGCL
213).
3. ATSI gives Notice of Special Meeting to ATSI Stockholders at address on
ATSI's records, which sets forth place, date and hour of special meeting and
specific purpose of meeting (DGCL 222).
4. Notice must be delivered personally or deposited in mail no more than 60
nor less than 20 days before the meeting. Notice must contain a copy of the
merger agreement or a brief summary thereof, and notice must be signed by
president, vice president, secretary or assistant secretary. (DGCL 222, 251(c))
5. ATSI gives shareholders notice of appraisal rights under DGCL 262
together with a copy of Section 262 not less than 20 days before the meeting.
6. ATSI shareholders approve merger of ATSI into AGI by majority vote.
7. ATSI files certificate of merger with Delaware Secretary of State.
8. ATSI shareholders who do not vote for merger have appraisal rights under
Delaware law. After the merger AGI into Acquiror, the obligations of AGI
described below will rest with Acquiror.
A. Each shareholder electing to demand appraisal must deliver to ATSI
before the taking of a vote on the merger a written demand for appraisal.
B. Within 10 days after effective date of merger, AGI must notify each
shareholder who submitted written appraisal demand of the date the merger
became effective.
C. With 120 days after effective date, AGI as survivor or any
shareholder seeking appraisal may file petition in Court of Chancery.
D. Any stockholder of AGI may withdraw appraisal demand within 60 days
after effective date.
E. Within 120 days after merger's effective date, any shareholder who
has complied with foregoing requirements has right to receive from AGI a
statement setting forth the aggregate number of shares that did not approve
the merger and with respect to which appraisal demands have been received
and the aggregate number of holders of such shares. The statement must be
mailed to the requesting shareholder within ten days after his written
request is received by AGI or within ten days after expiration of the
period for delivery of demands, whichever is later.
F. Upon a shareholder filing an appraisal petition, AGI shall be served
with a copy and, within 20 days of service, file in the office of the
Register in Chancery where the petition was filed a duly verified list of
names
75
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and address of all shareholders who have demanded appraisal and with whom
agreements as to the value of their shares have not been reached. If AGI
files an appraisal petition, it must accompany the petition with this list.
If ordered by the court, the Register in Chancery must give notice of the
time and place for the hearing of the petition as described in Section
262(f) of the DGCL.
G. After determining the shareholders entitled to appraisal, the Court
will appraise the shares, determining their fair value exclusive of any
element of value arising from the merger, together with a fair rate of
interest, if any, to be paid on the fair value. In determining the fair
value and fair rate of interest, the court may consider "all relevant
factors". The court may permit discovery and other pretrial proceedings and
proceed to trial on the appraisal.
H. The court shall direct AGI to pay the fair value of the shares,
together with interest, to the shareholders entitled thereto. The court
decides who pays what amount to cover the cost of the proceedings.
9. Holders of UAC Series A Preferred Shares approve, by 662/3% vote, merger
of ATSI into AGI.
Step 5: AGI Distributes Damson Interest to Holders of AGI Preferred Shares
1. AGI Board waives notice of special meeting. (Satisfied as of the
Execution Date)
2. By unanimous vote of all AGI Directors, AGI Board takes following
actions (satisfied as of the Execution Date):
A. Determines distribution is authorized under Delaware law in that
following the distribution, AGI will be able to pay its debts as they
become due.
B. Sets record date for Preferred Shareholders entitled to distribution
not more than 60 days prior to the distribution.
3. UGHC obtains waiver of right of first refusal and a consent to transfer
of more than 50% of Damson Interest from other Damson partners, including
General Partner.
4. AGI executes assignment of Damson Interest to each Preferred
Shareholder.
76
AGREEMENT AND PLAN OF MERGER
By and Among
IRON MOUNTAIN INCORPORATED
DSI ACQUISITION CORPORATION
and
DATA SECURITIES INTERNATIONAL, INC.
dated as of
August 25, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 - THE MERGER.................................................................................1
Section 1.1 The Merger............................................................1
Section 1.2 Action by Stockholders................................................2
Section 1.3 Closing...............................................................2
Section 1.4 Effective Time........................................................2
Section 1.5 Effect of the Merger..................................................2
Section 1.6 Certificate of Incorporation and Bylaws; Corporate Name...............2
Section 1.7 Directors and Officers................................................3
ARTICLE 2 - CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.........................................3
Section 2.1 Conversion of Securities..............................................3
Section 2.2 Exchange of Certificates..............................................4
Section 2.3 Stock Transfer Books..................................................5
Section 2.4 Option Securities.....................................................6
Section 2.5 Dissenting Shares.....................................................7
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................................7
Section 3.1 Organization and Business; Power and Authority; Effect
of Transaction........................................................7
Section 3.2 Financial and Other Information.......................................9
Section 3.3 Changes in Condition.................................................10
Section 3.4 Liabilities..........................................................10
Section 3.5 Title to Properties; Leases..........................................10
Section 3.6 Compliance with Private Authorizations...............................11
Section 3.7 Compliance with Government Authorizations and
Applicable Law.......................................................11
Section 3.8 Intangible Assets....................................................12
Section 3.9 Related Transactions.................................................12
Section 3.10 Insurance............................................................13
Section 3.11 Tax Matters..........................................................13
Section 3.12 ERISA................................................................14
Section 3.13 Authorized and Outstanding Capital Stock.............................16
Section 3.14 Employment Arrangements..............................................17
Section 3.15 Material Agreements..................................................18
Section 3.16 Ordinary Course of Business..........................................18
Section 3.17 Bank Accounts, Etc...................................................20
Section 3.18 Adverse Restrictions.................................................20
Section 3.19 Broker or Finder.....................................................21
Section 3.20 Operational Matters..................................................21
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF ACQUIROR
AND ACQUIROR MERGER SUBSIDIARY............................................................21
Section 4.1 Organization and Qualification; Power and Authority;
Effect of Transaction................................................21
Section 4.2 Capitalization of Acquiror and Acquiror
Merger Subsidiary....................................................22
Section 4.3 SEC Filings; Financial Statements....................................23
Section 4.4 Brokers..............................................................23
ARTICLE 5 - ADDITIONAL COVENANTS......................................................................24
Section 5.1 Access to Information; Confidentiality...............................24
Section 5.2 Agreement to Cooperate...............................................24
Section 5.4 No Solicitation......................................................26
Section 5.5 Directors' and Officers' Indemnification and Insurance...............27
Section 5.6 Notification of Certain Matters......................................27
Section 5.7 Public Announcements.................................................27
Section 5.8 Obligations of Acquiror..............................................27
Section 5.9 Employee Benefits; Severance Policy..................................28
Section 5.10 Certain Actions Concerning Business Combinations.....................28
Section 5.11 Conversion of Option Securities......................................28
Section 5.12 Tax Treatment........................................................28
ARTICLE 6 - CLOSING CONDITIONS........................................................................29
Section 6.1 Conditions to Obligations of Each Party to
Effect the Merger....................................................29
Section 6.2 Conditions to Obligations of Acquiror and
Acquiror Merger Subsidiary. .........................................29
Section 6.3 Conditions to Obligations of the Company.............................31
ARTICLE 7 - TERMINATION, AMENDMENT AND WAIVER.........................................................32
Section 7.1 Termination..........................................................32
Section 7.2 Effect of Termination................................................33
Section 7.3 Amendment............................................................33
Section 7.4 Waiver...............................................................33
Section 7.5 Fees, Expenses and Other Payments....................................33
Section 7.6 Effect of Investigation..............................................34
ARTICLE 8 - INDEMNIFICATION; ADJUSTMENT...............................................................34
Section 8.1 Survival.............................................................34
Section 8.2 Indemnification......................................................35
Section 8.3 Escrow Indemnity Funds; Appointment of Agent.........................36
Section 8.4 Limitation of Liability; Disposition of Escrow
Indemnity Funds......................................................36
Section 8.5 Notice of Claims.....................................................37
</TABLE>
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<S> <C>
Section 8.6 Defense of Third Party Claims........................................37
Section 8.7 Balance Sheet Adjustment.............................................38
Section 8.8 Exclusive Remedy.....................................................39
ARTICLE 9 - GENERAL PROVISIONS........................................................................40
Section 9.1 Notices..............................................................40
Section 9.2 Headings.............................................................40
Section 9.3 Severability.........................................................40
Section 9.4 Entire Agreement.....................................................41
Section 9.5 Assignment...........................................................41
Section 9.6 Parties in Interest..................................................41
Section 9.7 Governing Law........................................................41
Section 9.8 Enforcement of the Agreement.........................................42
Section 9.9 Counterparts.........................................................42
Section 9.10 Mutual Drafting......................................................42
ARTICLE 10 - DEFINITIONS..............................................................................42
</TABLE>
(iii)
<PAGE>
This AGREEMENT AND PLAN OF MERGER, dated as of August 25, 1997, among
Iron Mountain Incorporated, a Delaware corporation ("Acquiror"), DSI Acquisition
Corporation, a Delaware corporation and a wholly owned Subsidiary of Acquiror
("Acquiror Merger Subsidiary"), and Data Securities International, Inc., a
Delaware corporation (the "Company").
RECITALS
A. Capitalized terms used herein are either defined in Article 10 below
or in another Section of this Agreement and, in such case, Article 10 includes a
reference to such Section.
B. Upon the terms and subject to the conditions of this Agreement, in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), the Company and Acquiror Merger Subsidiary will carry out a business
combination transaction pursuant to which (i) the Company will merge with and
into Acquiror Merger Subsidiary (the "Merger"), and (ii) the stockholders of the
Company (the "Stockholders") will receive for their shares of Common Stock, par
value $.01 per share, of the Company (the "Company Stock") consideration
consisting of cash or cash and shares of the Common Stock, par value $.01 per
share, of Acquiror ("Acquiror Stock").
C. The Board of Directors of the Company has unanimously determined
that the Merger is fair to, and in the best interests of, the Company and the
Stockholders and has approved and adopted this Agreement as a plan of
reorganization within the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), has approved this Agreement, the Merger
and the Transactions and has recommended the approval and adoption of this
Agreement, the Merger and the Transactions by the Stockholders.
D. The Board of Directors of Acquiror has unanimously approved and
adopted this Agreement, the Merger and the Transactions, and Acquiror has, as
the sole stockholder of Acquiror Merger Subsidiary, approved and adopted this
Agreement, the Merger and the Transactions.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto, intending to be legally bound, agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement and in accordance with the DGCL, at the Effective
Time, the Company shall be merged with and into Acquiror Merger Subsidiary. As a
result of the Merger, the separate existence of the Company shall cease and
Acquiror Merger Subsidiary shall continue as the surviving corporation of the
Merger (the "Surviving Corporation").
<PAGE>
2
Section 1.2 Action by Stockholders.
(a) The Company, acting through its Board of Directors and in
accordance with Applicable Law and its Organizational Documents, shall (i) seek
the due approval and adoption of this Agreement, the Merger and the Transactions
by the Stockholders, whether by written consent or at a special meeting of the
Stockholders; (ii) include in any proxy statement or information statement
furnished to the Stockholders the conclusion and recommendation of the Board of
Directors to the effect that the Board of Directors, having determined that this
Agreement, the Merger and the Transactions are in the best interests of the
Company and the Stockholders, has approved this Agreement, the Merger and the
Transactions and recommends that the Stockholders vote in favor of the approval
and adoption of this Agreement, the Merger and the Transactions; and (iii) use
its best efforts to obtain the necessary approval and adoption of this
Agreement, the Merger and the Transactions by the Stockholders.
(b) Acquiror hereby represents that, as sole stockholder of
Acquiror Merger Subsidiary, it has approved and adopted, and shall take all
additional actions necessary to effectuate the provisions of, this Agreement,
the Merger and the Transactions.
Section 1.3 Closing. Unless this Agreement shall have been terminated
pursuant to Section 7.1 hereof and the Merger and the Transactions shall have
been abandoned, the closing of the Merger (the "Closing") will take place at the
offices of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, Three Embarcadero
Center, San Francisco, California, at 10:00 a.m., local time, on the second
business day (the "Closing Date") after the date on which the last of the
conditions set forth in Article 6 is satisfied or waived (other than conditions
requiring deliveries at the Closing), unless another date, time or place is
agreed to in writing by the Company and Acquiror.
Section 1.4 Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article 6
(but subject to Section 1.3 hereof), the Parties shall cause the Merger to be
consummated by filing a certificate of merger with the Secretary of State of the
State of Delaware, and by making any related filings required under the DGCL.
The Merger shall become effective at such time (but not prior to the Closing
Date) as such certificate is duly filed with the Secretary of State of the State
of Delaware, or at such later time as is specified in such certificate (the
"Effective Time").
Section 1.5 Effect of the Merger. From and after the Effective Time,
the Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
the Company and Acquiror Merger Subsidiary as provided under, and the Merger
shall otherwise have the effects provided under, the DGCL.
Section 1.6 Certificate of Incorporation and Bylaws; Corporate Name.
From and after the Effective Time, the Certificate of Incorporation and bylaws
of Acquiror Merger Subsidiary as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation and
<PAGE>
3
bylaws of the Surviving Corporation, until amended in accordance with Applicable
Law, and the name of the Surviving Corporation shall be such name as Acquiror
may elect.
Section 1.7 Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
Applicable Law (or their earlier resignation or removal), the directors and
officers of Acquiror Merger Subsidiary at the Effective Time shall be the
directors and officers of the Surviving Corporation.
ARTICLE 2
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.1 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Acquiror Merger Subsidiary,
the Company or the holders of any of the following securities (but subject to
the provisions of Article 8 hereof):
(a) Each share of Company Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Company Stock
to be cancelled pursuant to Section 2.1(c) and any Dissenting Shares), shall be
converted into the right to receive, subject to the indemnification provisions
of Article 8 hereof, the Share Price. Payment of the Share Price in respect of
each share of Company Stock held by John Boruvka (collectively, the "All Cash
Shares") shall be made, subject to the indemnification provisions of Article 8
hereof, in the form of cash in an amount equal to the All Cash Conversion Number
(the "All Cash Consideration"). Payment in respect of each share of Company
Stock issued and outstanding immediately prior to the Effective Time (other than
the All Cash Shares, any shares of Company Stock to be cancelled pursuant to
Section 2.1(c) and any Dissenting Shares), shall be made, subject to the
indemnification provisions of Article 8 hereof, in the form of:
(i) that number of shares of Acquiror Stock (the "Stock
Consideration") equal to the Stock Conversion Number, and
(ii) cash in an amount equal to the Cash Conversion Number
(the "Cash Consideration");
provided, however, that if the value of the aggregate Stock Consideration, based
on the Closing Price of Acquiror Stock on the Nasdaq National Market System on
the trading day next preceding the Closing Date, is less than 50% of the value
of the aggregate Merger Consideration, based on such Closing Price (the amount
by which 50% of the value of the aggregate Merger Consideration exceeds the
value of the aggregate Stock Consideration is referred to herein as the
"Adjustment Amount"), the aggregate Stock Consideration shall be increased by
that number of whole shares of Acquiror Stock having a value in excess of the
Adjustment Amount (such value to be based on such Closing Price) that most
nearly equals the
<PAGE>
4
Adjustment Amount and the aggregate Cash Consideration and All Cash
Consideration shall be reduced by the Adjustment Amount.
(b) At the Effective Time, all shares of Company Stock (the
"Shares") shall automatically be cancelled and retired and shall cease to be
outstanding and to exist, and certificates previously evidencing any such Shares
(each, a "Certificate") shall thereafter represent the right to receive, upon
the surrender of such Certificates in accordance with the provisions of Section
2.2, but subject to the indemnification provisions hereof, the Merger
Consideration multiplied by the number of Shares represented by such
Certificates. The holders of Certificates shall cease to have any rights with
respect to the Shares represented thereby except as otherwise provided herein or
by Applicable Law. Notwithstanding anything to the contrary herein, the Cash
Consideration or All Cash Consideration to be received by any Stockholder prior
to the termination of the Escrow Indemnity Period (as defined in Section 8.2
hereof) shall be adjusted to give full effect to the indemnification provisions
of Article 8 hereof.
(c) Shares held in the treasury of the Company or owned by
Acquiror or any direct or indirect Subsidiary of Acquiror immediately prior to
the Effective Time shall automatically be cancelled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(d) None of the shares of common stock of Acquiror Merger
Subsidiary outstanding immediately prior to the Effective Time shall be
converted as a result of the Merger, but all of such shares shall remain issued
shares of capital stock of the Surviving Corporation.
(e) In lieu of the issuance of fractional shares of Acquiror
Stock, cash adjustments, without interest, shall be paid to the holders of
Company Stock in respect of any fractional share that would otherwise be
issuable, and the amount of such cash adjustment shall be equal to an amount in
cash (rounded to the nearest cent) determined by multiplying such holder's
fractional interest by the Determination Price. For purposes of determining the
amount of the cash adjustment that any holder of Company Stock shall be entitled
to receive under this Section 2.1(e), Shares held of record by such holder and
represented by two or more Certificates shall be aggregated.
Section 2.2 Exchange of Certificates.
(a) On the Closing Date, Acquiror shall cause to be delivered
to John M. Duff, as paying agent (the "Paying Agent"), for delivery to each
Stockholder who then tenders Certificates representing Shares for cancellation
the Merger Consideration in respect of such Shares.
(b) With respect to each Stockholder who does not tender
Certificates for cancellation on the Closing Date, the procedure for payment of
the Merger Consideration shall be as follows:
<PAGE>
5
(i) Immediately after the Effective Time, (A) Acquiror shall
cause the Surviving Corporation to furnish to Paying
Agent, the aggregate Merger Consideration consisting of
cash and shares of Acquiror Stock (registered in the names
of the former stockholders of the Company) sufficient in
the aggregate for the Paying Agent to make full payment of
the Merger Consideration to the holders of all of the
outstanding Shares (other than any Dissenting Shares),
such cash and Shares being hereinafter referred to as the
"Payment Fund," and (B) the Paying Agent shall accept the
surrender of the Certificates that represented the former
Stockholders' Shares against payment of the Merger
Consideration and deliver to Buyer such surrendered
certificates. No interest will accrue or be paid to the
holder of any outstanding Shares.
(ii) Any portion of the Payment Fund remaining undistributed
to the holders of the Company Stock for ninety (90) days
after the Effective Time shall be delivered to Acquiror
upon demand by Acquiror, and any holders of Certificates
who have not theretofore complied with this Article shall
thereafter look only to Acquiror for the Merger
Consideration to which they are entitled pursuant to this
Article.
(c) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and subject to such
other conditions as Acquiror reasonably may impose, the Surviving Corporation
shall issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof as determined in accordance
with Section 2.1(a). Acquiror may, in its discretion and as a condition
precedent to authorizing the issuance of the Merger Consideration by the
Surviving Corporation, require the owner of such lost, stolen or destroyed
Certificate to provide a bond or other surety to Acquiror and the Surviving
Corporation in such sum as Acquiror may reasonably direct as indemnity against
any claim that may be made against Acquiror or the Surviving Corporation (and
their Affiliates) with respect to the Certificate alleged to have been lost,
stolen or destroyed.
(d) None of Acquiror, Acquiror Merger Subsidiary, the Company
or the Surviving Corporation shall be liable to any holder of Shares for any
shares of Acquiror Stock or cash from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Section 2.3 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of Shares thereafter on the records of the Company
other than to Acquiror. On or after the Effective Time, any Certificate
presented to the Paying Agent or the Surviving Corporation shall be converted
into the Merger Consideration.
<PAGE>
6
Section 2.4 Option Securities. As soon as reasonably practicable after
the Effective Time, each holder of an Option Security shall receive in respect
thereof an option (each, a "Substitute Option") to acquire shares of Acquiror
Stock under Acquiror's 1995 Stock Incentive Plan. Under the terms of each
Substitute Option, (x) the number of shares of Acquiror Stock subject to such
Substitute Option shall be equal to the product of (A) the number of shares of
Company Stock previously subject to the related Option Security, multiplied by
(B) the quotient of the Share Price divided by the Determination Price (such
quotient, the "Option Exchange Ratio"), rounded down to the nearest whole share;
and (y) the exercise price per share of Acquiror Stock subject to such
Substitute Option shall be equal to the exercise price per share of Company
Stock previously subject to the related Option Security divided by the Option
Exchange Ratio, rounded up to the nearest cent. Each Substitute Option issued in
respect of an Option Security shall have the following vesting schedule:
(i) to the extent that the Option Security was
exercisable with respect to any shares of Company
Stock on the Closing Date, the Substitute Option
shall be exercisable with respect to the applicable
number of shares of Acquiror Stock determined
pursuant to clause (x) above as of the Closing Date;
(ii) to the extent that the Option Security would have
been exercisable with respect to any shares of
Company Stock on any date after the Closing Date and
prior to the first anniversary of the Closing Date,
the Substitute Option shall become exercisable on
such date with respect to 25% of the number of shares
of Acquiror Stock that were not issuable upon
exercise as of the Closing Date;
(iii) on the first anniversary of the Closing Date, the
Substitute Option shall become exercisable with
respect to a number of shares of Acquiror Stock equal
to 25% of the number of shares of Acquiror Stock that
were not issuable upon exercise as of the Closing
Date; and
(iv) on the second anniversary of the Closing Date, the
Substitute Option shall become exercisable on such
date with respect to all remaining shares of Acquiror
Stock subject to such Substitute Option.
Each Substitute Option shall provide for accelerated vesting in the event that
the holder of such Substitute Option is terminated by Acquiror or the Surviving
Corporation, other than for cause, after the Closing Date. A Person shall be
deemed to have been terminated "for cause" if (i) the Person has committed a
willful, serious act, such as fraud, conversion, embezzlement, falsifying
records or reports, or a similar act against Acquiror or the Surviving
Corporation intending to enrich himself at the expense of the Acquiror or the
Surviving Corporation, (ii) the Person has been guilty of willful, gross
negligence in carrying out his duties, or (iii) the Person has been convicted
of, or entered a plea of guilty, no contest or nolo contendere to, a felony
crime involving moral turpitude. Except as otherwise set forth in this Section
2.4, each Substitute
<PAGE>
7
Option shall, to the extent permitted by Applicable Law, be subject to the terms
and conditions of Acquiror's 1995 Stock Incentive Plan.
Section 2.5 Dissenting Shares.
(a) Notwithstanding any other provision of this Agreement to
the contrary, Shares outstanding immediately prior to the Effective Time that
are held by Stockholders who have not voted in favor of the Merger or consented
thereto in writing and who shall be entitled to and shall have demanded properly
in writing appraisal for such Shares in accordance with the DGCL, and who shall
not have withdrawn such demand or otherwise have forfeited appraisal rights
(collectively, the "Dissenting Shares") shall not be converted into or represent
the right to receive the Merger Consideration. Such Stockholders shall be
entitled to receive payment of the appraised value of such Shares held by them
in accordance with the provisions of the DGCL, except that all Dissenting Shares
held by Stockholders who shall have failed to perfect or who effectively shall
have withdrawn, forfeited or lost their rights to appraisal of such Shares under
the DGCL shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive, without
any interest thereon, the Merger Consideration, upon surrender of the
Certificates that formerly evidenced such Shares in the manner provided in
Section 2.2.
(b) The Company shall give Acquiror prompt notice of its
receipt of any demands for appraisal, any withdrawals of such demands and any
other instruments served pursuant to the DGCL relating thereto. The Company and
Acquiror shall jointly direct all negotiations and proceedings with respect to
demands for appraisal under Applicable Law. The Company shall not, except with
the prior written consent of Acquiror, settle or offer to settle, or make any
payment with respect to, any demands for appraisal.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents, warrants and covenants to, and agrees
with, Acquiror and Acquiror Merger Subsidiary as follows:
Section 3.1 Organization and Business; Power and Authority; Effect of
Transaction.
(a) The Company:
(i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware,
(ii) has all requisite power and authority (corporate and
other) to own or hold under lease its properties and to
conduct its business as now conducted
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8
and as presently proposed to be conducted, and has in full
force and effect all Government Authorizations and Private
Authorizations and has made all Government Filings, to the
extent required for such ownership and lease of its
property and conduct of its business, and
(iii) is duly qualified and authorized to do business and is
in good standing as a foreign corporation in each
jurisdiction (a true and correct list of which is set
forth in Section 3.1(a) of the Disclosure Schedule) in
which the character of its property or the nature of its
business or operations requires such qualification or
authorization, except to the extent the failure to so
qualify or to maintain such authorizations would not have
an Adverse Effect.
(b) The Company has all requisite power and authority
(corporate and other) and has in full force and effect all Government
Authorizations and Private Authorizations in order to enable it to execute and
deliver, and to perform its obligations under, this Agreement and each
Collateral Document executed or required to be executed by it pursuant hereto or
thereto and to consummate the Merger and the Transactions, and the execution,
delivery and performance of this Agreement and each Collateral Document executed
or required to be executed pursuant hereto or thereto have been duly authorized
by all requisite corporate or other action (other than that of the
Stockholders). This Agreement has been duly executed and delivered by the
Company and, subject to the affirmative vote of the Stockholders referred to
below, constitutes, and each Collateral Document executed or required to be
executed pursuant hereto or thereto or to consummate the Merger and the
Transactions, when executed and delivered by the Company or an Affiliate of the
Company will constitute, legal, valid and binding obligations of the Company or
such Affiliate, enforceable in accordance with their respective terms, except as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance and
other similar laws relating to or affecting the rights of creditors and except
as the same may be subject to the effect of general principles of equity (the
"Enforceability Exceptions"). The affirmative vote or action by written consent
of the holders of a majority of the outstanding Shares is the only vote of the
holders of any class or series of the capital stock of the Company necessary to
approve this Agreement, the Merger and the Transactions under Applicable Law and
the Company's Organizational Documents. The provisions of Section 203 of the
DGCL will not apply to this Agreement, the Merger or the Transactions.
(c) Except as set forth in Section 3.1(c) of the Disclosure
Schedule, neither the execution and delivery of this Agreement or any Collateral
Document executed or required to be executed pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions and
provisions hereof or thereof by the Company or any of the other parties hereto
or thereto which is Affiliated with the Company:
(i) will conflict with, or result in a breach or violation of,
or constitute a default under, any Applicable Law on the
part of the Company or will
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9
conflict with, or result in a breach or violation of, or
constitute a default under, or permit the acceleration of
any obligation or liability in, or but for any requirement
of giving of notice or passage of time or both would
constitute such a conflict with, breach or violation of,
or default under, or permit any such acceleration in, any
Contractual Obligation of the Company,
(ii) will result in or permit the creation or imposition of any
Lien upon any property now owned or leased by the Company
or any such other party, or
(iii) will require any Government Authorization or Government
Filing or Private Authorization, except for the
certificate of merger and related filings under the DGCL
in connection with the Merger and the Transactions.
Section 3.2 Financial and Other Information.
(a) The Company has heretofore furnished to Acquiror copies
of the financial statements of the Company listed in Section 3.2(a) of the
Disclosure Schedule (the "Financial Statements"). Except as set forth in Section
3.2(a) of the Disclosure Schedule or as otherwise noted therein, the Financial
Statements, including in each case the notes thereto, have been prepared in
accordance with GAAP (subject in the case of unaudited statements to the absence
of notes and schedules) applied on a consistent basis throughout the periods
covered thereby and fairly present the financial condition and results of
operations of the Company, on the bases therein stated, as of the respective
dates thereof and for the respective periods covered thereby, subject, in the
case of unaudited financial statements, to normal nonmaterial year-end audit
adjustments and accruals.
(b) Neither the Disclosure Schedule, the Financial
Statements, this Agreement nor any Collateral Document furnished or to be
furnished by or on behalf of the Company or any of the Stockholders pursuant to
this Agreement or any Collateral Document executed or required to be executed by
or on behalf of the Company or the Stockholders pursuant hereto or thereto or to
consummate the Merger and the Transactions, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
required to be stated in such document by its terms or necessary in order to
make the statements contained herein or therein not misleading and all such
Collateral Documents are and will be true, correct and complete.
(c) The Company does not own any capital stock or equity or
other interest in any other Entity or enterprise, however organized and however
such interest may be denominated or evidenced.
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10
Section 3.3 Changes in Condition. Since the date of the most recent
financial statements forming part of the Financial Statements, except to the
extent specifically described in Section 3.3 of the Disclosure Schedule, there
has been no Adverse Change in the Company. There is no Event known to the
Company that Adversely Affects, or in the future might (so far as the Company
can now reasonably foresee) Adversely Affect, the Company or the ability of the
Company to perform any of the obligations set forth in this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto except for changes in general economic conditions or the industry in
general and to the extent set forth in Section 3.3 of the Disclosure Schedule.
Section 3.4 Liabilities. At the date of the most recent balance sheet
forming part of the Financial Statements, the Company had no obligations or
liabilities, past, present or deferred, accrued or unaccrued, fixed, absolute,
contingent or other, except as disclosed in such balance sheet, or the notes
thereto, and since such date the Company has not incurred any such obligations
or liabilities, other than obligations and liabilities incurred in the ordinary
course of business consistent with past practice of the Company, which do not
and, to the Company's knowledge, will not in the aggregate Adversely Affect the
Company, except to the extent set forth in Section 3.4 of the Disclosure
Schedule. The Company has not Guaranteed and is not otherwise primarily or
secondarily liable in respect of any obligation or liability of any other
Person, except for endorsements of negotiable instruments for deposit in the
ordinary course of business, consistent with prior practice, or as disclosed in
the most recent balance sheet, or the notes thereto, forming part of the
Financial Statements or in Section 3.4 of the Disclosure Schedule.
Section 3.5 Title to Properties; Leases.
(a) The Company does not own and has never owned any real
property. Except as disclosed in Section 3.5 of the Disclosure Schedule, the
Company has good leasehold title with respect to all real property leased and
good indefeasible and merchantable title to all other assets, tangible and
intangible, reflected on the most recent balance sheet forming part of the
Financial Statements, or acquired in the ordinary course of business by the
Company since such date, free and clear of all Liens, except (i) Liens reflected
in the Financial Statements, (ii) Liens for current taxes not yet due and
payable, (iii) Liens set forth on Section 3.5(a) of the Disclosure Schedule,
(iv) Liens that will be released prior to the Closing Date (and which are listed
on Section 3.5(a) of the Disclosure Schedule), and (v) such imperfections of
title, easements, encumbrances and mortgages or other Liens as are not in the
aggregate substantial in character, amount or extent and do not Adversely Affect
the value or the present use of the property subject thereto or affected
thereby, or otherwise Adversely Affect business operations of the Company. The
Company has the right as lessee under valid and existing leases to use, possess
and control all of the personal property and real estate leased by the Company
as presently used, possessed and controlled by the Company.
(b) Section 3.5(b) of the Disclosure Schedule contains a
true, correct and complete description of all real estate leased by the Company.
The leased real property (other
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11
than land), fixtures, fixed assets and machinery and equipment are in a state of
good repair and maintenance and are in good operating condition, reasonable wear
and tear excepted.
(c) To the Company's knowledge, except as set forth in
Section 3.5(c) of the Disclosure Schedule, all real property leased by the
Company conforms to and complies with all applicable title covenants,
conditions, restrictions and reservations and all applicable environmental,
zoning, wetlands, land use and other Applicable Laws, except as in the aggregate
would not result in an Adverse Effect on the Company.
Section 3.6 Compliance with Private Authorizations. Section 3.6 of the
Disclosure Schedule sets forth a true, correct and complete list and description
of each Private Authorization which individually is material to the Company, all
of which are in full force and effect. The Company has obtained all Private
Authorizations that are necessary for the ownership by the Company of its
properties and the conduct of its business as now conducted or as presently
proposed to be conducted or that, if not obtained and maintained, could, singly
or in the aggregate, Adversely Affect the Company. To the Company's knowledge,
the Company is not in breach or violation of, or in default in the performance,
observance or fulfillment of, any Private Authorization, and no Event exists or
has occurred, which constitutes, or but for any requirement of giving of notice
or passage of time or both would constitute, such a breach, violation or
default, under any Contractual Obligation or Private Authorization, except for
such defaults, breaches or violations as do not and, to the Company's knowledge,
will not in the aggregate have any Adverse Effect on the Company or the ability
of the Company to perform any of the obligations set forth in this Agreement or
any Collateral Document executed or required to be executed pursuant hereto or
thereto or to consummate the Merger and the Transactions. No material Private
Authorization is the subject of any pending or, to the Company's knowledge,
threatened attack, revocation or termination.
Section 3.7 Compliance with Government Authorizations and Applicable
Law.
(a) Section 3.7(a) of the Disclosure Schedule contains a
description of:
(i) all Legal Actions which are pending in which the Company
is engaged, or which involve the business, operations or
properties of the Company or, to the Company's knowledge,
which are threatened or contemplated against, the Company
or any of its business, operations or properties, which in
the case of such threatened or contemplated Legal Actions,
individually or in the aggregate, if determined against
the Company would reasonably be expected to have an
Adverse Effect on the Company; and
(ii) each material Government Authorization to which the
Company is subject and which relates to the business,
operations, properties, prospects, condition (financial or
other), or results of operations of the Company, all of
which are in full force and effect.
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(b) The Company has obtained all Government Authorizations
which are necessary for the ownership or use of its properties and the conduct
of its business as now conducted or as presently proposed to be conducted by the
Company or which, if not obtained and maintained, could singly or in the
aggregate, have any Adverse Effect on the Company. No material Government
Authorization is the subject of any pending or, to the Company's knowledge,
threatened attack, revocation or termination. The Company is not in material
breach or violation of, or in default in the performance, observance or
fulfillment of, any Government Authorization or any Applicable Law, and no Event
exists or has occurred that constitutes, or but for any requirement of giving of
notice or passage of time or both would constitute, such a breach, violation or
default, under any Government Authorization or any Applicable Law, except for
such breaches, violations or defaults as do not and, to the Company's knowledge,
will not have in the aggregate any Adverse Effect on the Company.
(c) During the five years preceding the date hereof, the
Company has not been charged by any Person with a breach of the Company's duties
as escrow agent under any agreement to which the Company was a party. The
matters, if any, referred to in Sections 3.7(a)(i) or 3.7(b) of the Disclosure
Schedule, if adversely determined against the Company, will not Adversely Affect
the Company or the ability of the Company to perform its obligations under this
Agreement or any Collateral Documents executed or required to be executed
pursuant hereto or thereto or to consummate the Merger and the Transactions.
Section 3.8 Intangible Assets. Section 3.8 of the Disclosure Schedule
sets forth a true, accurate and complete description of all Intangible Assets
held or used by the Company, including without limitation the nature of the
Company's interest in each and the extent to which the same have been duly
registered in the offices as indicated therein. The Company owns or possesses or
otherwise has the right to use all Intangible Assets necessary for the present
and planned future conduct of its business, except where the failure to so own,
possess or have the right to use would not, insofar as can reasonably be
foreseen, individually or in the aggregate, have an Adverse Effect on the
Company. Except as set forth in Section 3.8 of the Disclosure Schedule, no
authorizations or intangible assets (except the Intangible Assets so set forth)
are required for the Company to conduct its business as currently conducted or
proposed to be conducted on or prior to the Closing Date.
Section 3.9 Related Transactions. Section 3.9 of the Disclosure
Schedule sets forth a true, correct and complete description of any Contractual
Obligation or transaction, whether now existing or existing during the period
covered by the most recent audited Financial Statements, between the Company and
any Affiliate thereof (other than reasonable compensation for services as
officers, directors and employees and reimbursement for out-of-pocket expenses
reasonably incurred in support of the Company's business), including without
limitation any Contractual Obligation or transaction providing for the
furnishing of services to or by, providing for rental of property, real,
personal or mixed, to or from, or providing for the lending or borrowing of
money to or from or otherwise requiring payments to or from, any such Affiliate.
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Section 3.10 Insurance. Section 3.10 of the Disclosure Schedule lists
all insurance policies maintained by the Company and includes the insurers'
names, policy numbers, expiration dates, risks insured against, amounts of
coverage, the annual premiums, exclusions, deductibles and self-insured
retention and describes in reasonable detail any retrospective rating plan,
fronting arrangement or any other self-insurance or risk assumption agreed to by
the Company or imposed upon the Company by any such insurers, as well as any
self-insurance program that is in effect. The Company is not in breach or
violation of or in default under any such policy, and all premiums due thereon
have been paid, and each such policy or a comparable replacement policy will
continue to be in force and effect up to and including the Closing Date.
Section 3.11 Tax Matters.
(a) The Company has filed in accordance with all Applicable
Laws all Tax Returns that are required to be filed, and has paid, or made
adequate provision for the payment of, (i) all Taxes that have or may become due
and payable pursuant to said Returns, (ii) all installments (to the extent
required to avoid material underpayment penalties) of estimated Taxes due and
payable, and (iii) all other governmental charges and assessments received to
date. The Tax Returns of the Company have been prepared in accordance with all
Applicable Laws and generally accepted principles applicable to taxation
consistently applied. All Taxes that the Company is required by law to withhold
and collect have been duly withheld and collected, and have been paid over, in a
timely manner, to the proper Authorities to the extent due and payable. The
Company has not executed any waiver to extend, or otherwise taken or failed to
take any action that would have the effect of extending, the applicable statute
of limitations in respect of any Tax liabilities of the Company for the fiscal
years prior to and including the most recent fiscal year. Adequate provision has
been made on the most recent balance sheet forming part of the Financial
Statements for all Taxes of any kind, including interest and penalties in
respect thereof, whether disputed or not, and whether past, current or deferred,
accrued or unaccrued, fixed, contingent, absolute or other, and to the knowledge
of the Company, there are no transactions or matters or any basis that might or
could result in additional Taxes of any nature to the Company for which an
adequate reserve has not been provided on such balance sheet. The Company is not
a "consenting corporation" within the meaning of Section 341(f) of the Code. The
Company has been taxable as a Subchapter S corporation since January 1, 1997,
and prior to that time was taxable as a Subchapter C corporation under the Code,
except as otherwise set forth in Section 3.11(a) of the Disclosure Schedule. The
Company has never been a member of any consolidated group (other than
exclusively with the Company and its former Subsidiaries) for Tax purposes,
except as set forth in Section 3.11(a) of the Disclosure Schedule.
(b) From the end of its most recent fiscal year to the date
hereof, the Company has not made any payment on account of any Taxes except
regular payments required in the ordinary course of business, consistent with
prior practice, with respect to current operations or property presently owned.
(c) The information shown on the federal income Tax Returns of
the Company (true, correct and complete copies of which have been furnished by
the Company to Acquiror)
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is true, correct and complete and fairly and accurately reflects the information
purported to be shown. Federal and state income Tax Returns of the Company have
been examined by the IRS or applicable state Authority through the taxable
periods set forth in Section 3.11(c) of the Disclosure Schedule, and the Company
has not been notified regarding any pending examination, except as shown in
Section 3.11(c) of the Disclosure Schedule.
(d) The Company is not a party to any tax sharing agreement or
arrangement, except as set forth in Section 3.11(d) of the Disclosure Schedule.
(e) The Company is not, and during the five years prior to the
date hereof has not been, a "United States real property holding corporation" as
defined in Section 897 of the Code.
Section 3.12 ERISA.
(a) The Company (which for purposes of this Section 3.12 shall
include any ERISA Affiliate with respect to any Plan subject to Title IV of
ERISA) does not contribute to any Plan or sponsor any Plan or Benefit
Arrangement and has not contributed to or sponsored any Plan or Benefit
Arrangement, except as set forth in Section 3.12(a) of the Disclosure Schedule.
As to all Plans and Benefit Arrangements listed in Section 3.12(a) of the
Disclosure Schedule, and except as disclosed in such Section 3.12(a) of the
Disclosure Schedule:
(i) all such Plans and Benefit Arrangements comply and have
been administered in all material respects in form and in
operation with all Applicable Laws, and the Company has
not received any outstanding notice from any Authority
questioning or challenging such compliance;
(ii) all such Plans maintained or previously maintained by the
Company that are or were intended to comply with Section
401 of the Code comply and complied in form and in
operation with all applicable requirements of such
Section, a favorable determination letter has been
received from the Internal Revenue Service with respect to
each such Plan or the sponsor of the Plan is entitled to
rely on a favorable opinion letter issued to the prototype
sponsor by the Internal Revenue Service with respect to
each such Plan, and no event has occurred which will or
could reasonably be expected to give rise to
disqualification of any such Plan under such Section or to
a tax under Section 511 of the Code;
(iii) none of the assets of any such Plan are invested in
employer securities or employer real property;
(iv) there have been no "prohibited transactions" (as described
in Section 406 of ERISA or Section 4975 of the Code) with
respect to any such Plan and the Company has not otherwise
engaged in any prohibited transaction;
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(v) there have been no acts or omissions by the Company that
have given rise to or may reasonably be expected to give
rise to material fines, penalties, taxes or related
charges under Sections 502(c), 502(i) or 4071 of ERISA or
Chapter 43 of the Code for which the Company may be
liable;
(vi) there are no Claims (other than routine claims for
benefits) pending or threatened involving such Plans or
the assets of such Plans;
(vii) no such Plan is subject to Title IV of ERISA, or if
subject, there have been no "reportable events" (as
described in Section 4043 of ERISA) as to which there is
any material risk of termination of such Plan, and no
steps have been taken to terminate any such Plan;
(viii) to the extent that the most recent balance sheet forming
part of the Financial Statements does not include a pro
rata amount of the contributions which would otherwise
have been made in accordance with past practices for the
Plan years which include the Closing Date, such amounts
are set forth in Section 3.12(a) of the Disclosure
Schedule;
(ix) neither the Company nor any of its directors, officers,
employees or any other fiduciary has committed any breach
of fiduciary responsibility imposed by ERISA that would
subject the Company or any of its directors, officers or
employees to liability under ERISA;
(x) no such Plan that is subject to Part 3 of Subtitle B of
Title I of ERISA or Section 412 of the Code had an
accumulated funding deficiency (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recently completed
fiscal year of such Plan;
(xi) no material liability to the PBGC has been or is expected
by the Company to be incurred by the Company with respect
to any such Plan, and there has been no event or condition
which presents a material risk of termination of any such
Plan by the PBGC;
(xii) except as set forth in Section 3.12(a)(xii) of the
Disclosure Schedule (which entry, if applicable, shall
indicate the present value of accumulated plan liabilities
calculated in a manner consistent with FAS 106 and actual
annual expense for such benefits for each of the last two
(2) years) and pursuant to the provisions of COBRA, which
provisions have been complied with in all material
respects, the Company does not maintain any Plan that
provides benefits described in Section 3(1) of ERISA to
any
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former employees or retirees of the Company or any of its
former Subsidiaries;
(xiii) the Company has made available to Acquiror a copy of the
two most recently filed federal Form 5500 series and
accountant's opinion, if applicable, for each Plan (and
the two most recent actuarial valuation reports for each
Plan, if any, that is subject to Title IV of ERISA), and
all information provided by the Company to any actuary in
connection with the preparation of any such actuarial
valuation report was true, correct and complete in all
material respects; and
(xiv) the Company has delivered to Acquiror correct and complete
copies of all Plans and Benefit Arrangements and, where
applicable, each of the following documents with respect
to such plans: (i) any amendments; (ii) any related trust
documents; (iii) the most recent summary plan descriptions
and summaries of material modifications; and (iv) written
communications to employees to the extent the substance of
the Plans and Benefit Arrangements described therein
differs materially from the other documentation furnished
under this clause.
(b) The Company is not and has never has been a party to any
Multiemployer Plan or made contributions to any such plan.
(c) Section 3.12(c) of the Disclosure Schedule sets forth the
basis of funding, and the current status of, any past service liability with
respect to each Employment Arrangement to which the same is applicable.
Section 3.13 Authorized and Outstanding Capital Stock.
(a) The authorized and outstanding capital stock, Option
Securities and Convertible Securities of the Company is as set forth in Section
3.13(a) of the Disclosure Schedule. All of such outstanding capital stock has
been duly authorized and validly issued, is fully paid and nonassessable and is
not subject to any preemptive or similar rights. Except as set forth in Section
3.13(a) of the Disclosure Schedule, (i) there is neither outstanding nor has the
Company agreed to grant or issue any shares of its capital stock or any Option
Security or Convertible Security, and (ii) the Company is not a party to and is
not bound by any agreement, put or commitment pursuant to which it is obligated
to purchase, redeem or otherwise acquire any shares of capital stock or any
Option Security or Convertible Security. Between the date hereof and the
Closing, the Company will not issue, sell or purchase or agree to issue, sell or
purchase any capital stock or any Option Security or Convertible Security of the
Company, except to the extent required pursuant to the terms hereof. All of the
issued and outstanding Shares were issued and sold, and all Option Securities
were granted, in compliance with the Securities Act, the Exchange Act and
applicable state securities laws.
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(b) Section 3.13(b) of the Disclosure Schedule sets forth, as
of the date hereof, (i) the number of Shares subject to Option Securities
outstanding under the Data Securities International, Inc. 1995 Stock Option Plan
(the "Option Plan"), including the number of Shares subject to currently
exercisable Option Securities thereunder; (ii) the number of Shares reserved for
future issuance pursuant to Option Securities which may be granted under the
Option Plan; and (iii) the number of Shares subject to Option Securities that
would be exercisable as of September 1, 1997 in accordance with the vesting
schedules contained in the Option Plan and the related option agreements and
assuming that all option agreements remain outstanding. The Option Plan
constitutes the only plan or arrangement pursuant to which Option Securities are
currently outstanding. Except as contemplated by Section 2.4 of this Agreement,
neither the execution and delivery of this Agreement nor the consummation of the
Merger or the Transactions are Events that will cause an acceleration of the
exercise or vesting schedule of any Option Security. The Company has duly
complied in all material respects with all of the terms and conditions of the
Option Plan and no amendment, modification or other revision to the Option Plan
or any related option agreement that required the consent or approval of a
holder of an Option Security has been made unless, in each case, such consent or
approval was duly obtained. All Shares subject to issuance under an Option
Security will, upon issuance on the terms and conditions specified in such
Option Security, be validly issued, fully paid and nonassessable.
(c) All of the outstanding capital stock of the Company is
owned by the Stockholders, and all of the outstanding Option Securities and
Convertible Securities are owned by the Persons, as set forth in Section 3.13(c)
of the Disclosure Schedule, in each case, to the Company's knowledge, free and
clear of all Liens, except as set forth in Section 3.13(c) of the Disclosure
Schedule, and except as set forth in Section 3.13(c) of the Disclosure Schedule,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which any Stockholder is a party relating to the
pledge, disposition or voting of any Shares owned by such Stockholder, and there
are no voting trusts or voting agreements with respect to such Shares.
Section 3.14 Employment Arrangements.
(a) The Company does not have any obligation or liability,
contingent or other, under any Employment Arrangement, other than those listed
or described in Section 3.14(a) of the Disclosure Schedule. None of the
employees of the Company is now or, to the Company's knowledge, during the past
five (5) years has been represented by any labor union or other employee
collective bargaining organization, or are now or, to the Company's knowledge,
during the past five (5) years have been parties to any labor or other
collective bargaining agreement. The Company has performed all obligations
required to be performed under all Employment Arrangements and is not in
material breach or violation of or in default or arrears under any of the terms,
provisions or conditions thereof.
(b) Except as set forth in Section 3.14(b) of the Disclosure
Schedule or as contemplated hereby with respect to the vesting of Option
Securities, no employee is entitled to,
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nor shall any employee accrue or receive, additional benefits, service or
accelerated rights to payments of benefits, whether under any Employment
Arrangement or otherwise, including the right to receive any parachute payment,
as defined in Section 280G of the Code, or become entitled to severance,
termination allowance or similar payments as a result of this Agreement, the
Merger or the Transactions.
Section 3.15 Material Agreements. Listed on Section 3.15 of the
Disclosure Schedule are all Material Agreements relating to the ownership or
operation of the business and property of the Company presently held or used by
the Company or to which the Company is a party or to which it or any of its
property is subject or bound. True, complete and correct copies of each of the
Material Agreements have been furnished by the Company to Acquiror (or true,
complete and correct descriptions thereof have been set forth in Section 3.15 of
the Disclosure Schedule, if any such Material Agreements are oral). All of the
Material Agreements are valid, binding and legally enforceable obligations of
the Company and, to the Company's knowledge, of each other party thereto
(subject to the Enforceability Exceptions), and the Company validly and lawfully
operates its business and owns its property under each of the Material
Agreements. Except as disclosed in Section 3.15 of the Disclosure Schedule, the
Company has duly complied in all material respects with all of the terms and
conditions of each Material Agreement and has not done or performed, or failed
to do or perform (and there is no pending or, to the knowledge of the Company,
threatened Claim that the Company has not so complied, done and performed or
failed to do or perform), any act the effect of which would be to invalidate or
provide grounds for the other party thereto to terminate (with or without
notice, passage of time or both) such Material Agreement or impair the rights or
benefits, or increase the costs, of the Company, under any of the Material
Agreements.
Section 3.16 Ordinary Course of Business.
(a) The Company, from the date of the most recent balance
sheet forming part of the Financial Statements to the date hereof, and until the
Closing Date, except (i) as may be described on Section 3.16(a) of the
Disclosure Schedule, (ii) as may be required or expressly contemplated by the
terms of this Agreement, (iii) as may be reflected in the Financial Statements,
or (iv) as may be consented to by Acquiror, which consent shall not be
unreasonably withheld or delayed:
(i) has operated, and will continue to operate, its business
in the normal, usual and customary manner in the ordinary
course of business, consistent with prior practice;
(ii) has not sold or otherwise disposed of, or contracted to
sell or otherwise dispose of, and will not sell or
otherwise dispose of or contract to sell or otherwise
dispose of, any of its properties or assets, other than in
the ordinary course of business;
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19
(iii) except in each case in the ordinary course of business,
consistent with prior practice:
(A) has not incurred and will not incur any obligations
or liabilities (fixed, contingent or other);
(B) has not entered and will not enter into any
commitments; and
(C) has not cancelled and will not cancel any debts
or claims;
(iv) has not made or committed to make, and will not make or
commit to make, any additions to its property or any
purchases of machinery or equipment, except in the
ordinary course of business, consistent with past
practice;
(v) has not discharged or satisfied, and will not discharge or
satisfy, any Lien and has not paid and will not pay any
obligation or liability (absolute or contingent) other
than current liabilities or obligations under contracts
then existing or thereafter entered into in the ordinary
course of business, consistent with prior practice, and
commitments under Leases existing on that date or incurred
since that date in the ordinary course of business or
repaying or prepaying long-term indebtedness or the
current portion thereof;
(vi) has not created or permitted to be created, and will not
create or permit to be created any Lien on any of its
tangible property;
(vii) except in the ordinary course of business, has not
transferred or created, or permitted to be created, and
will not transfer or create, or permit to be created, any
Lien on any Intangible Assets;
(viii) except in the ordinary course of business, consistent
with prior practice, has not increased and will not
increase the compensation payable or to become payable to
any of its directors, officers, employees, advisers,
consultants, salesmen or agents or otherwise alter, modify
or change the terms of their employment or engagement;
(ix) has not suffered any material damage, destruction or loss
(whether or not covered by insurance) or any acquisition
or taking of property by any Authority;
(x) has not waived, and will not waive, any rights of material
value without fair and adequate consideration;
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20
(xi) has not entered into, amended or terminated and will not
enter into, amend or terminate any Lease, Government
Authorization, Private Authorization, Material Agreement
or Employment Arrangement or any Contractual Obligation or
transaction with any Affiliate, except for terminations in
the ordinary course of business, consistent with prior
practice, in accordance with the terms thereof;
(xii) has not amended or terminated and will not amend or
terminate, and has kept and will keep in full force and
effect including without limitation renewing to the extent
the same would otherwise expire or terminate, all
insurance policies and coverage;
(xiii) has not amended and will not amend any provision of its
Organizational Documents;
(xiv) has not made and will not make any changes in its methods
of financial accounting or accounting policies and will
not, after the Closing Date, change its methods of
financial accounting for tax purposes, including with
respect to any Returns filed after the Closing Date;
(xv) has not issued and will not issue any additional shares of
capital stock (other than the issuance of shares in
accordance with the terms of Option Securities outstanding
on the date hereof) or any Option Securities or
Convertible Securities and has not entered, and will not
enter into any agreement to do the same; and
(xvi) has not entered into and will not enter into any other
transaction or series of related transactions which
individually or in the aggregate is material to the
Company, except in the ordinary course of business.
(b) From the end of its most recent fiscal year to the date
hereof, except as described in Section 3.16(b) of the Disclosure Schedule, the
Company has not, or on or prior to the Closing Date will not have, declared,
made or paid, or agreed to declare, make or pay, any Distribution.
Section 3.17 Bank Accounts, Etc. Section 3.17 of the Disclosure
Schedule contains a true and correct and complete list as of the date hereof of
all banks, trust companies, savings and loan associations and brokerage firms in
which the Company has an account or a safe deposit box and the names of all
Persons authorized to draw thereon, to have access thereto, or to authorize
transactions therein, the names of all Persons, if any, holding powers of
attorney from the Company and a summary statement as to the terms thereof.
Section 3.18 Adverse Restrictions. The Company is not a party to or
subject to, nor is any of its property subject to, any Applicable Law,
Government Authorization, Contractual
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21
Obligation, Employment Arrangement, Material Agreement or Private Authorization,
or any other obligation or restriction of any kind or character, or any
aggregation thereof, which impairs in any material respect the Company's ability
to conduct its business as it is currently being conducted or which could have
any Adverse Effect on the Company, except as set forth in Section 3.18 of the
Disclosure Schedule.
Section 3.19 Broker or Finder. No Person other than Duff Ackerman
Goodrich & Associates, L.P. ("DAG"), assisted in or brought about the
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of the Company.
Section 3.20 Operational Matters. Section 3.20 of the Disclosure
Schedule sets forth a true, complete and correct list of all pending
notifications, requests, demands or orders for release of materials that are
subject to escrow or other deposit agreements with the Company, whether from the
depositor or any beneficiary claiming under such agreement, any Person
purporting to act on behalf of any of them or from any Authority.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
AND ACQUIROR MERGER SUBSIDIARY
Acquiror and Acquiror Merger Subsidiary, jointly and severally,
represent, warrant and covenant to, and agree with, the Company as follows:
Section 4.1 Organization and Qualification; Power and Authority; Effect
of Transaction.
(a) Each of Acquiror and Acquiror Merger Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware. Each of Acquiror and Acquiror Merger Subsidiary is duly
qualified and authorized to do business and is in good standing as a foreign
corporation in each jurisdiction in which the character of its property or the
nature of its business or operations requires such qualification or
authorization, except to the extent the failure to so qualify or to maintain
such authorizations would not have an Adverse Effect.
(b) Each of Acquiror and Acquiror Merger Subsidiary has all
requisite power and authority (corporate and other) and has in full force and
effect all Government Authorizations and Private Authorizations in order to
enable it to execute and deliver, and to perform its obligations under, this
Agreement and each Collateral Document executed or required to be executed
pursuant hereto or thereto and to consummate the Merger and the Transactions;
and the execution, delivery and performance of this Agreement and each
Collateral Document executed or required to be executed pursuant hereto or
thereto have been duly
<PAGE>
22
authorized by all requisite corporate or other action. This Agreement has been
duly executed and delivered by each of Acquiror and Acquiror Merger Subsidiary
and constitutes, and each Collateral Document executed or required to be
executed pursuant hereto or thereto when executed and delivered by it will
constitute, legal, valid and binding obligations of Acquiror and Acquiror Merger
Subsidiary, respectively, enforceable in accordance with their respective terms
(subject to the Enforceability Exceptions).
(c) Neither the execution and delivery of this Agreement or
any Collateral Document executed or required to be executed pursuant hereto or
thereto, nor the consummation of the Transactions, nor compliance with the
terms, conditions and provisions hereof or thereof by each of Acquiror and
Acquiror Merger Subsidiary:
(i) will conflict with, or result in a breach or violation of,
or constitute a default under, any Applicable Law on the
part of Acquiror or Acquiror Merger Subsidiary or will
conflict with, or result in a breach or violation of, or
constitute a default under, or permit the acceleration of
any obligation or liability in, or but for any requirement
of giving of notice or passage of time or both would
constitute such a conflict with, breach or violation of,
or default under, or permit any such acceleration in, any
Contractual Obligation of Acquiror or Acquiror Merger
Subsidiary, or
(ii) will require any Government Authorization or Government
Filing or Private Authorization, except for the
certificate of merger and related filings under the DGCL
in connection with the Merger and the Transactions.
Section 4.2 Capitalization of Acquiror and Acquiror Merger Subsidiary.
The authorized capital stock of Acquiror consists of 20,000,000 shares of common
stock, par value $.01 per share, of which 11,505,293 shares were outstanding as
of August 5, 1997, 1,000,000 shares of Nonvoting Common Stock, par value $.01
per share, of which 454,590 shares were outstanding as of August 5, 1997, and
2,000,000 shares of Preferred Stock, par value $.01 per share, none of which is
outstanding. The authorized capital stock of Acquiror Merger Subsidiary as of
the date hereof is 1,000 shares of common stock, par value $.01 per share, of
which 100 shares are issued and outstanding. All of such outstanding capital
stock has been duly authorized and validly issued, is fully paid and
nonassessable and is not subject to any preemptive or similar rights. All shares
of common stock of Acquiror Merger Subsidiary held by Acquiror have been duly
authorized and validly issued to Acquiror and are fully paid and nonassessable
and are not subject to any preemptive or similar rights. As of the date hereof,
except for this Agreement, Acquiror Merger Subsidiary does not have any
outstanding or authorized Convertible Securities. The shares of Acquiror Stock
issued in connection with the Merger will, when so issued, be duly authorized,
validly issued, fully paid and nonassessable and will not be subject to any
preemptive or similar rights.
<PAGE>
23
Section 4.3 SEC Filings; Financial Statements.
(a) Acquiror has filed all forms, reports and documents
required to be filed by it with the SEC since January 30, 1996, and has
heretofore made available to the Company, in the form filed with the SEC
(including any exhibits thereto) (i) its Annual Report on Form 10-K for the
fiscal year ended December 31, 1996; (ii) its Quarterly Report on Form 10-Q for
the quarters ended March 31, 1997 and June 30, 1997; (iii) its Current Report on
Form 8-K dated June 12, 1997 related to the merger of Safesite Records
Management Corporation into a wholly owned subsidiary of Acquiror; (iv) its
proxy statement relating to its 1997 meeting of stockholders; and (v) all other
forms, reports and registration statements filed by it with the SEC since March
31, 1997 (the forms, reports and other documents referred to in clauses (i)
through (v) above being referred to herein collectively as the "Acquiror SEC
Reports"). The Acquiror SEC Reports and any forms, reports and other documents
filed by Acquiror with the SEC after the date of this Agreement, (x) complied
with or will comply in all material respects with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder and (y) did not at the time they were filed, or will not
at the time they are filed, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(b) Acquiror's financial statements, including in each case
the notes thereto, contained in the Acquiror SEC Reports have been prepared in
accordance with GAAP (subject in the case of unaudited statements to the absence
of notes and schedules) applied on a consistent basis throughout the periods
covered thereby, except as otherwise noted therein, and fairly present the
financial condition and results of operations of Acquiror and its Subsidiaries,
on the bases therein stated, as of the respective dates thereof, and for the
respective periods covered thereby, subject in the case of unaudited financial
statements to normal nonmaterial year-end audit adjustments and accruals.
(c) Since the date of Acquiror's most recent report to the SEC
(Form 10-Q for the quarter ended June 30, 1997), there has been no Adverse
Change in Acquiror, and there is no Event known to Acquiror which Adversely
Affects, or in the future might (so far as Acquiror can now reasonably foresee)
Adversely Affect, Acquiror or the ability of Acquiror to perform any of the
obligations set forth in this Agreement, or any Collateral Document executed or
required to be execute pursuant hereto or thereto, except for changes in general
economic conditions or the industry in general.
Section 4.4 Brokers. No Person assisted in or brought about the
negotiation of this Agreement, the Merger or the subject matter of the
Transactions in the capacity of broker, agent or finder or in any similar
capacity on behalf of Acquiror or Acquiror Merger Subsidiary.
<PAGE>
24
ARTICLE 5
ADDITIONAL COVENANTS
Section 5.1 Access to Information; Confidentiality.
(a) The Company shall afford to Acquiror and its
Representatives full access during normal business hours throughout the period
prior to the Effective Time to all of the Company's properties, books,
contracts, commitments and records (including without limitation Tax Returns)
and, during such period, shall furnish promptly upon request (i) to the extent
not provided for pursuant to the preceding clause, all financial records,
ledgers, workpapers and other sources of financial information possessed or
controlled by the Company or its accountants deemed by Acquiror or its
Representatives necessary or useful for the purpose of performing an audit of
the Company and certifying financial statements and financial information, and
(ii) such other information concerning any of the foregoing as Acquiror shall
reasonably request. In addition, each Party shall furnish promptly upon request
a copy of each report, schedule and other document filed or received by it
pursuant to the requirements of any Applicable Law (including without limitation
federal or state securities laws) or filed by it or any of its Subsidiaries with
any Authority in connection with the Transactions or which may have a material
effect on their respective businesses, operations, properties, prospects,
personnel, condition, (financial or other), or results of operations. The
Company and Acquiror acknowledge that they have heretofore executed a
confidentiality agreement, dated February 27, 1997, as executed by the Company
on March 7, 1997 (the "Confidentiality Agreement"), which separately and as
incorporated herein shall remain in full force and effect after and
notwithstanding the execution and delivery of this Agreement, and that
information obtained from the Company by Acquiror or its Representatives or from
Acquiror by the Company or its Representatives, pursuant to Section 5.1(a), the
Confidentiality Agreement or otherwise, shall be subject to the provisions of
the Confidentiality Agreement.
(b) Subject to the terms and conditions of the Confidentiality
Agreement, Acquiror and the Company may disclose such information as may be
necessary in connection with seeking all Government and Private Authorizations
or that is required by Applicable Law to be disclosed. In the event that this
Agreement is terminated in accordance with its terms, Acquiror and the Company
shall each promptly redeliver all nonpublic written material provided pursuant
to this Section or any other provision of this Agreement or otherwise in
connection with the Merger and the Transactions and shall not retain any copies,
extracts or other reproductions in whole or in part of such written material
other than one copy thereof, which shall be delivered to independent counsel for
such party.
(c) No investigation pursuant to this Section 5.1 shall affect
any representation or warranty in this Agreement of any Party hereto or any
condition to the obligations of the Parties hereto.
Section 5.2 Agreement to Cooperate.
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25
(a) Each Party shall use its best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under Applicable Law to consummate the Merger and make
effective the Transactions, including using its best efforts to: (i) prepare and
file with the applicable Authorities as promptly as practicable after the
execution of this Agreement all requisite applications and amendments thereto,
together with related information, data and exhibits, necessary to request
issuance of orders approving the Merger and the Transactions by all such
applicable Authorities, each of which must be obtained or become final in order
to satisfy the condition applicable to it set forth in Section 6.1(d); (ii)
obtain all necessary or appropriate waivers, consents and approvals; (iii)
effect all necessary registrations, filings and submissions (including without
limitation filings under federal or state securities laws and any other
submissions requested by the SEC); and (iv) lift any injunction or other legal
bar to the Merger and the Transactions and, in such case, to proceed with the
Merger and the Transactions as expeditiously as possible, subject, however, to
the requisite votes of the Stockholders.
(b) Each Party agrees to take such actions as may be necessary
to obtain any Government Authorizations legally required for the consummation of
the Merger and the Transactions, including the making of any Government Filings,
publications and requests for extensions and waivers.
(c) The Company will use its best efforts on or prior to the
Closing Date to obtain the satisfaction of the conditions specified in Sections
6.1 and 6.2. Each of Acquiror and Acquiror Merger Subsidiary will use its best
efforts on or prior to the Closing Date to obtain the satisfaction of the
conditions applicable to it specified in Sections 6.1 and 6.3.
(d) The Company shall take such steps as are necessary and
appropriate to obtain, and shall promptly obtain, satisfaction and discharge of
all Liens set forth in Section 3.5(a) of the Disclosure Schedule.
(e) The parties shall cooperate with one another in the
preparation, execution and filing of all Returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp Taxes, any Plan, Benefit
Arrangement or Employment Arrangement, any transfer, recording, registration and
other fees, and any similar Taxes that become payable in connection with the
Transactions that are required or permitted to be filed on or before the
Effective Time. Acquiror shall make available after the Closing Date such
Returns of the Company and other information as the Stockholders may reasonably
request in connection with any proceedings, arrangements or disputes relating to
adjustment of federal income and other Taxes of the Stockholders for periods
prior to the Closing Date.
(f) The Company shall cooperate with Acquiror's independent
accountants in their audit of the Company and its financial statements for the
year ended December 31, 1996 and pursuant to Section 8.7 hereof.
<PAGE>
26
(g) Without intending to limit the generality of the covenants
set forth in Section 3.16, the Company agrees that it shall not without the
prior written consent of Acquiror, which consent shall not unreasonably be
withheld or delayed, (i) enter into, agree to or otherwise become bound by any
new leases of real property or amend or exercise any option to extend any
existing lease of real property or (ii) hire any new employee whose annual
compensation exceeds $50,000. In addition, the Company shall confer on a regular
and frequent basis with Acquiror with respect to operational matters of the
Company.
Section 5.3 Investment Agreements; Registration Rights Agreement.
(a) Prior to the Closing Date, the Company shall deliver to
Acquiror letter agreements, substantially in the form attached hereto as Exhibit
5.3 (the "Investment Agreement"), executed by each Stockholder.
(b) Acquiror agrees that it will take such actions as are
necessary to enable each Stockholder who so desires to become party to that
certain Amended and Restated Registration Rights Agreement dated as of June 12,
1997 (the "Registration Rights Agreement") with respect to shares of Acquiror
Stock to be issued to the Stockholders pursuant to Section 2.1(a) hereof,
pursuant to which the Stockholders shall, subject to customary proration or
"cutback" provisions, have (i) the right on one occasion, exercisable upon the
request of a majority in interest of the Stockholders, to demand the
registration of shares of Acquiror Stock having an aggregate market price of at
least $4,000,000, and (ii) an unlimited number of piggyback registration rights
in conjunction with public offerings of Acquiror Stock (other than any such
offerings in connection with acquisitions). The exercise of such rights shall be
subject to the terms and conditions of the Registration Rights Agreement.
Section 5.4 No Solicitation. The Company shall not, nor shall it permit
any of its Representatives (including, without limitation, any investment
banker, attorney or accountant retained by it) to, initiate, solicit or
facilitate, directly or indirectly, any inquiries or the making of any proposal
with respect to an Other Transaction, engage in any discussions or negotiations
concerning, or provide to any other person any information or data relating to,
it for the purposes of, or otherwise cooperate in any way with or assist or
participate in, or facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, a proposal to seek or
effect an Other Transaction, or agree to or endorse any Other Transaction;
provided, however, that nothing contained in this Section shall prohibit the
Company or its Board of Directors from making any disclosure to Stockholders
that, in the reasonable judgment of its Board of Directors in accordance with,
and based upon the written advice of, outside counsel, is required under
Applicable Law. The Company shall promptly advise Acquiror of, and shall
communicate the material terms of, any proposal it may receive, or any inquiries
it receives that may reasonably be expected to lead to such a proposal relating
to an Other Transaction, and the identity of the Person making it. The Company
shall further advise Acquiror of the status and changes in the material terms of
any such proposal or inquiry (or any amendment to any of them). During the term
of this Agreement, the Company shall not
<PAGE>
27
enter into any agreement oral or written, and whether or not legally binding,
with any Person that provides for, or in any way facilitates, an Other
Transaction, or affects any other obligation of the Company under this
Agreement.
Section 5.5 Directors' and Officers' Indemnification and Insurance.
From and after the Effective Time, the Surviving Corporation shall indemnify,
defend and hold harmless the present and former officers and directors of the
Company against all Claims or amounts that, with the approval of the Surviving
Corporation, are paid in settlement of or otherwise in connection with any Claim
based in whole or in part on the fact that such Person is or was a director or
officer of the Company and arising out of actions or omissions occurring at or
prior to the Effective Time (including, without limitation, the Merger and the
Transactions), in each case to the fullest extent currently provided under the
Company's Organizational Documents or the DGCL (but only to the extent permitted
under the DGCL), and shall pay any expenses in advance of the final disposition
of any such action or proceeding to each such Person to the fullest extent
permitted under the DGCL, upon receipt from such Person of an undertaking to
repay such advances to the extent required under the DGCL.
Section 5.6 Notification of Certain Matters. Each Party shall give
prompt notice to the other of the occurrence or non-occurrence of any Event that
would be likely to cause in any material respect (i) any representation or
warranty made by it contained in this Agreement to be untrue or inaccurate, or
(ii) any change to be made in the Disclosure Schedule, or (iii) any failure of
the Company or Acquiror, as the case may be, to comply with or satisfy, or be
able to comply with or satisfy, any material covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.6 shall not limit or otherwise
affect the remedies available hereunder to the Party receiving such notice.
Section 5.7 Public Announcements. Until the Closing, or in the event of
termination of this Agreement, each party shall consult with the other before
issuing any press release or otherwise making any public statements with respect
to this Agreement, the Merger or any Transaction and shall not issue any such
press release or make any such public statement without the prior consent of the
other, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, the Company acknowledges and agrees that Acquiror
may, without the prior consent of the Company, issue such press releases or make
such public statements as may be required by Applicable Law or by Nasdaq
regulations, in which case, to the extent practicable, Acquiror will consult
with, and exercise in good faith, all reasonable business efforts to agree with
the Company regarding the nature, extent and form of such press release or
public statement, and, in any event, with prior notice to the Company.
Section 5.8 Obligations of Acquiror. Acquiror agrees to take all action
necessary to cause Acquiror Merger Subsidiary and the Surviving Corporation to
perform their respective obligations under this Agreement. Acquiror shall be
liable as provided herein for any breach of any representation, warranty,
covenant or agreement of Acquiror Merger Subsidiary and for any breach of this
covenant.
<PAGE>
28
Section 5.9 Employee Benefits; Severance Policy.
(a) Prior to the Closing Date, the Company shall take all
actions necessary to terminate each Plan maintained by the Company that complies
or is intended to comply with Section 401 of the Code. If a Plan is terminated
in accordance with this Section 5.9(a), benefit accruals, including
contributions of salary reduction contributions, if any, shall cease. The
Company shall take all actions necessary to amend each Plan to prevent loans as
soon as practicable following execution of this Agreement.
(b) The Surviving Corporation may, in its sole discretion,
substitute such employee compensation, benefit and severance programs for those
of the Company as are comparable to the programs provided from time to time to
Acquiror's employees and the employees of Acquiror's Subsidiaries. Subject to
the preceding sentence, the Surviving Corporation shall have no obligation to
continue the existence of any Plan or Benefit Arrangements maintained by the
Company
Section 5.10 Certain Actions Concerning Business Combinations. The
Company will not apply, and will not take any action resulting in the
application of, or otherwise elect to apply, the provisions of applicable state
takeover laws, if any, with respect to or as a result of the Merger or the
Transactions.
Section 5.11 Conversion of Option Securities. The Company will take all
action necessary (a) to provide timely written notice to all persons holding
Option Securities to the effect that all Option Securities outstanding as of the
Effective Time will be exchanged for Substitute Options in accordance with
Section 2.4 hereof, and (b) to obtain any consent or waiver from the holder of
an Option Security necessary to give effect to actions contemplated by Section
2.4. Without the prior written consent of Acquiror, except as set forth in
Section 3.13(b) of the Disclosure Schedule or as contemplated hereby, (i) such
notice will not cause an acceleration of the exercise, conversion or vesting
schedule of any Option Security, and (ii) the Company will not otherwise
accelerate, or cause an acceleration of, the exercise, exchange or vesting
schedule of any Option Security.
Section 5.12 Tax Treatment. Each of Acquiror, Acquiror Merger
Subsidiary and the Company shall use its reasonable best efforts to cause the
Merger to qualify as a reorganization under the provisions of Section 368(a) of
the Code and to obtain the opinion of counsel referred to in Section 6.2(j).
<PAGE>
29
ARTICLE 6
CLOSING CONDITIONS
Section 6.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each Party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(a) This Agreement, the Merger and the Transactions shall have
been approved and adopted in accordance with the DGCL by the affirmative vote,
or to the extent permitted by Applicable Law, by written consent, of the
Stockholders holding at least the minimum number of shares of the Company Stock
then issued and outstanding as are required by Applicable Law and the Company's
Organizational Documents for such approval and adoption;
(b) As of the Closing Date, no Legal Action shall be pending
before or threatened in writing by any Authority seeking to restrain, prohibit,
make illegal or delay materially, or seeking material damages from the Party
seeking to invoke this Section 6.1(b) (and, in case Acquiror is seeking to
invoke this Section 6.1(b), the Company), or to impose any Adverse conditions in
connection with, the consummation of the Merger and the Transactions, or that
might, in the reasonable business judgment of Acquiror, have an Adverse Effect
on Acquiror and its Subsidiaries taken as a whole, assuming consummation of the
Merger; and
(c) Other than the filing of the certificate of merger in
accordance with the DGCL, all authorizations, consents, waivers, orders or
approvals required to be obtained, and all filings, submissions, registrations,
notices or declarations required to be made, by Acquiror or Acquiror Merger
Subsidiary and the Company prior to the consummation of the Merger and the
Transactions shall have been obtained from, and made with, all required
Authorities, except for such authorizations, consents, waivers, orders,
approvals, filings, registrations, notices or declarations the failure to obtain
or make as would not, in the reasonable judgment of Acquiror, assuming
consummation of the Merger, have an Adverse Effect on the Company.
Section 6.2 Conditions to Obligations of Acquiror and Acquiror Merger
Subsidiary. The obligations of Acquiror and Acquiror Merger Subsidiary to effect
the Merger shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions, any or all of which may be waived, in whole or
in part, to the extent permitted by Applicable Law:
(a) All agreements, certificates, opinions and other documents
shall be reasonably satisfactory in form, scope and substance to Acquiror and
its counsel, and Acquiror and its counsel shall have received all information
and copies of all documents, including records of corporate proceedings, which
they may reasonably request in connection therewith, such documents where
appropriate to be certified by proper corporate officers;
<PAGE>
30
(b) The representations, warranties, covenants and agreements
of the Company contained in this Agreement or otherwise made in writing by it or
on its behalf pursuant hereto or otherwise made in connection with the Merger
and the Transactions shall be true and correct in all material respects at and
as of the Closing Date with the same force and effect as though made on and as
of such date except those which speak as of a certain date, which shall continue
to be true and correct as of such date on the Closing Date; each and all of the
agreements and conditions to be performed or satisfied by the Company at or
prior to the Closing Date shall have been duly performed or satisfied in all
material respects; and the Company shall have furnished Acquiror with such
certificates and other documents evidencing the truth of such representations,
warranties, covenants and agreements and the performance of such agreements or
conditions as Acquiror shall have reasonably requested;
(c) There shall have been furnished to Acquiror favorable
opinions dated the Closing Date of Howard, Rice, Nemerovski, Canady, Falk &
Rabkin in the form and substance satisfactory to Acquiror and its counsel;
(d) No Legal Action or other Claim shall be pending or
threatened at any time prior to or on the Closing Date before or by any
Authority or by any other Person seeking to restrain or prohibit, or seeking
damages or other relief in connection with, the execution and delivery of this
Agreement or the consummation of the Merger and the Transactions or that might
in the reasonable judgment of Acquiror have any Adverse Effect on the Company
or, assuming consummation of the Merger, Acquiror and its Subsidiaries taken as
a whole;
(e) Each Stockholder shall have executed and delivered an
Investment Agreement.
(f) The Company shall have obtained consents to the assignment
and continuation of all Material Agreements that, in the reasonable judgment of
Acquiror, require such consents, and the Company shall have obtained
satisfaction and discharge of all Liens set forth in Schedule 3.5(a);
(g) As of the Closing Date, there shall not have occurred and
be continuing any Adverse Change affecting the condition (financial and other)
of the Company as reflected in the Financial Statements;
(h) Each of the officers and directors of the Company and each
trustee under each Plan shall have submitted his or her unqualified written
resignation, dated as of the Closing Date, from all such positions held with the
Company and as a trustee for each such Plan;
(i) Except for such Contractual Obligations as are set forth
in Schedule 6.1(i) hereto, which shall be effective as of the Effective Time,
all Contractual Obligations set forth in Section 3.9 of the Disclosure Schedule
shall have been satisfied and discharged as of the Closing Date;
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31
(j) DAG shall have delivered to Acquiror an acknowledgment of
payment and release in respect of any fees and expenses relating to DAG's
services as broker, agent or finder in connection with this Agreement, the
Merger and the Transactions;
(k) Acquiror shall have received a favorable opinion, dated
the Closing Date, of Sullivan & Worcester LLP, its special tax counsel, to the
effect that this Agreement constitutes a plan of reorganization in accordance
with the provisions of Section 368(a) of the Code and as to the consequences
thereof to Acquiror; and
(l) Acquiror, the Company, the Agent and the escrow agent
shall have executed and delivered the Escrow Agreement and the Escrow Indemnity
Funds described therein shall have been delivered to the Escrow Agent.
Section 6.3 Conditions to Obligations of the Company. The obligations
of the Company to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part to the extent permitted by Applicable Law:
(a) Acquiror shall have furnished the Company with the
favorable opinion, dated the Closing Date, of Sullivan & Worcester LLP, counsel
to Acquiror, in the form attached hereto as Exhibit 6.3(a);
(b) All agreements, certificates, opinions and other documents
shall be reasonably satisfactory in form, scope and substance to the Company and
its counsel, and the Company and its counsel shall have received all information
and copies of all documents, including records of corporate proceedings, that
they may reasonably request in connection therewith, such documents where
appropriate to be certified by proper corporate officers;
(c) The representations, warranties, covenants and agreements
of each of Acquiror and Acquiror Merger Subsidiary contained in this Agreement
or otherwise made in writing by it or on its behalf pursuant hereto or otherwise
made in connection with the Transactions shall be true and correct in all
material respects at and as of the Closing Date with the same force and effect
as though made on and as of such date except those which speak as of a certain
date, which shall continue to be true and correct as of such date on the Closing
Date; each and all of the agreements and conditions to be performed or satisfied
by each of Acquiror and Acquiror Merger Subsidiary hereunder at or prior to the
Closing Date shall have been duly performed or satisfied in all material
respects; and each of Acquiror and Acquiror Merger Subsidiary shall have
furnished the Company with such certificates and other documents evidencing the
truth of such representations, warranties, covenants and agreements and the
performance of such agreements or conditions as the Company shall have
requested;
(d) Acquiror shall have made arrangements satisfactory to the
Company for the payment and discharge, simultaneously with the Closing of the
indebtedness of the Company set forth in Section 6.1(d) of the Disclosure
Schedule and, simultaneously with the Closing or immediately thereafter, the
other obligations of the Company set forth in Section 3.16(a) of the Disclosure
Schedule;
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32
(e) The Escrow Agreement shall have been executed and
delivered by Acquiror and the escrow agent and Acquiror shall have provided the
Stockholders the opportunity to become parties to the Registration Rights
Agreement.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement,
the Merger and the Transactions by the Stockholders:
(a) by mutual consent of Acquiror and the Company;
(b) by either Acquiror or the Company if any permanent
injunction, decree or judgment by any Authority preventing the consummation of
the Merger shall have become final and nonappealable;
(c) by the Company in the event (i) the Company is not in
breach of this Agreement and none of its representations and warranties shall
have become and continue to be untrue in any material respect, unless such
breach or untruth is capable of being cured by and will not prevent or delay
consummation of the Merger by or beyond the Termination Date, and (ii) either
(A) Acquiror or Acquiror Merger Subsidiary is in breach of this Agreement or any
of its representations or warranties shall have become and continue to be untrue
in any material respect, unless, in either case such breach or untruth is
capable of being cured by and will not prevent or delay consummation of the
Merger by or beyond the Termination Date, or (B) the Merger and the Transaction
have not been consummated by the Termination Date;
(d) by Acquiror:
(i) if the Merger and the Transactions fail to receive
the approval required by Applicable Law, by vote (or
to the extent permitted by Applicable Law, by
consent) of the Stockholders;
(ii) in the event (A) neither Acquiror nor Acquiror Merger
Subsidiary is in breach of this Agreement and none of
their representations or warranties shall have become
and continue to be untrue in any material respect,
unless such breach or untruth is capable of being
cured by and will not prevent or delay consummation
of the Merger by or beyond the Termination Date, and
(B) (I) the Company is in breach of this Agreement or
any of its representations or warranties shall have
become and continue to be untrue in any material
respect, unless, in either case, such breach or
untruth is capable of being cured by and will not
prevent or delay
<PAGE>
33
consummation of the Merger by or beyond the
Termination Date, or (II) the Merger and the
Transactions have not been consummated prior to the
Termination Date, or (III) any Stockholder is in
breach of such Stockholders' Investment Agreement or
any of such Stockholder's representations or
warranties therein shall have become and continue to
be untrue in any material respect, unless, in either
case, such breach or untruth is capable of being
cured by and will not prevent or delay consummation
of the Merger by or beyond the Termination Date; or
(iii) if (A) the Board of Directors of the Company shall
(I) withdraw, modify or change its recommendation so
that it is not in favor of this Agreement, the Merger
or the Transactions, or shall have resolved to do any
of the foregoing, or (II) have recommended or
resolved to recommend to the Stockholders any Other
Transaction, or (B) the Company shall have entered
into or agreed to enter into any Other Transaction.
Section 7.2 Effect of Termination. Except as provided in Sections 5.1,
5.7, 7.2 and 7.5, in the event of the termination of this Agreement pursuant to
Section 7.1, this Agreement shall forthwith become void, there shall be no
liability on the part of any Party or any of its officers or directors to the
other, and all rights and obligations of each Party shall cease; provided,
however, that such termination shall not relieve any Party from liability for
the breach of any of its representations, warranties, covenants or agreements
set forth in this Agreement, or impair the right of the Company, on the one
hand, and Acquiror and Acquiror Merger Subsidiary, on the other hand, to compel
specific performance of the other Party of its or their obligations under this
Agreement.
Section 7.3 Amendment. This Agreement may be amended by the Parties by
action taken by or on behalf of the respective Boards of Directors thereof at
any time prior to the Effective Time; provided, however, that, after approval of
this Agreement and the Merger by the Stockholders, any amendment that under
Applicable Law may not be made without the approval of the Stockholders shall
not be made without such approval. This Agreement may not be amended except by
an instrument in writing signed by the Parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, except to
the extent Applicable Law does not permit, either Acquiror and Acquiror Merger
Subsidiary or the Company may (i) extend the time for the performance of any of
the obligations or other acts of the other, subject, however, to the terms and
conditions of Section 7.1, (ii) waive any inaccuracies in the representations
and warranties of the other contained herein or in any document delivered
pursuant hereto and (iii) waive compliance by the other with any of the
agreements, covenants or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an agreement in writing signed by the
Party or Parties to be bound thereby.
Section 7.5 Fees, Expenses and Other Payments.
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34
(a) All costs and expenses incurred in connection with this
Agreement, the Merger and the Transactions, and compliance with Applicable Law
and Contractual Obligations as a consequence hereof and thereof, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred by the Parties shall be borne solely and entirely by the
Party that has incurred such costs and expenses (with respect to such Party, its
"Expenses").
(b) The Company agrees that if this Agreement shall be
terminated by Acquiror pursuant to Section 7.1(d) (other than a termination by
Acquiror pursuant to Section 7.1(d)(ii)(B)(II) unless the reason for the failure
to consummate the Merger prior to the Termination Date is due to any breach by
the Company of its covenants herein or the failure of the representations and
warranties of the Company to be true and correct in all material respects), then
the Company will pay to Acquiror an amount equal to the out-of-pocket Expenses
of Acquiror related to this Agreement. Any payment required to be made pursuant
to this Section 7.5(b) shall be made as promptly as practicable but not later
than two business days after termination of this Agreement and, in any such
case, shall be made by wire transfer of immediately available funds to an
account designated by Acquiror.
(c) Acquiror agrees that if this Agreement shall be terminated
by the Company pursuant to Section 7.1(c) (other than a termination by the
Company pursuant to Section 7.1(c)(ii)(B) unless the reason for the failure to
consummate the Merger prior to the Termination Date is due to any breach by
Acquiror or Acquiror Merger Subsidiary of any of their respective covenants
herein or the failure of the representations and warranties of Acquiror and
Acquiror Merger Subsidiary to be true and correct in all material respects),
then Acquiror will pay to the Company an amount equal to the out-of-pocket
Expenses of the Company related to this Agreement. Any payment required to be
made pursuant to this Section 7.5(c) shall be made as promptly as practicable
but not later than two business days after termination of this Agreement and, in
any such case, shall be made by wire transfer of immediately available funds to
an account designated by the Company.
Section 7.6 Effect of Investigation. The right of any Party to
terminate this Agreement pursuant to Section 7.1 shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Party, or any Person controlling any such party or any of their respective
Representatives whether prior to or after the execution of this Agreement.
ARTICLE 8
INDEMNIFICATION; ADJUSTMENT
Section 8.1 Survival. The representations, warranties, covenants and
agreements of the Parties contained in or made pursuant to this Agreement or any
Collateral Document shall survive the Closing and shall remain operative and in
full force and effect for a period of fifteen
<PAGE>
35
(15) months after the Closing Date (the "Indemnity Period"), regardless of any
investigation or statement as to the results thereof made by or on behalf of any
Party. No claim for indemnification may be asserted after the expiration of the
Indemnity Period; provided, that, notwithstanding anything herein to the
contrary, any representation, warranty, covenant and agreement that is the
subject of a Claim asserted in writing prior to the expiration of the Indemnity
Period shall survive with respect to such Claim or any dispute with respect
thereto until the final resolution thereof.
Section 8.2 Indemnification.
(a) Each Stockholder shall, by executing and delivering an
Investment Agreement, be deemed to agree, severally and not jointly, on and
after the Closing Date to indemnify and hold harmless Acquiror and the Surviving
Corporation and their respective stockholders, directors, officers, employees
and representatives (collectively, the "Acquiror Indemnified Parties") from and
against any and all damages, claims, losses, expenses, costs, obligations, and
liabilities, including without limitation, liabilities for all reasonable
attorneys', accountants' and experts' fees and expenses incurred, to enforce the
terms of this Agreement or any Collateral Document (collectively, "Loss and
Expense"), suffered, directly or indirectly by the Acquiror Indemnified Parties
by reason of, or arising out of:
(i) any breach of representation or warranty made by the
Company pursuant to this Agreement or any Collateral
Document or by any Stockholder pursuant to such
Stockholder's Investment Agreement or any failure by
the Company to perform or fulfill any of its
covenants or agreements set forth in this Agreement
or any Collateral Document to which it is a party;
(ii) any Legal Action or other Claim by any third party
relating to the Company to the extent such Legal
Action or other Claim has also resulted in a breach
of representation or warranty by the Company pursuant
to this Agreement or any Collateral Document; or
(iii) any determination pursuant to Section 8.7 hereof
requiring a payment to Acquiror.
(b) Acquiror agrees on and after the Closing Date to indemnify
and hold harmless each Stockholder from and against all Loss and Expense
suffered by any of them by reason of, or arising out of any breach of
representation or warranty made by Acquiror or Acquiror Merger Subsidiary
pursuant to this Agreement or any Collateral Document or any failure by Acquiror
or Acquiror Merger Subsidiary to perform or fulfill any of their respective
covenants or agreements set forth in this Agreement or any Collateral Document
or any failure of the Surviving Corporation to perform or fulfill any of its
covenants or agreements set forth in this Agreement or any Collateral Document
required to be performed after the Closing.
<PAGE>
36
Section 8.3 Escrow Indemnity Funds; Appointment of Agent. The Parties
hereto agree that, upon and subject to the Closing, $1,000,000 of the Merger
Consideration in cash (the "Escrow Indemnity Funds") will be withheld from the
Merger Consideration and held in escrow for a period of six (6) months after the
Closing Date (the "Escrow Period") in accordance with the terms of this Article
8 and the Escrow Agreement. The Company hereby appoints John M. Duff and R.
Thomas Goodrich, and each of them (each an "Agent," and each with full and
unqualified power to delegate to one or more persons the authority granted to
him hereunder) to act as agent and attorney-in-fact for the Company and the
Stockholders, with full power of substitution, to take all actions called for by
this Article 8 and the Escrow Agreement on its behalf, in accordance with the
terms of this Article 8 and the Escrow Agreement.
Section 8.4 Limitation of Liability; Disposition of Escrow Indemnity
Funds.
(a) Notwithstanding the provisions of Sections 8.2(a) and 8.3
above, after the Closing, each Party's rights to indemnification shall be
subject to the following limitations: (i) an indemnified party shall be entitled
to recover its Loss and Expense in respect of any Claim only if the Loss and
Expense for all Claims exceeds $100,000 in the aggregate, (ii) in no event shall
the amount required to be paid by any Stockholder pursuant to the provisions of
this Article 8 exceed the amount of Cash Consideration received by such
Stockholder or, in the case of the All Cash Shares, a portion of the aggregate
All Cash Consideration equal to the ratio that the aggregate Cash Consideration
bears to the aggregate Cash Consideration and Stock Consideration, and (iii) in
no event shall the aggregate amount required to be paid by Acquiror pursuant to
the provisions of this Article 8 exceed the aggregate amount of the Stock
Consideration.
(b) On or before the Closing Date, Acquiror, the Company and
the Agent shall execute and deliver an escrow agreement substantially in the
form attached hereto as Exhibit 8.4 (the "Escrow Agreement"). Any Claims of
Acquiror for indemnification to be satisfied out of the Escrow Indemnity Funds
shall be made in accordance with the terms of the Escrow Agreement.
(c) In the event there shall be no Unresolved Claims (as
defined in the Escrow Agreement) pursuant to the provisions of this Agreement
with respect to the Escrow Indemnity Funds, if any, existing at the expiration
of the Escrow Period, the Escrow Indemnity Funds then remaining (together with
any then existing interest or earnings) shall be distributed to the Stockholders
(or their nominee or transferee, as set forth in the Transmittal Documents in
respect of the Merger Consideration) entitled thereto in accordance with their
proportionate ownership in the Company at the Effective Time. In the event one
or more such Claims with respect to the Escrow Funds, if any, shall exist upon
the expiration of the Escrow Indemnity Period, an amount of such Escrow
Indemnity Funds reasonably estimated by Acquiror to cover the fees, expense and
other costs (including reasonable counsel fees and expenses) that will be
required to resolve such Claims shall be retained as part of the Escrow
Indemnity Funds and the balance thereof, if any, shall be distributed to the
Persons entitled thereto. Upon the resolution of all such Claims and the payment
of all such fees, expenses and costs out of the Escrow
<PAGE>
37
Indemnity Funds, the balance of the Escrow Indemnity Funds, if any, shall be
distributed to the Persons entitled thereto.
Section 8.5 Notice of Claims. If an indemnified party believes that it
has suffered or incurred any Loss and Expense, it shall notify the indemnifying
party promptly in writing, describing such Loss and Expense, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such Loss and Expense shall have occurred. If any Legal Action
is instituted by a third party with respect to which an indemnified party
intends to claim any liability or expense as Loss and Expense under this Article
8, such indemnified party shall promptly notify the indemnifying party of such
Legal Action, but the failure so to notify the indemnifying party shall not
relieve such indemnifying party of its obligations under this Article 8, except
to the extent such failure to notify prejudices the ability of such indemnifying
party to defend against such Claim.
Section 8.6 Defense of Third Party Claims. The indemnifying party shall
have the right to conduct and control, through counsel of its own choosing,
reasonably acceptable to the indemnified party, any third party Legal Action or
other Claim, but the indemnified party may, at its election, participate in the
defense thereof at its sole cost and expense; provided, however, that if the
indemnifying party shall fail to defend any such Legal Action or other Claim,
then the indemnified party may defend, through counsel of its own choosing, such
Legal Action or other Claim, and (so long as it gives the indemnifying party at
least fifteen (15) days' notice of the terms of the proposed settlement thereof
and permits the indemnifying party to then undertake the defense thereof) settle
such Legal Action or other Claim to the extent entitled under this Article 8 and
to recover the amount of such settlement or of any judgment and the reasonable
costs and expenses of such defense. The indemnifying party shall not compromise
or settle any such Legal Action or other Claim without the prior written consent
of the indemnified party, which consent shall not unreasonably be withheld,
delayed or conditioned if the terms and conditions of such compromise or
settlement proposed by the indemnifying party and agreed to in writing by the
claimant in such Legal Action or other Claim (i) include a full release of the
indemnified party from the Legal Action or other Claim which is the subject of
such settlement proposal, and (ii) if the indemnified party is Acquiror or the
Surviving Corporation, do not include any term or condition that would restrict
in any material manner the continued ownership or operations of business and
properties of the Surviving Corporation in substantially the manner then being
theretofore owned, operated and conducted by the Surviving Corporation. No
matter whether an indemnifying party defends or prosecutes any third party Legal
Action or Claim, the indemnified and indemnifying parties shall cooperate in the
defense or prosecution thereof. Such cooperation shall include access during
normal business hours afforded to the indemnifying party to, and reasonable
retention by the indemnified party of, records and information that are
reasonably relevant to such third party Legal Action or Claim, and the
indemnifying party shall reimburse the indemnified party for all its reasonable
out-of-pocket expenses in connection therewith.
<PAGE>
38
Section 8.7 Balance Sheet Adjustment.
(a) Not less than five days prior to the Closing Date, the
Company shall prepare and deliver to Acquiror a schedule (the "Company
Calculation") showing the Company's best estimate of (i) the Total Liabilities,
(ii) the aggregate exercise price of the outstanding Option Securities that are
exercisable as of the Effective Time (the "Exercise Price") and (iii) the
Company's cash and trade accounts receivable as of the Closing Date net of an
allowance for billing adjustments and doubtful accounts (the "Short-Term
Assets"). The parties agree that, as of the date hereof, $180,000 is a
reasonable allowance for such billing adjustments and doubtful accounts. If
Acquiror disagrees with such estimate, Representatives of the Company and
Acquiror shall meet to discuss such estimate, and the Company Calculation shall
be revised, to the extent agreed, to reflect such discussions; provided that, if
the Representatives of the Parties are unable to agree, Acquiror shall prepare
and deliver to the Company a schedule (the "Alternative Calculation") showing
Acquiror's estimate of the Total Liabilities, the Exercise Price and the
Short-Term Assets, and the Alternative Calculation shall be used in the
determination made with respect to the Cash Amount set forth in the following
sentence. If, pursuant to the Company Calculation or the Alternative
Calculation, as the case may be, the Total Liabilities are greater than the sum
of (x) the Exercise Price, plus (y) the Short-Term Assets, plus (z) $5,000,000
(the "Measured Assets"), the Cash Amount shall be reduced by the amount of such
excess; if the Measured Assets are greater than the Total Liabilities, the Cash
Amount shall be increased by the amount of such excess.
(b) As promptly as practicable after the Effective Time, but
in any event within 90 days thereafter, Acquiror shall cause its independent
public accountants, Arthur Andersen LLP, to audit the Closing Balance Sheet of
the Company as of the Closing Date in accordance with generally accepted
auditing standards. Arthur Andersen LLP shall prepare and deliver to Acquiror
and to the Agent a schedule based upon such audit (the "Audited Calculation")
showing their determination of the Total Liabilities and the Measured Assets.
(c) If the Agent, acting pursuant to the instructions of a
majority in interest of the Stockholders, disagrees with the Audited
Calculation, the Agent shall give notice thereof to the Acquiror within 10 days
after delivery of the Audited Calculation to the Agent. If the Agent and
Acquiror are unable to settle the dispute within the 30-day period following
delivery of such notice, the dispute shall be submitted to independent public
accountants selected by Acquiror and reasonably acceptable to the Agent for
resolution, and the decision of such independent certified public accountants
shall be final and binding upon Acquiror and the Stockholders. The costs of such
independent public accountants shall be paid one-half by Acquiror and one-half
by the Stockholders (to be satisfied out of the Escrow Indemnity Funds).
Acquiror and the Stockholders shall use reasonable efforts to have the dispute
resolved within 30 days after such dispute is submitted to said accountants, but
neither Acquiror or the Stockholders shall have any liability to any party
hereto if such dispute is not resolved within such 30-day period.
<PAGE>
39
(d) Within 10 business days after a final determination of the
Total Liabilities and the Measured Assets (whether as a result of the
Stockholders' failure to give timely notice of their disagreement with the
Audited Calculation, or a resolution by Acquiror and the Stockholders of any
such disagreement, or a determination of Total Liabilities by the accountants
described in paragraph (c)), then Acquiror shall promptly receive payment from
the Escrow Indemnity Funds or Acquiror shall pay to the Stockholders, as the
case may be, any additional payment to which Acquiror or the Stockholders would
have been entitled based on the final determination of the Total Liabilities and
the Measured Assets; provided, that no payment shall be made by any party unless
the difference between the final determination and the Company Calculation or
the Alternative Calculation, as the case may be, is greater than $10,000. Any
such payment to the Stockholders shall be made to each Stockholder pro rata in
accordance with such Stockholder's ownership of Company Stock. Notwithstanding
the foregoing, payment by Acquiror of any amounts due hereunder shall, to the
extent necessary to cause the aggregate Stock Consideration to be not less than
50% of the value of the aggregate Merger Consideration as described in the
proviso to Section 2.1(a) above, be in the form of Acquiror Stock.
(e) All calculations regarding the balance sheet adjustment
contemplated by this Section 8.7 shall be made in accordance with GAAP,
consistently applied in accordance with the audit by Arthur Andersen LLP of the
Company's financial statements for the year ended December 31, 1996, and this
Agreement; provided, however, that (i) no effect shall be given to any
restatement in the Audited Calculation arising from treatment of the recognition
of deferred revenue in accordance with GAAP and (ii) the deferred revenue shown
on the most recent Financial Statements in the amount of approximately $200,000,
representing deferred revenue arising from existing multi-year contracts, shall
not be restated in connection with the Audited Calculation.
Section 8.8 Exclusive Remedy. Except for fraud, willful or intentional
misrepresentation or willful or intentional breach of warranty, covenant or
agreement or as otherwise provided in Section 8.5, the indemnification provided
in this Article shall be the sole and exclusive post-Closing remedy available to
either party against the other party for any Claim under this Agreement or any
Collateral Document. Without limiting the generality or effect of the foregoing,
as a material inducement to the other Parties hereto entering into this
Agreement, each of the Parties to this Agreement hereby waives, and each
Stockholder by executing and delivering an Investment Agreement shall be deemed
to waive, any claim or cause of action, known and unknown, foreseen and
unforeseen, that exists or may arise in the future, or which it otherwise might
assert, under federal or state securities Laws, trade regulation Laws, or
environmental Laws, by reason of this Agreement, the events giving rise to this
Agreement and the Transactions provided for herein or contemplated hereby or
thereby, except for (i) claims or causes of action brought under and subject to
the terms and conditions of this Agreement, (ii) injunctive or other equitable
relief, or (iii) fraud, willful or intentional misrepresentation or willful or
intentional breach of warranty, covenant or agreement.
<PAGE>
40
ARTICLE 9
GENERAL PROVISIONS
Section 9.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) If to Acquiror or Acquiror Iron Mountain Incorporated
Merger Subsidiary, to: 745 Atlantic Avenue
Boston, Massachusetts 02111
Attention: Chief Financial Officer
Telecopier No.: (617) 357-7881
with a copy to: Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: William J. Curry, Esq.
Telecopier No.: (617) 338-2880
(b) If to the Company, to: Data Securities International, Inc.
c/o Duff Ackerman Goodrich & Associates, L.P.
Two Embarcadero Center
San Francisco, California 94111
Attention: John M. Duff, Jr.
Telecopier No.: (415) 788-7311
with a copy to: Howard, Rice, Nemerovski, Canady, Falk & Rabkin
Three Embarcadero Center, 8th Floor
San Francisco, California 94111
Attention: Richard W. Canady, Esq.
Telecopier No.: (415) 399-3041
Section 9.2 Headings. The headings contained in this Agreement are
for purposes of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.3 Severability. If any term or provision of this Agreement
shall be held or deemed to be, or shall in fact be, invalid, inoperative,
illegal or unenforceable as applied to any particular case in any jurisdiction
or jurisdictions, or in all jurisdictions or in all cases, because of the
conflicting of any provision with any constitution or statute or rule of public
policy or for any other reason, such circumstance shall not have the effect of
rendering the provision or
<PAGE>
41
provisions in question invalid, inoperative, illegal or unenforceable in any
other jurisdiction or in any other case or circumstance or of rendering any
other provision or provisions herein contained invalid, inoperative, illegal or
unenforceable to the extent that such other provisions are not themselves
actually in conflict with such constitution, statute or rule of public policy,
but this Agreement shall be reformed and construed in any such jurisdiction or
case as if such invalid, inoperative, illegal or unenforceable provision had
never been contained herein and such provision reformed so that it would be
valid, operative and enforceable to the maximum extent permitted in such
jurisdiction or in such case. Notwithstanding the foregoing, in the event of any
such determination the effect of which is to Affect Materially and Adversely
either party, the parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as possible to the
fullest extent permitted by Applicable Law in an acceptable manner to the end
that the Transactions are fulfilled and consummated to the maximum extent
possible.
Section 9.4 Entire Agreement. This Agreement (together with the
Confidentiality Agreement, the Disclosure Schedule and the other Collateral
Documents delivered in connection herewith) constitutes the entire agreement of
the Parties and supersedes all prior agreements and undertakings, both written
and oral (other than the Confidentiality Agreement), between the Parties, or any
of them, with respect to the subject matter hereof.
Section 9.5 Assignment. This Agreement shall not be assigned by
operation of law or otherwise and any purported assignment shall be null and
void, provided that Acquiror may cause a wholly owned Subsidiary of Acquiror to
be substituted for Acquiror Merger Subsidiary as the party to the Merger and
may, in addition, assign the other rights, but not its obligations, including,
without limitation, its obligation to pay the Merger Consideration, under this
Agreement to such Subsidiary.
Section 9.6 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each Party, and nothing in this Agreement,
express or implied (other than the provisions of Article 8, which are intended
to be binding upon the Stockholders), is intended to or shall confer upon any
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
Section 9.7 Governing Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by, and construed in
accordance with, the applicable laws of the United States of America and the
laws of The Commonwealth of Massachusetts applicable to contracts made and
performed in such Commonwealth and, in any event, without giving effect to any
choice or conflict of laws provision or rule that would cause the application of
domestic substantive laws of any other jurisdiction, except to the extent that
the provisions of the DGCL apply to the Merger. Anything in this Agreement to
the contrary notwithstanding, including without limitation the provisions of
Article 8, in the event of any dispute between the parties which results in a
Legal Action, the prevailing Party shall be entitled to receive from the
non-prevailing Party reimbursement for reasonable legal fees and expenses
incurred by such prevailing Party in such Legal Action.
<PAGE>
42
Section 9.8 Enforcement of the Agreement. Each Party recognizes and
agrees that each other Party's remedy at law for any breach of the provisions of
this Agreement would be inadequate and agrees that for breach of such
provisions, such Party shall, in addition to such other remedies as may be
available to it at law or in equity or as provided in this Agreement, be
entitled to injunctive relief and to enforce its rights by an action for
specific performance to the extent permitted by Applicable Law. Each Party
hereby waives any requirement for security or the posting of any bond or other
surety in connection with any temporary or permanent award of injunctive,
mandatory or other equitable relief. Nothing herein contained shall be construed
as prohibiting a Party from pursuing any other remedies available to such Party
for any breach or threatened breach hereof or failure to take or refrain from
any action as required hereunder to consummate the Merger and carry out the
Transactions.
Section 9.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 9.10 Mutual Drafting. This Agreement is the result of the joint
efforts of Acquiror and the Company, and each provision hereof has been subject
to the mutual consultation, negotiation and agreement of the parties and there
shall be no construction against any party based on any presumption of that
party's involvement in the drafting thereof. Each of the parties is a
sophisticated legal entity that was advised by experienced counsel and, to the
extent it deemed necessary, other advisors in connection with this Agreement.
Accordingly, each of the parties hereby acknowledges that (i) no party has
relied or will rely in respect of this Agreement or the Transactions
contemplated hereby upon any document or written or oral information previously
furnished to or discovered by it or its representatives, other than this
Agreement (including the Exhibits and the Disclosure Schedule) or such of the
foregoing as are delivered at the Closing, (ii) there are no representations or
warranties by or on behalf of any party hereto or any of its respective
Affiliates or representatives other than those expressly set forth in this
Agreement and the Collateral Documents, and (iii) the parties' respective rights
and obligations with respect to this Agreement and the events giving rise
thereto will be solely as set forth in this Agreement and the Collateral
Documents.
ARTICLE 10
DEFINITIONS
As used herein, unless the context otherwise requires, the following
terms (or any variant in the form thereof) have the following respective
meanings. Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa, and the reference to any gender shall be
deemed to include all genders. Unless otherwise defined or the context otherwise
clearly requires, terms for which meanings are provided herein shall have such
meanings when used in the Disclosure Schedule and each Collateral Document,
notice,
<PAGE>
43
certificate, communication, opinion or other document executed or required to be
executed pursuant hereto or thereto or otherwise delivered, from time to time,
pursuant hereto or thereto.
"Acquiror" is defined in the first paragraph of this Agreement.
"Acquiror Indemnified Parties" is defined in Section 8.2.
"Acquiror Merger Subsidiary" is defined in first paragraph of this
Agreement.
"Acquiror SEC Reports" is defined in Section 4.3(a).
"Acquiror Stock" is defined in paragraph B of the Recitals.
"Adjustment Amount" is defined in Section 2.1(a).
"Adverse" or "Adversely" when used alone or in conjunction with other
terms (including without limitation "Affect," "Change" and "Effect") means any
Event that could reasonably be expected to (a) adversely affect the validity or
enforceability of this Agreement or any Collateral Document or the likelihood of
consummation of the Merger, (b) adversely affect in any material respect the
business, operations, management, properties or the condition (financial or
other), or results of operation (including without limitation, earnings before
interest, taxes, depreciation and amortization) of a Party (it being understood
that a decline in the market value of Acquiror Stock shall not in and of itself
and without more constitute or be deemed to reflect an Adverse Change), (c)
impair a Party's ability to fulfill its obligations under the terms of this
Agreement or any Collateral Document, or (d) adversely affect in any material
respect the aggregate rights and remedies of any Party under this Agreement or
any Collateral Document.
"Affiliate" or "Affiliated" means, with respect to any Person, (a) any
other Person at the time directly or indirectly controlling, controlled by or
under direct or indirect common control with such Person, (b) any other Person
of which such Person at the time owns, or has the right to acquire, directly or
indirectly, ten percent (10%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, ten percent (10%) or more of any class
of the capital stock or beneficial interest of such Person, (d) any executive
officer or director of such Person, (e) with respect to any partnership, joint
venture or similar Entity, any general partner thereof, and (f) when used with
respect to an individual, shall include any member of such individual's
immediate family or a family trust.
"Agent" is defined in Section 8.3.
"Agreement" means this Agreement as originally in effect, including
unless the context otherwise specifically requires, all schedules and exhibits
hereto, as the same may from time to time be supplemented, amended, modified or
restated in the manner herein or therein provided.
<PAGE>
44
"All Cash Consideration" is defined in Section 2.1(a).
"All Cash Conversion Number" means the quotient obtained by dividing
(i) the sum of the Cash Amount plus $7,000,000, by (ii) the number of Fully
Diluted Shares.
"All Cash Shares" is defined in Section 2.1(a).
"Alternative Calculation" is defined in Section 8.7(a).
"Applicable Law" means any Law of any Authority, whether domestic or
foreign, including without limitation the DGCL, all federal and state securities
laws, the Code, ERISA and Environmental Laws, to or by which a Person or it or
any of its business or operations is subject or any of its property or assets is
bound.
"Audited Calculation" is defined in Section 8.7(b).
"Authority" means any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or
quasi-governmental agency, arbitrator, authority, board, body, branch, bureau,
central bank or comparable agency or Entity, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system or other
political unit or subdivision or other Entity of any of the foregoing, whether
domestic or foreign.
"Benefit Arrangement" means any material benefit arrangement that is
not a Plan, including (i) any employment or consulting agreement, (ii) any
arrangement providing for insurance coverage or workers' compensation benefits,
(iii) any incentive bonus or deferred bonus arrangement, (iv) any arrangement
providing termination allowance, severance pay, salary continuation for
disability or other leave of absence, supplemental unemployment benefits,
layoff, reduction in force or similar benefits, (v) any stock option or equity
compensation plan, (vi) any deferred compensation plan, (vii) any compensation
policy and practice, (viii) any educational assistance arrangements or policies,
and (ix) any change of control arrangements or policies.
"Cash Amount" means $5,550,000 (subject to adjustment as provided in
Section 2.1(a)), plus the amount, if any, by which the Measured Assets exceed
the Total Liabilities or minus the amount, if any, by which the Total
Liabilities exceed the Measured Assets.
"Cash Conversion Number" means the quotient obtained by dividing (i)
the excess of the Cash Amount over the aggregate All Cash Consideration by (ii)
the number of Fully Diluted Shares.
"Cash Consideration" is defined in Section 2.1(a).
<PAGE>
45
"Certificate" is defined in Section 2.1(b).
"Claims" means any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and nature
relating thereto, and all fees, costs, expenses and disbursements (including
without limitation reasonable attorneys' and other legal fees, costs and
expenses) relating to any of the foregoing.
"Closing" is defined in Section 1.3.
"Closing Balance Sheet" means the statement of assets acquired and
liabilities assumed to be prepared on the basis of generally accepted accounting
principles applied on a consistent basis with the preparation of the audited
financials statements and with this agreement, including (i) the Short-Term
Assets, as defined in Section 8.7, (ii) Total Liabilities, as defined in Section
8.7, and (iii) the other accruals for management bonuses and payments to be made
pursuant to Section 3.16(a) of the Disclosure Schedule.
"Closing Date" is defined in Section 1.3.
"Closing Price" means the last sale price of a share of Acquiror Stock
quoted on the Nasdaq National Market System on any trading day or, if not so
quoted, the average of the low bid and high asked prices on such trading day.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, as set forth in Section 4980B of the Code and Part 6 of Title
I of ERISA.
"Code" is defined in paragraph C of the Recitals.
"Collateral Document" means any agreement, instrument, certificate,
opinion, memorandum, schedule or other document delivered by a Party or a
Stockholder pursuant to this Agreement or in connection with the Merger and the
Transactions.
"Company" is defined in the first paragraph of this Agreement.
"Company Calculation" is defined in Section 8.7(a).
"the Company's knowledge" (including the term "to the knowledge of the
Company") means the knowledge, information or belief of any Company director or
officer; and that such director or officer, after reasonable investigation,
shall have reason to believe and shall believe that the subject representation
or warranty is true and accurate as stated.
"Company Stock" is defined in paragraph B of the Recitals.
"Confidentiality Agreement" is defined in Section 5.1(a).
<PAGE>
46
"Contract" or "Contractual Obligation" means any term, condition,
provision, representation, warranty, agreement, covenant, undertaking,
commitment, indemnity or other obligation which is outstanding or existing under
any instrument, contract, lease or other contractual undertaking to which the
obligor is a party or by which it or any of its business is subject or property
or assets is bound.
"control" (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement or understanding, or as trustee or executor, by contract or credit
arrangement or otherwise.
"Convertible Securities" means any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for Shares, whether or not the right
to convert or exchange thereunder is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or existence or
non-existence of some other Event, or both.
"DAG" is defined in Section 3.19.
"Determination Price" means the average of the Closing Prices of shares
of Acquiror Stock as reported on the Nasdaq National Market composite
transactions reporting system for the 15 consecutive trading days ending August
25, 1997; provided however, that if the average Closing Price for such period is
less than $27.00, then the Determination Price shall be $27.00, and provided
further that if the average Closing Price for such period is greater than
$32.00, then the Determination Price shall be $32.00.
"DGCL" is defined in paragraph B of the Recitals.
"Disclosure Schedule" means the disclosure schedule dated as of the
date of this Agreement delivered by the Company to Acquiror.
"Dissenting Shares" is defined in Section 2.5(a).
"Distribution" means, with respect to the Company: (a) the declaration
or payment of any dividend (except dividends payable in Company Stock) on or in
respect of any shares of any class of capital stock of the Company owned by a
Person other than the Company, (b) the purchase, redemption or other retirement
of any shares of any class of capital stock of the Company owned by a Person
other than the Company, and (c) any other distribution on or in respect of any
shares of any class of capital stock of the Company owned by a Person other than
the Company.
"Effective Time" is defined in Section 1.4.
<PAGE>
47
"Employment Arrangement" means, with respect to any Person, any
employment, consulting, retainer, severance or similar contract, agreement,
plan, arrangement or policy (exclusive of any which is terminable within thirty
(30) days without liability, penalty or payment of any kind by such Person or
any Affiliate (other than any such liability, penalty or payment of general
application to all the Company's employees)), or providing for severance,
termination payments, insurance coverage (including any self-insured
arrangements), workers compensation, disability benefits, life, health, medical,
dental or hospitalization benefits, supplemental unemployment benefits, vacation
or sick leave benefits, pension or retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock purchase or
appreciation rights or other forms of incentive compensation or post-retirement
insurance, compensation or benefits, or any collective bargaining or other labor
agreement, whether or not any of the foregoing is subject to the provisions of
ERISA.
"Encumber" means to suffer, accept, agree to or permit the imposition
of any Lien.
"Enforceability Exceptions" shall have the meaning set forth in
Section 3.1(b).
"Entity" means any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
"ERISA Affiliate" means any Person that is treated as a single employer
with the Company under Sections 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA.
"Escrow Agreement" is defined in Section 8.4(b).
"Escrow Indemnity Funds" is defined in Section 8.3.
"Escrow Period" is defined in Section 8.3.
"Event" means the occurrence or existence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, and the rules
and regulations of the Commission thereunder, all as from time to time in
effect, or any successor
<PAGE>
48
law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or
regulatory provision.
"Exercise Price" is defined in Section 8.7(a).
"Expenses" is defined in Section 7.5.
"Financial Statements" is defined in Section 3.2.
"Fully Diluted Shares" means the sum of (A) the number of shares of
Company Stock issued and outstanding immediately prior to the Merger (except
shares subject to Section 2.1(c)), plus (B) the number of shares of Company
Stock which may be issued pursuant to Option Securities that are exercisable as
of the Effective Time (including those which will become exercisable by virtue
of the consummation of the Merger).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Government Authorizations" means all approvals, concessions, consents,
franchises, licenses, permits, plans, registrations and other authorizations of
all Authorities.
"Government Filings" means all filings, including franchise and similar
Tax filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with all Authorities.
"Guaranty" or "Guaranteed" means any agreement, undertaking or
arrangement by which the Company guarantees, endorses or otherwise becomes or is
liable, directly or indirectly, contingently or otherwise, upon any indebtedness
of any other Person including without limitation the payment of amounts drawn
down by beneficiaries of letters of credit (other than by endorsements of
negotiable instruments for deposit or collection in the ordinary course of
business). The amount of the obligor's obligation under any Guaranty shall be
deemed to be the outstanding amount (or maximum permitted amount, if larger) of
the indebtedness directly or indirectly guaranteed thereby (subject to any
limitation set forth therein).
"Indemnity Period" is defined in Section 8.1.
"Indebtedness" means, with respect to the Company, all obligations,
contingent or otherwise, which in accordance with GAAP should be classified upon
the Company's consolidated balance sheet as liabilities in respect of borrowed
money, notes or similar instruments, capitalized leases, the deferred purchase
price of property or redeemable preferred stock, and all guarantees,
endorsements and other contingent obligations in respect of Indebtedness of
others (it being understood that obligations of the Company in respect of trade
payables incurred in the ordinary course of business shall not be included in
the definition of Indebtedness).
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49
"Intangible Assets" means all assets and property lacking physical
properties, the evidence of ownership of which must customarily be maintained by
independent registration, documentation, certification, recordation or other
means.
"Investment Agreement" is defined in Section 5.3(a).
"Law" means any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, guideline, law, injunction, interpretation, judgment, order, ordinance,
policy statement, proclamation, promulgation, regulation, requirement, rule,
rule of law, rule of public policy, settlement agreement, statute, or writ or
any Authority, domestic or foreign; (b) the common law, or other legal or
quasi-legal precedent; or (c) arbitrator's, mediator's or referee's award,
decision, finding or recommendation; including, in each such case or instance,
any interpretation, directive, guideline or request, whether or not having the
force of law including, in all cases, without limitation any particular section,
part or provision thereof.
"Lease" means any lease of property, whether real, personal or mixed,
and all amendments thereto.
"Legal Action" means any litigation or legal or other actions,
arbitrations, counterclaims, proceedings, requests for material information by
or pursuant to the order of any Authority, or suits, at law or in arbitration,
equity or admiralty commenced by any Person, whether or not purported to be
brought on behalf of a party hereto affecting such party or any of such party's
business, property or assets.
"Lien" means any of the following: mortgage; lien (statutory or other);
preference, priority or other security agreement, arrangement or interest;
hypothecation, pledge or other deposit arrangement; assignment; charge; levy;
executory seizure; attachment; garnishment; encumbrance (including any easement,
exception, variance, reservation or limitation, right of way, zoning
restriction, building or use restriction, and the like); conditional sale, title
retention or other similar agreement, arrangement, device or restriction;
preemptive or similar right; any financing lease involving substantially the
same economic effect as any of the foregoing; the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction; restriction on sale, transfer, assignment, disposition or other
alienation; or any option, equity, claim or right of or obligation to, any other
Person, of whatever kind and character.
"Loss and Expense" is defined in Section 8.2.
"Material" or "materiality" for the purposes of this Agreement, shall,
unless specifically stated to the contrary, be determined without regard to the
fact that various provisions of this Agreement set forth specific dollar
amounts.
<PAGE>
50
"Material Agreement" or "Material Commitment" means, with respect to
the Company, any Contractual Obligation (a) which (i) involves the purchase,
sale or lease of goods or materials or performance of services aggregating more
than $15,000, (ii) extends for more than three (3) months, or (iii) is not
terminable on thirty (30) days or less notice without penalty or other payment,
(b) which involves indebtedness for money borrowed in excess of $100,000, or (c)
which is or otherwise constitutes a written agency, dealer, license,
distributorship, sales representative or similar written agreement.
"Measured Assets" is defined in Section 8.7(a).
"Merger" is defined in paragraph B of the Recitals.
"Merger Consideration" shall mean and include the All Cash
Consideration to be paid in consideration of each All Cash Share and the Stock
Consideration and Cash Consideration to be paid in consideration of any other
Share pursuant to Section 2.1(a).
"Multiemployer Plan" means a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA.
"Option Exchange Ratio" is defined in Section 2.4.
"Option Plan" is defined in Section 3.13(b).
"Option Securities" means all rights, options and warrants, and calls
or commitments evidencing the right, to subscribe for, purchase or otherwise
acquire Shares or Convertible Securities, whether or not the right to subscribe
for, purchase or otherwise acquire is immediately exercisable or is conditioned
upon the passage of time, the occurrence or non-occurrence or the existence or
non-existence of some other Event.
"Organizational Document" means the Company's Certificate of
Incorporation, its by-laws and all stockholder agreements, voting trusts and
similar arrangements applicable to any of its capital stock, each as in effect
from time to time.
"Other Transaction" means a transaction or series of related
transactions (other than the Merger) resulting in (a) any change in control of
the Company, (b) any merger or consolidation of the Company, regardless of
whether the Company is the surviving Entity, (c) any tender offer or exchange
offer for, or any acquisition of, any securities of the Company, (d) any sale or
other disposition of assets of the Company not otherwise permitted under Section
3.16 hereof, or (e) so long as this Agreement remains in effect, any issue or
sale, or any agreement to issue or sell, any capital stock, Convertible
Securities or Option Securities of the Company (other than the issuance of
shares in accordance with the terms of Option Securities outstanding on the date
hereof).
"Party" means a signatory to this Agreement.
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51
"Paying Agent" is defined in Section 2.2(b)(i).
"Payment Fund" is defined in Section 2.2(b)(i).
"PBGC" means the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
"Person" means any natural individual or any Entity.
"Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA.
"Private Authorizations" means all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than Authorities) including without limitation those with respect to patents,
trademarks, service marks, trade names, copyrights, computer software programs,
technology and know-how.
"Representatives" of a Party means the officers, directors, employees,
accountants, counsel, financial advisors, consultants and other representatives
of such Party.
"SEC" means the Securities and Exchange Commission of the United States
or any successor Authority.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
"Share Price" means the quotient obtained by dividing:
(i) $12,550,000 plus the amount, if any, by which the
Measured Assets exceed the Total Liabilities or minus
the amount, if any, by which the Total Liabilities
exceeds the Measured Assets, by
(ii) the Fully Diluted Shares.
"Shares" is defined in Section 2.1(b).
"Short-Term Assets" is defined in Section 8.7(a).
"Stock Conversion Number" means the quotient obtained by dividing:
(i) the quotient obtained by dividing $7,000,000 by the
Determination Price by
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52
(ii) the excess of (x) the number of Fully Diluted Shares
over (y) the number of All Cash Shares.
"Stock Consideration" is defined in Section 2.1(a).
"Stockholders" is defined in paragraph B of the Recitals.
"Subsidiary" means, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
"Substitute Option" is defined in Section 2.4.
"Surviving Corporation" is defined in Section 1.1
"Tax" (and "Taxable," which means subject to Tax), means, with respect
to the Company, (a) all taxes (domestic or foreign), including without
limitation any income (net, gross or other including recapture of any tax items
such as investment tax credits), alternative or add-on minimum tax, gross
income, gross receipts, gains, sales, use, leasing, lease, user, ad valorem,
transfer, recording, franchise, profits, property (real or personal, tangible or
intangible), fuel, license, withholding on amounts paid to or by the Company,
payroll, employment, unemployment, social security, excise, severance, stamp,
occupation, premium, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, levies, assessments, charges, penalties, addition to
tax or additional amount imposed by any Taxing Authority, (b) any joint or
several liability of the Company with any other Person for the payment of any
amounts of the type described in (a), and (c) any liability of the Company for
the payment of any amounts of the type described in (a) as a result of any
express or implied obligation to indemnify any other Person.
"Tax Claim" means any Claim which relates to Taxes, including without
limitation the representations and warranties set forth in Section 3.11.
"Tax Return" or "Returns" means all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
"Taxing Authority" means any Authority responsible for the imposition
of any Tax.
"Termination Date" means September 10, 1997 or such other date as the
Parties may from time to time mutually agree.
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53
"Total Liabilities" means the total liabilities of the Company as of
the Effective Time, including without limitation deferred revenue (subject to
Section 8.7 hereof), any prepayment penalties or premiums associated with the
repayment of indebtedness of the Company at the Closing, any legal fees or
accounting fees of the Company related to the Merger and the fees of any brokers
or finders retained by the Company or the Stockholders in connection with the
Merger.
"Transactions" means the other transactions contemplated by this
Agreement or the Merger or by any Collateral Document executed or required to be
executed in connection herewith or therewith.
"Transmittal Documents" is defined in Section 2.2(b).
IN WITNESS WHEREOF, Acquiror, Acquiror Merger Subsidiary and the
Company have caused this Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized.
IRON MOUNTAIN INCORPORATED
By: /s/ John F. Kenny
----------------------------------
Name: John F. Kenny
Title: Executive Vice President and
Chief Financial Officer
DSI ACQUISITION CORPORATION
By: /s/ John F. Kenny
----------------------------------
Name: John F. Kenny
Title: Executive Vice President and
Chief Financial Officer
DATA SECURITIES INTERNATIONAL, INC.
By: /s/ John M. Duff, Jr.
----------------------------------
Name: John M. Duff, Jr.
Title: President
EXECUTION
COUNTERPART
===============================================================================
IRON MOUNTAIN INCORPORATED
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of September 26, 1997
(Originally dated as of September 30, 1996)
---------------------
$250,000,000
---------------------
BANKBOSTON, N.A.
THE BANK OF NEW YORK
CANADIAN IMPERIAL BANK OF COMMERCE
FLEET NATIONAL BANK,
as Lead Managers
CHASE SECURITIES INC.,
as Arranger
THE CHASE MANHATTAN BANK,
as Administrative Agent
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TABLE OF CONTENTS
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Page
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RECITALS......................................................................................................... 1
Section 1. Definitions and Accounting Matters.................................................................. 1
1.01 Certain Defined Terms............................................................................ 1
1.02 Accounting Terms and Determinations.............................................................. 23
1.03 Types of Loans................................................................................... 23
Section 2. Loans, Etc.......................................................................................... 23
2.01 Loans............................................................................................ 23
2.02 Reductions of Commitments........................................................................ 24
2.03 Fees 24
2.04 Lending Offices.................................................................................. 25
2.05 Several Obligations; Remedies Independent........................................................ 25
2.06 Notes 25
2.07 Use of Proceeds.................................................................................. 25
2.08 Letters of Credit................................................................................ 25
Section 3. Borrowings, Conversions and Prepayments............................................................. 30
3.01 Borrowings....................................................................................... 30
3.02 Prepayments and Conversions...................................................................... 30
Section 4. Payments of Principal and Interest.................................................................. 32
4.01 Repayment of Loans............................................................................... 32
4.02 Interest......................................................................................... 32
Section 5. Payments; Pro Rata Treatment; Computations; Etc..................................................... 33
5.01 Payments......................................................................................... 33
5.02 Pro Rata Treatment............................................................................... 34
5.03 Computations..................................................................................... 34
5.04 Minimum and Maximum Amounts; Types............................................................... 34
5.05 Certain Notices.................................................................................. 35
5.06 Non-Receipt of Funds by the Administrative Agent................................................. 36
5.07 Sharing of Payments; Waiver of Enforcement Without Consent, Etc.................................. 36
5.08 Withholding Tax Exemption........................................................................ 37
Section 6. Yield Protection and Illegality..................................................................... 37
6.01 Additional Costs................................................................................. 37
6.02 Limitation on Types of Loans..................................................................... 39
6.03 Illegality....................................................................................... 40
6.04 Substitute ABR Loans............................................................................. 40
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6.05 Compensation..................................................................................... 40
6.06 Capital Adequacy................................................................................. 40
6.07 Substitution of Lender........................................................................... 41
6.08 Additional Costs in Respect of Letters of Credit................................................. 41
Section 7. Conditions Precedent................................................................................ 42
7.01 Amendment and Restatement Effective Date. ...................................................... 42
7.02 Initial and Subsequent Loans..................................................................... 44
Section 8. Representations and Warranties...................................................................... 45
8.01 Corporate Existence.............................................................................. 45
8.02 Information...................................................................................... 45
8.03 Litigation....................................................................................... 46
8.04 No Breach........................................................................................ 46
8.05 Corporate Action................................................................................. 47
8.06 Approvals........................................................................................ 47
8.07 Regulations U and X.............................................................................. 47
8.08 ERISA ........................................................................................... 47
8.09 Taxes ........................................................................................... 47
8.10 Subsidiaries; Agreements; Etc.................................................................... 48
8.11 Investment Company Act........................................................................... 48
8.12 Public Utility Holding Company Act............................................................... 48
8.13 Ownership and Use of Properties.................................................................. 49
8.14 Environmental Compliance......................................................................... 49
8.15 Solvency......................................................................................... 50
8.16 Capitalization................................................................................... 50
8.17 Senior Debt...................................................................................... 51
Section 9. Covenants........................................................................................... 51
9.01 Financial Statements and Other Information....................................................... 51
9.02 Taxes and Claims................................................................................. 53
9.03 Insurance........................................................................................ 53
9.04 Maintenance of Existence; Conduct of Business.................................................... 54
9.05 Maintenance of and Access to Properties.......................................................... 54
9.06 Compliance with Applicable Laws.................................................................. 55
9.07 Litigation....................................................................................... 55
9.08 Indebtedness..................................................................................... 55
9.11 Fixed Charges Coverage Ratio..................................................................... 57
9.12 Mergers, Asset Dispositions, Etc................................................................. 57
9.13 Liens ........................................................................................... 59
9.14 Investments...................................................................................... 59
9.15 Restricted Payments.............................................................................. 61
9.16 Transactions with Affiliates..................................................................... 62
9.17 Subordinated Indebtedness........................................................................ 62
9.18 Lines of Businesses.............................................................................. 63
9.19 Capital Expenditures............................................................................. 63
ii
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9.20 Modification of Other Agreements................................................................. 63
9.21 Interest Rate Protection......................................................................... 63
9.22 Certain Obligations Respecting Subsidiaries...................................................... 63
9.23 Environmental Matters............................................................................ 65
9.24 Residual Assurances.............................................................................. 65
9.25 Senior Subordinated Debt......................................................................... 66
Section 10. Defaults........................................................................................... 66
10.01 Events of Default............................................................................... 66
Section 11. The Administrative Agent........................................................................... 69
11.01 Appointment, Powers and Immunities.............................................................. 69
11.02 Reliance by Administrative Agent................................................................ 69
11.03 Defaults........................................................................................ 70
11.04 Rights as a Lender.............................................................................. 70
11.05 Indemnification................................................................................. 70
11.06 Non-Reliance on Administrative Agent and Other Lenders.......................................... 71
11.07 Failure to Act.................................................................................. 71
11.08 Resignation or Removal of Administrative Agent.................................................. 71
11.09 Consents under Basic Documents.................................................................. 72
11.10 Collateral Sub-Agents........................................................................... 72
Section 12. Miscellaneous...................................................................................... 72
12.01 Waiver.......................................................................................... 72
12.02 Notices......................................................................................... 73
12.03 Expenses, Etc................................................................................... 73
12.04 Indemnification................................................................................. 73
12.05 Amendments, Etc................................................................................. 74
12.06 Successors and Assigns.......................................................................... 74
12.07 Confidentiality................................................................................. 75
12.08 Survival........................................................................................ 76
12.09 Captions........................................................................................ 76
12.10 Counterparts; Integration....................................................................... 76
12.11 Additional Lenders.............................................................................. 76
12.12 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL................................. 76
</TABLE>
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Schedules
---------
SCHEDULE I - Commitments; Non-Committing Lenders
SCHEDULE II - Subsidiaries; Investments in Joint Ventures
and Other Persons
SCHEDULE III - Credit Agreements, Indentures, Leases
SCHEDULE IV - Equity Rights
SCHEDULE V - Existing Letters of Credit
Exhibits
--------
EXHIBIT A - Form of Note
EXHIBIT B - Form of Subsidiary Guaranty
EXHIBIT C - Form of Company Pledge Agreement
EXHIBIT D - Form of Subsidiary Pledge Agreement
EXHIBIT E - Form of Opinion of Special New York Counsel
to the Company
EXHIBIT F - Form of Opinion of Special New York Counsel
to the Administrative Agent
iv
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of
September 26, 1997, among: IRON MOUNTAIN INCORPORATED, a corporation duly
organized and validly existing under the laws of the State of Delaware (together
with its successors, the "Company"); each of the lenders that is a signatory
hereto under the caption "LENDERS" on the signature pages hereto and each lender
or financial institution that becomes a "Lender" after the date hereof pursuant
to Section 12.06 hereof (individually, together with its successors, a "Lender"
and, collectively, together with their respective successors, the "Lenders");
and THE CHASE MANHATTAN BANK, as agent for the Lenders (in such capacity,
together with its successors in such capacity, the "Administrative Agent").
The Company, the Lenders and the Administrative Agent are
parties to a Credit Agreement dated as of September 30, 1996 (as amended to but
excluding the date hereof, the "Credit Agreement"), providing, subject to the
terms and conditions thereof, for extensions of credit to be made by said
Lenders to the Company in an aggregate principal or face amount not exceeding
$150,000,000. The Company, the Lenders and the Administrative Agent wish to
increase the aggregate amount of the Commitments under the Credit Agreement from
$150,000,000 to $250,000,000, to amend the Credit Agreement in certain respects
and to restate the Credit Agreement as set forth herein.
Accordingly, the Company, the Lenders and the Administrative
Agent agree that effective on the Amendment and Restatement Effective Date as
hereinafter defined, the Credit Agreement is amended and restated to read in its
entirety as set forth below:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Section 1.01
or in other provisions of this Agreement in the singular to have the same
meanings when used in the plural and vice versa):
"ABR Loans" shall mean Loans which bear interest at a rate
based upon the Alternate Base Rate.
"Acquisition" shall mean an acquisition of assets of, or all
or substantially all of the Capital Stock of, another business by the Company
and/or one or more of its Subsidiaries.
"Acquisition Consideration" shall mean, with respect to any
Acquisition, the aggregate amount of consideration paid by the Company and its
Subsidiaries in connection therewith, inclusive of (a) Stock Consideration and
(b) other consideration on account of (i) any expenses incurred in connection
with such Acquisition, (ii) liabilities under agreements not to compete incurred
in connection with such Acquisition, (iii) the principal amount of
Credit Agreement
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Indebtedness assumed in connection with such Acquisition and (iv) Additional
Expenditures related to such Acquisition.
"Additional Expenditures" shall mean, with respect to any
Acquisition, amounts expended or to be expended by the Company and its
Subsidiaries within twelve months after the date of such Acquisition to acquire
or construct facilities and equipment that are not part of the assets acquired
pursuant to such Acquisition but which are deemed by the Company to be essential
for the integration or restructuring of the assets so acquired.
"Additional Subordinated Indebtedness" shall mean Indebtedness
payable to sellers in connection with Permitted Acquisitions that by its terms
is subordinated to the payment of the principal of and interest on the Loans and
Reimbursement Obligations.
"Adjusted EBITDA" shall mean, for any period, EBITDA for such
period, minus the tax provision for such period currently payable.
"Administrative Questionnaire" shall mean an administrative
questionnaire in a form supplied by the Administrative Agent.
"Affiliate" shall mean, as to any Person, any other Person
which directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the immediate family (including parents, siblings, spouse, children,
stepchildren, nephews, nieces and grandchildren) of such individual and any
trust whose principal beneficiary is such individual or one or more members of
such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event, any Person which owns directly or indirectly more than 5% of the
securities having ordinary voting power for the election of directors or other
governing body of a corporation or more than 5% of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to control such corporation or other Person.
Notwithstanding the foregoing, (a) no individual shall be deemed to be an
Affiliate of a corporation solely by reason of his or her being an officer or
director of such corporation and (b) Subsidiary Guarantors shall be deemed not
to be Affiliates of the Company or any of the Subsidiary Guarantors.
"Alternate Base Rate" shall mean, for any day, a rate per
annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the
Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate
due to a change in the Prime Rate, the Base CD Rate or the
Credit Agreement
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Federal Funds Effective Rate shall be effective from and including the effective
date of such change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate, respectively.
"Amendment and Restatement Effective Date" shall have the
meaning assigned to such term in Section 7.01 hereof.
"Applicable Commitment Fee Rate" shall mean, at any time, the
percentage per annum set forth in the schedule below opposite the Pricing Level
in effect at such time:
- --------------------------------------------------------------------------
Applicable Commitment
Pricing Level Fee Rate
------------- --------
- --------------------------------------------------------------------------
Level 6 0.375%
- --------------------------------------------------------------------------
Level 5 0.375%
- --------------------------------------------------------------------------
Level 4 0.375%
- --------------------------------------------------------------------------
Level 3 0.375%
- --------------------------------------------------------------------------
Level 2 0.300%
- --------------------------------------------------------------------------
Level 1 0.250%
- --------------------------------------------------------------------------
For purposes of this definition, the "Pricing Level" in effect at any
time shall be the level (either Level 1, Level 2, Level 3, Level 4,
Level 5 or Level 6) indicated in the schedule set forth in the
definition of "Applicable Margin" in this Section 1.01 corresponding to
the Applicable Leverage Ratio in effect at such time.
Credit Agreement
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"Applicable L/C Percentage" shall mean, at any time, the
Applicable Margin in effect at such time with respect to Eurodollar Loans
(irrespective of whether at the time any Eurodollar Loan is outstanding).
"Applicable Lending Office" shall mean, for each Lender and
for each Type of Loan, the lending office of such Lender (or of an affiliate of
such Lender) designated for such Type of Loan in the Administrative
Questionnaire of such Lender or such other lending office of such Lender (or of
an affiliate of such Lender) as such Lender may from time to time specify to the
Administrative Agent and the Company as the office by which its Loans of such
Type are to be made and maintained.
"Applicable Leverage Ratio" shall mean, at any time, the
Leverage Ratio as at the end of the most recent fiscal quarter of the Company in
respect of which financial statements have been delivered by the Company
pursuant to either Section 9.01(a) or 9.01(b) hereof; provided that no change in
the Applicable Leverage Ratio will take effect until the date five Business Days
following receipt by the Administrative Agent of the applicable financial
statements.
"Applicable Margin" shall mean the rate for the respective
Type of Loan set forth below opposite the level (either Level 1, Level 2, Level
3, Level 4, Level 5 or Level 6) indicated in the schedule set forth below
corresponding to the Applicable Leverage Ratio in effect at such time:
Credit Agreement
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- --------------------------------------------------------------------------------
Range of Applicable Applicable Margin
Leverage Ratio -----------------
-------------- ABR Eurodollar
Loans Loans
- --------------------------------------------------------------------------------
Level 6
-------
Greater than 5.50 to 1.00 1.50% 2.25%
- --------------------------------------------------------------------------------
Level 5
-------
Less than or equal to 5.50 to 1.00 and 1.00% 1.75%
greater than 5.25 to 1.00
- --------------------------------------------------------------------------------
Level 4
-------
Less than or equal to 5.25 to 1.00 and 0.75% 1.50%
greater than 4.50 to 1.00
- --------------------------------------------------------------------------------
Level 3
-------
Less than or equal to 4.50 to 1.00 and 0.50% 1.25%
greater than 3.75 to 1.00
- --------------------------------------------------------------------------------
Level 2
-------
Less than or equal to 3.75 to 1.00 and 0.25% 1.00%
greater than 3.25 to 1.00
- --------------------------------------------------------------------------------
Level 1
-------
Less than or equal to 3.25 to 1.00 0.0% 0.75%
- --------------------------------------------------------------------------------
"Assessment Rate" shall mean, for any day, the annual
assessment rate in effect on such day that is payable by a member of the Bank
Insurance Fund classified as "well-capitalized" and within supervisory subgroup
"B" (or a comparable successor risk classification) within the meaning of 12
C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance
Corporation for insurance by such Corporation of time deposits made in Dollars
at the offices of such member in the United States; provided that if, as a
result of any change in any law, rule or regulation, it is no longer possible to
determine the Assessment Rate as aforesaid, then the Assessment Rate shall be
such annual rate as shall be determined by the Administrative Agent to be
representative of the cost of such insurance to the Lenders.
Credit Agreement
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"Bankruptcy Code" shall mean the United States Bankruptcy
Code, as now or hereafter in effect, or any successor statute.
"Base CD Rate" shall mean the sum of (a) the Three-Month
Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the
Assessment Rate.
"Basic Documents" shall mean this Agreement, the Notes, the
Letter of Credit Documents, the Subsidiary Guaranty and the Security Documents.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Business Day" shall mean any day other than a day on which
commercial banks are authorized or required to close in New York City or Boston,
Massachusetts and, where such term is used in the definition of "Quarterly Date"
in this Section 1.01 or if such day relates to a borrowing of, a payment or
prepayment of principal of or interest on, a conversion of or into, or an
Interest Period for, a Eurodollar Loan or a notice by the Company with respect
to any such borrowing, payment, prepayment, conversion or Interest Period, which
is also a day on which dealings in Dollar deposits are carried out in the London
interbank market.
"Capital Expenditures" shall mean expenditures in respect of
fixed assets by the Company or any of its Subsidiaries, including the
capitalized amount of Capital Lease Obligations incurred during the relevant
period, other than (i) expenditures for the restoration or replacement of fixed
assets to the extent financed by the proceeds of an insurance policy described
in clause (1) of Section 9.03 hereof or through a condemnation award, (ii)
Permitted Acquisitions, (iii) Qualifying Sale-Leaseback Transactions (except to
the extent any lease of Property by the Company or any of its Subsidiaries in
connection therewith would constitute a capital lease), (iv) Additional
Expenditures related to Permitted Acquisitions and (v) Large Volume Account
Capitalized Expenditures.
"Capital Lease Obligations" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board) and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"Capital Stock" shall mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-
Credit Agreement
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voting) of such Person's capital stock or other ownership interests, including,
without limitation, all common stock and all preferred stock.
"Casualty Event" shall mean, with respect to any property of
any Person, any loss of or damage to, or any condemnation or other taking of,
such property for which such Person or any of its Subsidiaries receives
insurance proceeds, or proceeds of a condemnation award or other compensation.
"Chase" shall mean The Chase Manhattan Bank and its
successors.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Change of Control" shall mean that:
(a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Principal
Stockholders (or any of them), is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of more than 50% of the voting power of all classes of
Voting Stock of the Company; or
(b) during any consecutive 25-month period, individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election to such Board
of Directors, or whose nomination for election by the stockholders of
the Company, was approved by a vote of at least 66-2/3% of the
directors still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the Board
of Directors then in office; or
(c) the Company shall be required pursuant to the provisions
of the Senior Subordinated Debt Documents (or any other agreement or
instrument relating to or providing for any other Subordinated
Indebtedness) to redeem or repurchase, or make an offer to redeem or
repurchase, all or any portion of the Senior Subordinated Debt (or such
Subordinated Indebtedness, as the case may be) as a result of a change
of control (however defined).
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Collateral Account" shall mean a cash collateral account in
the name and under the control of the Administrative Agent maintained in
accordance with the terms of the Security Documents.
Credit Agreement
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"Commitment" shall mean, as to each Lender, the obligation of
such Lender to make Loans, and to issue or participate in Letters of Credit
pursuant to Section 2.08 hereof, in an aggregate principal or face amount at any
one time outstanding up to but not exceeding the amount set opposite such
Lender's name on the signature pages hereof under the caption "Commitment" or,
in the case of a Person that is party to an assignment permitted under Section
12.06 hereof after the Amendment and Restatement Effective Date, as specified in
the respective instrument of assignment pursuant to which such assignment is
effected (as the same may be reduced at any time or from time to time pursuant
to Section 2.02 or 3.02 hereof).
"Commitment Percentage" shall mean, with respect to any Lender
at any time, the ratio (expressed as a percentage) of (a) the amount of the
Commitment of such Lender at such time to (b) the aggregate amount of the
Commitments of all of the Lenders at such time.
"Commitment Termination Date" shall mean September 30, 2002
(or, if such day is not a Business Day, the next preceding Business Day).
"Company Pledge Agreement" shall mean an Amended and Restated
Pledge Agreement substantially in the form of Exhibit C hereto between the
Company and the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Controlled Group" shall mean all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with the Company, are treated as a single
employer under Section 414 of the Code.
"Default" shall mean an Event of Default or an event which
with notice or lapse of time or both would, unless cured or waived, become an
Event of Default.
"Dollars" and "$" shall mean lawful money of the United States
of America.
"EBITDA" shall mean, for any period, the sum (without
duplication), determined on a consolidated basis for the Company and its
Subsidiaries, of (a) net income for such period plus (b) to the extent deducted
in determining net income for such period, the sum of (i) depreciation and
amortization (including deferred financing costs, organization costs, goodwill
and non-compete amortization) for such period, (ii) other non-cash expenses for
such period, (iii) interest expense for such period, (iv) provision for income
taxes for such period, (v) extraordinary losses (including without limitation
losses arising from any natural disasters) for such period, (vi) non-compete
expenses for such period to the extent not capitalized in accordance with GAAP
and (vii) losses on sales of fixed assets not in the ordinary course of business
for such period after giving effect to any related charges for, reductions of or
provisions for taxes thereon minus (c) to the extent included in the calculation
of net income for such period, the sum of (i) other income (including interest
income) for such period, (ii)
Credit Agreement
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extraordinary gains for such period and (iii) gains on sales of fixed assets not
in the ordinary course of business for such period after giving effect to any
related charges for, reductions of or provisions for taxes thereon.
For the purposes of calculating the ratios set forth in
Sections 9.09, 9.10 and 9.11 there may, at the Company's option, be included in
EBITDA for any relevant period, on a pro forma basis (adjusted to give effect to
expenses that will not be ongoing), the net income (and the additions and
subtractions thereto referred to above) for such period of any Person (or
assets) acquired after the commencement of such period in connection with any
Permitted Acquisition having Acquisition Consideration of more than $500,000.
The net income (and the related additions and subtractions) of the Person or
assets acquired pursuant to such Acquisition for such period shall be calculated
by reference to the most recent available quarterly financial statements of the
acquired business, annualized.
"Environmental Laws" shall mean any and all federal, state,
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, codes, plans, injunctions, permits, concessions, grants,
franchises, licenses or other governmental restrictions, contracts, indemnities,
assumptions of liability or agreements relating to the environment or to
emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products, chemicals
or industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"Environmental Liabilities" shall mean all liabilities of the
Company and each Subsidiary, whether vested or unvested, contingent or fixed,
actual or potential which arise under or relate to Environmental Laws.
"Equity Rights" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of Capital Stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
-----------------
"Eurodollar Base Rate" shall mean, with respect to any
Eurodollar Loans, the rate per annum determined by the Administrative Agent to
be the average of the rates quoted by the Reference Lenders at approximately
11:00 a.m. London time (or as soon thereafter as practicable) on the day two
Business Days prior to the first day of the Interest Period for such
Credit Agreement
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<PAGE>
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Loans for the offering by the Reference Lenders to leading banks in the London
interbank market of Dollar deposits having a term comparable to such Interest
Period and in an amount comparable to the principal amount of the respective
Eurodollar Loans of the Reference Lenders to which such Interest Period relates.
If any Reference Lender is not participating in any Eurodollar Loans during the
Interest Period therefor (pursuant to Section 6.04 hereof or for any other
reason), the Eurodollar Base Rate for such Loans for such Interest Period shall
be determined by reference to the amount of the Loan which such Reference Lender
would have made had it been participating in such Loans. If any Reference Lender
does not furnish a timely quotation, the Administrative Agent shall determine
the relevant interest rate on the basis of the quotation or quotations furnished
by the remaining Reference Lender or Lenders or, if none of such quotations is
available on a timely basis, the provisions of Section 6.02 shall apply.
"Eurodollar Loans" shall mean Loans the interest on which is
determined on the basis of rates referred to in the definition of "Eurodollar
Base Rate" in this Section 1.01.
"Eurodollar Rate" shall mean, for any Eurodollar Loans, a rate
per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined
by the Administrative Agent to be equal to (i) the Eurodollar Base Rate for such
Loans for the Interest Period for such Loans divided by (ii) 1 minus the Reserve
Requirement for such Loans for such Interest Period.
"Events of Default" shall have the meaning assigned to such
term in Section 10.01 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"Excluded Subsidiary" shall mean any Subsidiary of the Company
principally engaged in the records management business domiciled (within the
meaning of the Code) outside the United States of America.
"Existing Lender" shall mean each Lender under the Credit
Agreement immediately prior to the occurrence of the Amendment and Restatement
Effective Date.
"Existing Letters of Credit" shall mean, collectively, all
letters of credit identified on Schedule V hereto and outstanding on the
Amendment and Restatement Effective Date.
"Existing Loan" shall mean each Loan (as defined in the Credit
Agreement) held by each Existing Lender under the Credit Agreement immediately
prior to the effectiveness of the amendment and restatement of the Credit
Agreement provided for hereby.
Credit Agreement
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"Federal Funds Effective Rate" shall mean, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of l%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"Fixed Charges" shall mean for any period the sum of (i)
Scheduled Amortization for such period plus (ii) Interest Expense for such
period plus (iii) the aggregate amount of Maintenance Capital Expenditures for
such period plus (iv) the aggregate amount of non-compete expenses for such
period to the extent not capitalized in accordance with GAAP.
"Funded Indebtedness" shall mean, without duplication, (a)
Indebtedness that matures or otherwise becomes due more than one year after the
incurrence thereof or is extendible, renewable or refundable, at the option of
the obligor, to a date more than one year after the incurrence thereof
(including the current portion thereof) and (b) Indebtedness outstanding
hereunder.
"GAAP" shall mean generally accepted accounting principles as
in effect from time to time consistently applied.
"Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise, other
than agreements to purchase goods at an arm's length price in the ordinary
course of business) or (ii) entered into for the purpose of assuring in any
other manner the holder of such Indebtedness of the payment thereof or to
protect such holder against loss in respect thereof (in whole or in part),
provided that the term Guaranty shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee" used as a verb
has a corresponding meaning.
"Hazardous Substances" shall mean any toxic, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, including any substance regulated under Environmental
Laws.
"Indebtedness" shall mean, as to any Person (determined
without duplication):
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(i) indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred
purchase or acquisition price of property or services (including
amounts payable under agreements not to compete and other similar
arrangements), other than accounts payable (other than for borrowed
money) incurred in the ordinary course of business and accrued expenses
incurred in the ordinary course of business;
(ii) obligations of such Person in respect of letters of
credit or similar instruments issued or accepted by banks and other
financial institutions for the account of such Person;
(iii) Capital Lease Obligations of such Person;
(iv) obligations of such Person to redeem or otherwise retire
shares of Capital Stock of such Person;
(v) indebtedness of others of the type described in clauses
(i) through (iv) above secured by a Lien on the property of such
Person, whether or not the respective obligation so secured has been
assumed by such Person; and
(vi) indebtedness of others of the type described in clauses
(i) through (v) above Guaranteed by such Person.
Notwithstanding anything to the contrary contained in clause (i) of the
preceding sentence, indebtedness of any Person in respect of amounts payable
under an agreement not to compete shall be the amount carried on the balance
sheet of such Person in respect of such agreement in accordance with GAAP.
"Interest Expense" shall mean, for any period, the sum
(determined without duplication) of the aggregate amount of interest accruing
during such period on Indebtedness of the Company and its Subsidiaries (on a
consolidated basis), including the interest portion of payments under Capital
Lease Obligations and any capitalized interest, and excluding amortization of
debt discount and expense and interest paid in kind.
"Interest Period" shall mean, with respect to any Eurodollar
Loans, the period commencing on the date such Loans are made or converted from
ABR Loans or the last day of the next preceding Interest Period with respect to
such Loans and ending on the numerically corresponding day in the first, second,
third, sixth or (if acceptable to all Lenders) twelfth calendar month
thereafter, as the Company may select as provided in Section 5.05 hereof, except
that each such Interest Period which commences on the last Business Day of a
calendar month (or on any day for which there is no numerically corresponding
day in the appropriate subsequent calendar month) shall end on the last Business
Day of the appropriate subsequent calendar month. Notwithstanding the foregoing:
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(i) if any Interest Period would otherwise end after the
Commitment Termination Date, such Interest Period shall end on the
Commitment Termination Date;
(ii) each Interest Period that would otherwise end on a day
that is not a Business Day shall end on the next succeeding Business
Day (or, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day); and
(iii) notwithstanding clause (i) above, no Interest Period
shall have a duration of less than one month and, if the Interest
Period for any Eurodollar Loan would otherwise be a shorter period,
such Loans shall not be available hereunder for such period.
"Interest Rate Agreement" shall mean (i) an interest rate swap
agreement, interest rate cap agreement or similar arrangement between the
Company and one or more of the Lenders or (ii) an interest rate swap agreement,
interest rate cap agreement or similar arrangement between the Company and one
or more financial institutions (other than a Lender) approved by the
Administrative Agent (which approval shall not be unreasonably withheld)
pursuant to which the Company is not required in the absence of default to make
any payments other than initial fees.
"Investments" shall have the meaning assigned to such term in
Section 9.14 hereof.
"Issuing Bank" shall mean Chase, as the issuer of Letters of
Credit under Section 2.08 hereof, together with its successors and assigns in
such capacity.
"Large Volume Account Capitalized Expenditures" shall mean any
expenditures incurred by the Company or its Subsidiaries in connection with new
customers initially storing with the Company or its Subsidiaries in excess of
10,000 boxes, to the extent that such expenditures are capitalized in accordance
with GAAP.
"Letter of Credit Documents" shall mean, with respect to any
Letter of Credit, collectively, any application therefor and any other
agreements, instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or providing
for (a) the rights and obligations of the parties concerned or at risk with
respect to such Letter of Credit or (b) any collateral security for any of such
obligations, each as the same may be modified and supplemented and in effect
from time to time.
"Letter of Credit Liability" shall mean, without duplication,
at any time and in respect of any Letter of Credit, the sum of (a) the undrawn
face amount of such Letter of Credit plus (b) the aggregate unpaid principal
amount of all Reimbursement Obligations of the Company at such time due and
payable in respect of all drawings made under such Letter of
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Credit. For purposes of this Agreement, a Lender (other than the Issuing Bank)
shall be deemed to hold a Letter of Credit Liability in an amount equal to its
participation interest in the related Letter of Credit under Section 2.08
hereof, and the Issuing Bank shall be deemed to hold a Letter of Credit
Liability in an amount equal to its retained interest in the related Letter of
Credit after giving effect to the acquisition by the Lenders other than the
Issuing Bank of their participation interests under said Section 2.08.
"Letters of Credit" shall have the meaning assigned to such
term in Section 2.08 hereof.
"Leverage Ratio" shall have the meaning assigned to such term
in Section 9.09 hereof.
"Lien" shall mean, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, the Company and each of its
Subsidiaries shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Liquid Investments" shall mean:
(i) certificates of deposit maturing within 90 days of the
acquisition thereof denominated in Dollars and issued by (X) a Lender
or (Y) a bank or trust company having combined capital and surplus of
at least $500,000,000 and which has (or which is a Subsidiary of a bank
holding company which has) publicly traded debt securities rated A or
higher by Standard & Poor's Ratings Services or A-2 or higher by
Moody's Investors Service, Inc.;
(ii) 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 (x) any Lender or (y) any bank or trust company
meeting the qualifications specified in clause (i)(Y) above;
(iii) obligations issued or guaranteed by the United States of
America, with maturities not more than one year after the date of
issue;
(iv) commercial paper with maturities of not more than 90 days
and a published rating of not less than A-2 and P-2 (or the equivalent
rating); and
(v) investments in money market funds substantially all of
whose assets are comprised of securities and other obligations of the
types described in clauses (i) through (iv) above.
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"Loans" shall mean the loans provided for in Section 2.01
hereof, which may be ABR Loans and/or Eurodollar Loans.
"Maintenance Capital Expenditures" shall mean Capital
Expenditures required to maintain, reconfigure, or replace existing assets (as
distinguished from Capital Expenditures relating to growth and as distinguished
from Additional Expenditures), as certified pursuant to Section 9.01(i) hereof.
"Majority Lenders" shall mean Lenders having at least 51% of
the aggregate amount of the Commitments (or, if the Commitments shall have
terminated, the aggregate unpaid principal amount of Loans and Letter of Credit
Liabilities).
"Material Adverse Effect" shall mean a material adverse effect
on (a) the business, assets, property, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole, (b) the validity
or enforceability of any of the Basic Documents, (c) the rights and remedies of
the Lenders and the Administrative Agent under any of the Basic Documents or the
Senior Subordinated Debt Documents or (d) the timely payment of the principal of
or interest on the Loans or the Reimbursement Obligations or other amounts
payable in connection therewith.
"Multiemployer Plan" shall mean at any time an employee
pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which
the Company or any member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions, including for these purposes any Person which ceased to be a
member of the Controlled Group during such five year period.
"Net Cash Proceeds" shall mean, in each case as set forth in a
statement in reasonable detail delivered to the Administrative Agent:
(a) with respect to the disposition of any asset by the
Company or any of its Subsidiaries, the excess, if any, of (i) the cash
received in connection with such disposition over (ii) the sum of (A)
the principal amount of any Indebtedness which is secured by such asset
and which is required to be repaid in connection with the disposition
thereof, plus (B) the reasonable out-of-pocket expenses incurred by the
Company or such Subsidiary, as the case may be, in connection with such
disposition, plus (C) provision for taxes, including income taxes,
attributable to the disposition of such asset;
(b) with respect to the issuance of any Indebtedness of the
Company or any its Subsidiaries the gross proceeds received by the
Company or such Subsidiary from such issuance less all reasonable legal
expenses, discounts and commissions and other fees and expenses
incurred or to be incurred and all federal, state, local and foreign
taxes assessed or to be assessed in connection therewith; and
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(c) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation
received by the Company and its Subsidiaries in respect of such
Casualty Event net of (i) reasonable expenses incurred by the Company
and its Subsidiaries in connection therewith and (ii) contractually
required repayments of Indebtedness to the extent secured by a Lien on
such property and any income and transfer taxes payable by the Company
or any of its Subsidiaries in respect of such Casualty Event.
"1996 Senior Subordinated Debt" shall mean the Indebtedness of
the Company in respect of the 10-1/8% Senior Subordinated Notes of the Company
due October 1, 2006 issued pursuant to the 1996 Senior Subordinated Debt
Indenture.
"1997 Senior Subordinated Debt" shall mean Indebtedness of the
Company in an aggregate principal amount not exceeding $300,000,000 issued by
the Company on or prior to December 31, 1997 that is subordinated to the
obligations of the Company hereunder to at least the same extent as the 1996
Senior Subordinated Debt and is otherwise on terms and conditions, and pursuant
to documentation, reasonably satisfactory to the Administrative Agent and the
Majority Lenders.
"1996 Senior Subordinated Debt Indenture" shall mean the
Indenture dated as of October 1, 1996 among the Company and First Bank National
Association, as Trustee, as the same may be amended or modified, without
prejudice to the provisions of Section 9.20 hereof.
"1997 Senior Subordinated Debt Indenture" shall mean the
indenture among the Company and a trustee to be identified, as the same may be
amended or modified, without prejudice to the provisions of Section 9.20 hereof,
providing for the issuance of 1997 Senior Subordinated Debt.
"Non-Committing Lenders" shall mean each Existing Lender
designated as a "Non-Committing Lender" on the signature pages hereto.
"Notes" shall mean the promissory notes provided for by
Section 2.06 hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"Obligor" shall mean, collectively, the Company and each of
the Subsidiary Guarantors.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Permitted Acquisition" has the meaning set forth in Section
9.12.
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"Permitted Indebtedness" shall mean, without duplication:
(i) Additional Subordinated Indebtedness;
(ii) Indebtedness secured by Permitted Mortgages;
(iii) Indebtedness in respect of agreements not to compete;
(iv) Capitalized Lease Obligations;
(v) Indebtedness consisting of reimbursement obligations in
respect of letters of credit issued by any bank for the account of the
Company or any of its Subsidiaries, the aggregate amount available to
be drawn under which may not exceed $1,500,000 at any time;
(vi) Indebtedness in respect of any Interest Rate Agreement;
(vii) unsecured Indebtedness of the Company in an aggregate
outstanding principal amount not at any time exceeding $3,000,000;
(viii) Indebtedness of Excluded Subsidiaries in an aggregate
outstanding principal amount not at any time exceeding $5,000,000 (and
any guaranty by the Company of such Indebtedness to the extent
constituting an Investment permitted under Section 9.14(vii) hereof);
and
(ix) any guaranty by the Company of Indebtedness incurred
pursuant to the foregoing clauses (ii), (iii), (iv) or (v) by a
Subsidiary of the Company;
provided that (A) Permitted Indebtedness incurred pursuant to the foregoing
clauses (i) and (iii) may be incurred only in connection with Permitted
Acquisitions; and (B) Permitted Indebtedness incurred pursuant to the foregoing
clauses (i), (ii), (iii) and (viii) shall be incurred on terms and pursuant to
documentation in all respects reasonably satisfactory to the Administrative
Agent.
"Permitted Mortgage" means any mortgage subjecting property of
any Subsidiary of the Company to a Lien where (i) the outstanding Capital Stock
of such Subsidiary has been pledged to the Administrative Agent for the benefit
of the Lenders pursuant to the Company Pledge Agreement, the Subsidiary Pledge
Agreement or another pledge agreement that is in form and substance reasonably
acceptable to the Administrative Agent, (ii) the Company shall agree, for the
benefit of the Administrative Agent and the Lenders, not to permit any
Subsidiary owning any interest in such property to create, incur or suffer to
exist any Indebtedness other than Indebtedness permitted hereunder (determined
without giving effect to clause (ii) of the definition of "Permitted
Indebtedness" in this Section
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1.01) and other Indebtedness secured by such mortgage, (iii) such mortgage (and
the other documentation, if any, relating thereto) does not contain any
cross-default provisions referring to any other indebtedness of the Company or
its Subsidiaries and (iv) such mortgage (and the other documentation, if any,
relating thereto) does not contain any covenants subjecting the Company or its
Subsidiaries to financial tests of any nature.
"Person" shall mean an individual, a corporation, a company, a
voluntary association, a partnership, a limited liability company, a trust, an
unincorporated organization or a government or any agency, instrumentality or
political subdivision thereof.
"Plan" shall mean an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (a) maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of the
Controlled Group or (b) maintained pursuant to a collective bargaining agreement
or any other arrangement under which more than one employer makes contributions
and to which the Company or any member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the preceding five
plan years made contributions.
"Post-Default Rate" shall mean a rate equal to the sum of 2%
plus the higher of (i) the rate of interest applicable to ABR Loans and (ii) in
the case of any Loan, the rate of interest (if any) otherwise applicable to such
Loan.
"Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by The Chase Manhattan Bank as its prime
rate in effect at its principal office in New York City; each change in the
Prime Rate shall be effective from and including the date such change is
publicly announced as being effective.
"Principal Stockholders" shall mean each of Vincent J. Ryan,
Schooner Capital Corporation, C. Richard Reese, Eugene B. Doggett, and their
respective Affiliates.
"Qualifying Sale-Leaseback Transaction" shall mean any
arrangement by which the Company or any of its Subsidiaries enters into an
arrangement with any bank, insurance company or other lender or investor
providing for the leasing to the Company or a Subsidiary thereof of any real
property which has been or is to be sold or transferred by the Company or such
Subsidiary to such lender or investor or to any Person to whom funds have been
or are to be advanced by such lender or investor and where the real property in
question has been constructed after the Amendment and Restatement Effective
Date.
"Quarterly Dates" shall mean the last Business Day of each
March, June, September and December.
"RCRA" means the Resource Conservation and Recovery Act, as
amended.
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"Reference Lenders" shall mean each of Chase and such other
Lenders as the Administrative Agent may designate with the consent of the
Company, such consent not to be unreasonably withheld.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender,
any change on or after the date of this Agreement in United States federal,
state or foreign laws or regulations, including Regulation D, or the adoption or
making on or after such date of any interpretations, directives or requests
applying to a class of lenders including such Lender of or under any United
States federal or state, or any foreign, laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Reimbursement Obligations" shall mean, at any time, the
obligations of the Company then outstanding to reimburse amounts paid by the
Issuing Bank in respect of any drawings under a Letter of Credit.
"Release" shall have the meaning set forth in 42 U.S.C.
Section 9601(22), but shall not include any "federally permitted release" as
defined in 42 U.S.C. Section 9601(10). The term "Released" shall have a
corresponding meaning.
"Reserve Requirement shall mean, for any Eurodollar Loans for
any Interest Period therefor, the average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks by
reason of any Regulatory Change against (i) any category of liabilities which
includes deposits by reference to which the Eurodollar Rate is to be determined
as provided in the definition of "Eurodollar Base Rate" in this Section 1.01 or
(ii) any category of extensions of credit or other assets which include
Eurodollar Loans.
"Residual Assurances" shall mean any commitment or undertaking
by the Company required as a condition to any financing made available by any
Person to an Affiliate of the Company to finance the costs of construction or
acquisition by such Affiliate of records management facilities (including the
acquisition of real estate for development purposes), where such facility is
intended to be leased to the Company or a Subsidiary of the Company, which
commitment or undertaking is intended to provide such Person with an additional
assurance that it will receive a minimum return under such financing (and which
does not constitute a Guaranty of the principal amount of such financing);
provided that no payment
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under any such commitment or undertaking may be made prior to July 31, 2002, and
that such commitment or undertaking shall be entered into on terms and pursuant
to documentation in all respects reasonably satisfactory to the Administrative
Agent.
"Restricted Payment" shall mean dividends (in cash, property
or obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for the purchase,
redemption, retirement or other acquisition of, any shares of any class of
Capital Stock of the Company, or any payment in respect of any option or warrant
to purchase any shares of any class of Capital Stock of the Company or the
exchange or conversion of any shares of any class of Capital Stock of the
Company for or into any obligations of or shares of any other class of Capital
Stock of the Company or any other property, but excluding dividends payable
solely in, or exchanges or conversions for or into, shares of common stock of
the Company.
"Scheduled Amortization" shall mean, for any period, the sum
(calculated without duplication) of all payments of principal of Indebtedness of
the Company (other than Indebtedness hereunder) scheduled to be made during such
period.
"Security Documents" shall mean, collectively, the Company
Pledge Agreement, the Subsidiary Pledge Agreement and all Uniform Commercial
Code financing statements required by said agreements to be filed with respect
to the security interests in personal Property created pursuant thereto.
"Senior Subordinated Debt" shall mean 1996 Senior Subordinated
Debt and 1997 Senior Subordinated Debt.
"Senior Subordinated Debt Documents" shall mean all documents
and agreements executed and delivered in connection with the original issuance
of the Senior Subordinated Debt, including the Senior Subordinated Debt
Indentures and the promissory notes evidencing Indebtedness thereunder, in each
case as the same may be amended or modified, without prejudice to the provisions
of Section 9.20 hereof.
"Senior Subordinated Debt Indentures" shall mean the 1996
Senior Subordinated Debt Indenture and the 1997 Senior Subordinated Debt
Indenture.
"Statutory Reserve Rate" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which Chase is subject for new
negotiable nonpersonal time deposits in dollars of over $100,000 with maturities
approximately equal to three months. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage.
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"Stock Consideration" shall mean, with respect to any
Acquisition, the aggregate amount of consideration paid by the Company and its
Subsidiaries in connection therewith consisting of the Company's common stock or
with proceeds of the issuance of the Company's common stock within twelve months
prior to the date of such Acquisition. For purposes hereof, the amount of Stock
Consideration paid by the Company in respect of any Acquisition where the Stock
Consideration consists of the Company's common stock shall be deemed to be equal
to the fair market value of the Company's common stock so paid, determined in
good faith by the Company at the time of such Acquisition.
"Subordinated Indebtedness" shall mean, collectively, (a)
Senior Subordinated Debt and (b) Additional Subordinated Indebtedness.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership, limited liability company or other entity of which at
least a majority of the securities or other ownership interests having by the
terms thereof ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions of such corporation,
partnership, limited liability company or other entity (irrespective of whether
or not at the time securities or other ownership interests of any other class or
classes of such corporation, partnership, limited liability company or other
entity shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by such
Person or one or more Subsidiaries of such Person or by such Person and one or
more Subsidiaries of such Person.
"Subsidiary Guarantor" shall mean (i) each of the Subsidiaries
of the Company listed in Part 1 of Schedule II hereto other than those
Subsidiaries identified in Part 1 of Schedule II as not being a Subsidiary
Guarantor and (ii) each other Subsidiary of the Company that from time to time
becomes a party to the Subsidiary Guaranty or otherwise guarantees the
obligations of the Company hereunder pursuant to Section 9.22.
"Subsidiary Guaranty" shall mean the Amended and Restated
Subsidiary Guaranty, in substantially the form of Exhibit B hereto, as said
agreement shall be modified and supplemented and in effect from time to time.
"Subsidiary Pledge Agreement" shall mean an Amended and
Restated Pledge Agreement substantially in the form of Exhibit D hereto between
the Subsidiary Guarantors and the Administrative Agent, as the same shall be
modified and supplemented and in effect from time to time.
"Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day is not a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release
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H.15(519) during the week following such day) or, if such rate is not so
reported on such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of major
money center banks in New York City received at approximately 10:00 a.m., New
York City time, on such day (or, if such day is not a Business Day, on the next
preceding Business Day) by the Administrative Agent from three negotiable
certificate of deposit dealers of recognized standing selected by it.
"Type" shall have the meaning assigned to such term in Section
1.03 hereof.
"Unfunded Liabilities" shall mean, with respect to any Plan,
at any time, the amount (if any) by which (a) the present value of all benefits
under such Plan exceeds (b) the fair market value of all Plan assets allocable
to such benefits, all determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess represents a potential
liability of the Company or any member of the Controlled Group to the PBGC or
such Plan under Title IV of ERISA.
"Voting Stock" shall mean, with respect to any Person, any
class or classes of Capital Stock pursuant to which the holders thereof have the
general voting power under ordinary circumstances to elect at least a majority
of the board of directors, managers or trustees of such Person (irrespective of
whether or not, at the time, stock of any other class or classes has, or might
have, voting power by reason of the happening of any contingency).
"Wholly-Owned Subsidiary" shall mean as to any Person, a
Subsidiary of such Person all of whose outstanding shares of Capital Stock
(except directors' qualifying shares) are directly or indirectly owned by such
Person.
1.02 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with GAAP;
provided that if any change in GAAP proposed after the Amendment and Restatement
Effective Date in itself materially affects the calculation of any financial
covenant in Section 9, the Company may by notice to the Administrative Agent, or
the Administrative Agent (at the request of the Majority Lenders) may by notice
to the Company, require that such covenant thereafter be calculated in
accordance with GAAP as in effect, and applied by the Company, immediately
before such change in GAAP occurs. If such notice is given, the compliance
certificates delivered pursuant to Section 9.01 after such change occurs shall
be accompanied by reconciliations of the difference between the calculation set
forth therein and a calculation made in accordance with GAAP as in effect from
time to time after such change occurs. To enable the ready determination of
compliance with the covenants set forth in Section 9 hereof, the Company will
not change from December 31 in each year the date on which its fiscal year ends,
nor from March 31, June 30 and September 30 the dates on which the first three
fiscal quarters in each fiscal year end.
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1.03 Types of Loans. Loans hereunder are distinguished by
"Type". The "Type" of a Loan refers to the determination whether such Loan is a
Eurodollar Loan or an ABR Loan.
Section 2. Loans, Etc.
2.01 Loans.
(a) Each Lender severally agrees, on the terms and conditions
of this Agreement, to make loans to the Company in Dollars during the period
from and including the Amendment and Restatement Effective Date to but not
including the Commitment Termination Date in an aggregate principal amount at
any one time outstanding up to but not exceeding the amount of the Commitment of
such Lender as in effect from time to time, provided that in no event shall the
aggregate principal amount of all Loans, together with the aggregate amount of
all Letter of Credit Liabilities, exceed the aggregate amount of the Commitments
as in effect from time to time. Subject to the terms and conditions of this
Agreement, during such period the Company may borrow, repay and reborrow the
amount of the Commitments by means of ABR Loans and Eurodollar Loans and may
convert Loans of one Type into Loans of the other Type (as provided in Section
3.02(a) hereof) or continue Eurodollar Loans for subsequent Interest Periods.
(b) The Company shall, on the Amendment and Restatement
Effective Date, if there are any Existing Loans outstanding on such date, borrow
Loans from certain of the Lenders and/or (notwithstanding the provisions of
Section 5.02 of the Credit Agreement requiring that prepayments be made ratably
in accordance with the principal amounts of the Loans held by the Lenders)
prepay Loans of certain of the Lenders and repay the Existing Loans of each
Existing Lender (together in each case with accrued interest and any amounts
payable under Section 6.05 of the Credit Agreement) such that, after giving
effect thereto, the Loans (including, without limitation, the Types and Interest
Periods thereof) shall be held by the Lenders ratably in accordance with their
respective Commitments.
(c) Schedule I hereto sets forth the amount of increase or
decrease in the Commitment of each such Lender and of any other borrowings and
prepayments such that after giving effect to the transactions contemplated in
this Section to occur on the Amendment and Restatement Effective Date, each
Lender's Commitment shall be in accordance with the Commitment set forth
opposite its name on the signature pages hereof and each Lender's Loan to the
Company shall not exceed its Commitment.
2.02 Reductions of Commitments.
(a) Mandatory. The Commitments shall terminate on the
Commitment Termination Date. In addition, the Commitments shall be reduced in
the amount and on the
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date of each prepayment applied to the Loans (or to reduce Commitments) pursuant
to Section 3.02(b).
(b) Optional. The Company shall have the right to terminate or
reduce the unused Commitments (for which purpose use of the Commitments shall be
deemed to include the aggregate amount of Letter of Credit Liabilities) at any
time or from time to time, provided that (i) the Company shall give notice of
each such termination or reduction to the Administrative Agent as provided in
Section 5.05 hereof and (ii) each partial reduction shall be in an aggregate
amount at least equal to $1,000,000.
(c) No Reinstatement. Commitments once terminated or reduced
may not be reinstated.
2.03 Fees. The Company shall pay to the Administrative Agent
for the account of each Lender commitment fees on the daily average unused
amount of such Lender's Commitment (for which purpose the aggregate amount of
any Letter of Credit Liabilities shall be deemed to be a pro rata (based on the
Commitments) use of each Lender's Commitment) for the period from the Amendment
and Restatement Effective Date to and including the earlier of the date the
Commitments are terminated and the Commitment Termination Date, at a rate per
annum equal to the Applicable Commitment Fee Rate in effect from time to time.
Accrued commitment fees under this Section 2.03 shall be payable on the
Quarterly Dates and on the earlier of the date the Commitments are terminated
and the Commitment Termination Date. The Company shall pay to Chase on the
Amendment and Restatement Effective Date syndication, agency and additional
commitment fees in the amounts heretofore mutually agreed in writing. The
Company shall pay to the Administrative Agent on the Amendment and Restatement
Effective Date and on each anniversary thereof, so long as any of the
Commitments are in effect and until payment in full of all Loans hereunder, all
interest thereon and all other amounts payable hereunder, an annual agency fee
in the amount heretofore mutually agreed in writing.
2.04 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
2.05 Several Obligations; Remedies Independent. The failure of
any Lender to make any Loan to be made by it on the date specified therefor
shall not relieve any other Lender of its obligation to make its Loan on such
date, but neither the Administrative Agent nor any Lender shall be responsible
for the failure of any other Lender to make a Loan to be made by such other
Lender. The amounts payable by the Company at any time hereunder and under the
Notes to each Lender shall be a separate and independent debt and each Lender
shall be entitled to protect and enforce its rights arising out of this
Agreement and the Notes, and it shall not be necessary for any other Lender or
the Administrative Agent to consent to, or be joined as an additional party in,
any proceedings for such purposes.
Credit Agreement
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2.06 Notes. The Loans made by each Lender shall be evidenced
by a single promissory note of the Company (each, a "Note") in substantially the
form of Exhibit A hereto, dated the Amendment and Restatement Effective Date,
payable to such Lender in a principal amount equal to such Lender's Commitment
as in effect on the Amendment and Restatement Effective Date and otherwise duly
completed. Each Lender is hereby authorized by the Company to endorse on the
schedule (or a continuation thereof) attached to each Note of such Lender, to
the extent applicable, the date, amount and Type of and the Interest Period (if
any) for each Loan made by such Lender to the Company hereunder, and the date
and amount of each payment or prepayment of principal of such Loan received by
such Lender, provided that any failure by such Lender to make any such
endorsement shall not affect the obligations of the Company under such Note or
hereunder in respect of such Loan.
2.07 Use of Proceeds. The proceeds of the Loans shall be used
for the general corporate purposes of the Company and its Subsidiaries,
including, without limitation, the making of Permitted Acquisitions and the
refinancing of existing Indebtedness of the Company and its Subsidiaries.
Neither the Administrative Agent nor any Lender shall have any responsibility as
to the use of any of the proceeds of any of the Loans or Letters of Credit.
2.08 Letters of Credit. Subject to the terms and conditions of
this Agreement, the Commitments may be utilized, upon the request of the
Company, in addition to the Loans provided for by Section 2.01 hereof, by the
issuance by the Issuing Bank of standby letters of credit (collectively with the
Existing Letters of Credit, "Letters of Credit") for account of the Company or
any of its Subsidiaries (as specified by the Company), provided that in no event
shall (i) the aggregate amount of all Letter of Credit Liabilities, together
with the aggregate outstanding principal amount of the Loans, exceed the
aggregate amount of the Commitments as in effect from time to time, (ii) the
aggregate outstanding amount of all Letter of Credit Liabilities exceed
$10,000,000 and (iii) the expiration date of any Letter of Credit extend beyond
the earlier of the Commitment Termination Date and the date one year following
the issuance of such Letter of Credit (provided that any Letter of Credit with a
one-year tenor may provide for the renewal thereof for additional one-year
periods, which periods shall in any event not extend beyond the Commitment
Termination Date). On the Amendment and Restatement Effective Date, all Existing
Letters of Credit shall automatically, without any action on the part of any
Person, be deemed to be Letters of Credit issued and outstanding hereunder.
The following additional provisions shall apply to Letters of
Credit:
(a) The Company shall give the Administrative Agent at least
three Business Days' irrevocable prior notice (effective upon receipt)
specifying the Business Day (which shall be no later than 30 days
preceding the Commitment Termination Date) on which each Letter of
Credit is to be issued and the account party or parties therefor and
describing in reasonable detail the proposed terms of such Letter of
Credit (including the beneficiary thereof) and the nature of the
transactions or obligations proposed to be
Credit Agreement
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supported thereby. Upon receipt of any such notice, the Administrative
Agent shall advise the Issuing Bank of the contents thereof.
(b) On each day during the period commencing with the issuance
by the Issuing Bank of any Letter of Credit and until such Letter of
Credit shall have expired or been terminated, the Commitment of each
Lender shall be deemed to be utilized for all purposes of this
Agreement in an amount equal to such Lender's Commitment Percentage of
the then undrawn face amount of such Letter of Credit. Each Lender
(other than the Issuing Bank) agrees that, upon the issuance of any
Letter of Credit hereunder, it shall automatically acquire a
participation in the Issuing Bank's liability under such Letter of
Credit in an amount equal to such Lender's Commitment Percentage of
such liability, and each Lender (other than the Issuing Bank) thereby
shall automatically absolutely, unconditionally and irrevocably assume,
as primary obligor and not as surety, and be unconditionally obligated
to the Issuing Bank to pay and discharge when due, its Commitment
Percentage of the Issuing Bank's liability under such Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit
of any demand for payment under such Letter of Credit, the Issuing Bank
shall promptly notify the Company (through the Administrative Agent) of
the amount to be paid by the Issuing Bank as a result of such demand
and the date on which payment is to be made by the Issuing Bank to such
beneficiary in respect of such demand. Notwithstanding the identity of
the account party of any Letter of Credit, the Company hereby
unconditionally agrees to pay and reimburse the Administrative Agent
for account of the Issuing Bank for the amount of each demand for
payment under such Letter of Credit that is in substantial compliance
with the provisions of such Letter of Credit at or prior to the date on
which payment is to be made by the Issuing Bank to the beneficiary
thereunder, without presentment, demand, protest or other formalities
of any kind.
(d) Forthwith upon its receipt of a notice referred to in
paragraph (c) of this Section 2.08, the Company shall advise the
Administrative Agent whether or not the Company intends to borrow
hereunder to finance its obligation to reimburse the Issuing Bank for
the amount of the related demand for payment and, if it does, submit a
notice of such borrowing as provided in Section 5.05 hereof.
(e) Each Lender (other than the Issuing Bank) shall pay to the
Administrative Agent for account of the Issuing Bank at an account in
New York, New York specified by the Administrative Agent in Dollars and
in immediately available funds the amount of such Lender's Commitment
Percentage of any payment under a Letter of Credit upon notice by the
Issuing Bank (through the Administrative Agent) to such Lender
requesting such payment and specifying such amount. Each such Lender's
obligation to make such payment to the Administrative Agent for account
of the Issuing Bank under this paragraph (e), and the Issuing Bank's
right to receive the same, shall be absolute
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and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the failure of any other
Lender to make its payment under this paragraph (e), the financial
condition of the Company (or any other account party), any failure to
satisfy any condition precedent to any Loan, the existence of any
Default or the termination of the Commitments. Each such payment to the
Issuing Bank shall be made without any offset, abatement, withholding
or reduction whatsoever. If any Lender shall default in its obligation
to make any such payment to the Administrative Agent for account of the
Issuing Bank, for so long as such default shall continue the
Administrative Agent may at the request of the Issuing Bank withhold
from any payments received by the Administrative Agent under this
Agreement or any Note for account of such Lender the amount so in
default and, to the extent so withheld, pay the same to the Issuing
Bank in satisfaction of such defaulted obligation.
(f) Upon the making of each payment by a Lender to the Issuing
Bank pursuant to paragraph (e) above in respect of any Letter of
Credit, such Lender shall, automatically and without any further action
on the part of the Administrative Agent, the Issuing Bank or such
Lender, acquire (i) a participation in an amount equal to such payment
in the Reimbursement Obligation owing to the Issuing Bank by the
Company hereunder and under the Letter of Credit Documents relating to
such Letter of Credit and (ii) a participation in a percentage equal to
such Lender's Commitment Percentage in any interest or other amounts
payable by the Company hereunder and under such Letter of Credit
Documents in respect of such Reimbursement Obligation (other than the
commissions, charges, costs and expenses payable to the Issuing Bank
pursuant to paragraph (g) of this Section 2.08). Upon receipt by the
Issuing Bank from or for account of the Company of any payment in
respect of any Reimbursement Obligation or any such interest or other
amount (including by way of setoff or application of proceeds of any
collateral security) the Issuing Bank shall promptly pay to the
Administrative Agent for account of each Lender entitled thereto such
Lender's Commitment Percentage of such payment, each such payment by
the Issuing Bank to be made in the same money and funds in which
received by the Issuing Bank. In the event any payment received by the
Issuing Bank and so paid to the Lenders hereunder is rescinded or must
otherwise be returned by the Issuing Bank, each Lender shall, upon the
request of the Issuing Bank (through the Administrative Agent), repay
to the Issuing Bank (through the Administrative Agent) the amount of
such payment paid to such Lender, with interest at the rate specified
in paragraph (j) of this Section 2.08.
(g) The Company shall pay to the Administrative Agent for
account of each Lender (ratably in accordance with their respective
Commitment Percentages) a letter of credit fee in respect of each
Letter of Credit in an amount equal to the Applicable L/C Percentage of
the daily average undrawn face amount of such Letter of Credit for the
period from and including the date of issuance of such Letter of Credit
(i) in the case of a Letter of Credit that expires in accordance with
its terms, to and including such expiration date and (ii) in the case
of a Letter of Credit that is drawn in full or is
Credit Agreement
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otherwise terminated other than on the stated expiration date of such
Letter of Credit, to but excluding the date such Letter of Credit is
drawn in full or is terminated (such fee to be non-refundable, to be
paid in arrears on each Quarterly Date and on the Commitment
Termination Date and on the date of expiry or termination or full
utilization of such Letter of Credit and to be calculated for any day
after giving effect to any payments made under such Letter of Credit on
such day). In addition, the Company shall pay to the Administrative
Agent for account of the Issuing Bank a fronting fee in respect of each
Letter of Credit in an amount equal to 0.25% per annum of the daily
average undrawn face amount of such Letter of Credit for the period
from and including the date of issuance of such Letter of Credit (i) in
the case of a Letter of Credit that expires in accordance with its
terms, to and including such expiration date and (ii) in the case of a
Letter of Credit that is drawn in full or is otherwise terminated other
than on the stated expiration date of such Letter of Credit, to but
excluding the date such Letter of Credit is drawn in full or is
terminated (such fee to be non-refundable, to be paid in arrears on
each Quarterly Date and on the Commitment Termination Date and to be
calculated for any day after giving effect to any payments made under
such Letter of Credit on such day) plus all commissions, charges, costs
and expenses in the amounts customarily charged by the Issuing Bank
from time to time in like circumstances with respect to the issuance of
each Letter of Credit and drawings and other transactions relating
thereto.
(h) Promptly following the end of each calendar month, the
Issuing Bank shall deliver (through the Administrative Agent) to each
Lender and the Company a notice describing the aggregate amount of all
Letters of Credit outstanding at the end of such month. Upon the
request of any Lender from time to time, the Issuing Bank shall deliver
any other information reasonably requested by such Lender with respect
to each Letter of Credit then outstanding.
(i) The issuance by the Issuing Bank of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 7
hereof, be subject to the conditions precedent that (i) such Letter of
Credit shall be in such form, contain such terms and support such
transactions as shall be satisfactory to the Issuing Bank consistent
with its then current practices and procedures with respect to letters
of credit of the same type and (ii) the Company shall have executed and
delivered such applications, agreements and other instruments relating
to such Letter of Credit as the Issuing Bank shall have reasonably
requested consistent with its then current practices and procedures
with respect to letters of credit of the same type, provided that in
the event of any conflict between any such application, agreement or
other instrument and the provisions of this Agreement or any Security
Document, the provisions of this Agreement and the Security Documents
shall control.
(j) To the extent that any Lender shall fail to pay any amount
required to be paid pursuant to paragraph (e) or (f) of this Section
2.08 on the due date therefor, such
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Lender shall pay interest to the Issuing Bank (through the
Administrative Agent) on such amount from and including such due date
to but excluding the date such payment is made at a rate per annum
equal to the Federal Funds Effective Rate, provided that if such Lender
shall fail to make such payment to the Issuing Bank within three
Business Days of such due date, then, retroactively to the due date,
such Lender shall be obligated to pay interest on such amount at the
Post-Default Rate.
(k) The issuance by the Issuing Bank of any modification or
supplement to any Letter of Credit hereunder shall be subject to the
same conditions as are applicable under this Section 2.08 to the
issuance of new Letters of Credit, and no such modification or
supplement shall be issued hereunder unless either (i) the respective
Letter of Credit affected thereby would have complied with such
conditions had it originally been issued hereunder in such modified or
supplemented form or (ii) each Lender shall have consented thereto.
The Company hereby indemnifies and holds harmless each Lender (including the
Issuing Bank) and the Administrative Agent from and against any and all claims
and damages, losses, liabilities, costs or expenses that such Lender or the
Administrative Agent may incur (or that may be claimed against such Lender or
the Administrative Agent by any Person whatsoever) by reason of or in connection
with the execution and delivery or transfer of or payment or refusal to pay by
the Issuing Bank under any Letter of Credit; provided that the Company shall not
be required to indemnify any Lender or the Administrative Agent for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, caused by (x) the willful misconduct or gross negligence of the Issuing
Bank in determining whether a request presented under any Letter of Credit
complied with the terms of such Letter of Credit or (y) in the case of the
Issuing Bank, such Lender's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and conditions
of such Letter of Credit. Nothing in this Section 2.08 is intended to limit the
other obligations of the Company, any Lender or the Administrative Agent under
this Agreement.
Section 3. Borrowings, Conversions and Prepayments.
3.01 Borrowings. The Company shall give the Administrative
Agent notice of each Loan to be made hereunder as provided in Section 5.05
hereof. Not later than 11:00 a.m. New York time on the date specified for each
such borrowing hereunder, each Lender shall make available the amount of the
Loan to be made by it on such date to the Administrative Agent, at an account in
New York, New York specified by the Administrative Agent, in immediately
available funds, for account of the Company. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company designated by the
Company and maintained with Chase in New York, New York.
Credit Agreement
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3.02 Prepayments and Conversions.
(a) Optional Prepayments and Conversions. The Company shall
have the right to prepay Loans and to convert Loans of one Type into Loans of
the other Type, at any time or from time to time, provided that: (i) the Company
shall give the Administrative Agent notice of each such prepayment as provided
in Section 5.05 hereof and (ii) except to the extent required pursuant to
Section 3.02(b) hereof, Eurodollar Loans may be prepaid or converted only on the
last day of an Interest Period for such Loans.
(b) Mandatory Prepayments.
(1) Casualty Events; Condemnation Awards. On the date twelve
months following the receipt by the Company or any of its Subsidiaries
of any proceeds of insurance, condemnation award or other compensation
in respect of any Casualty Event affecting any property of the Company
or any of its Subsidiaries (or upon such earlier date as the Company or
such Subsidiary, as the case may be, shall have determined not to
repair or replace the property affected by such Casualty Event), the
Company shall prepay the Loans (and/or provide cover for Letter of
Credit Liabilities as specified in paragraph (c) below), and the
Commitments shall be subject to automatic reduction, in an aggregate
amount equal to 100% of the Net Cash Proceeds of such Casualty Event
not theretofore applied to the repair or replacement of such property.
(2) Issuance of Indebtedness. The Company shall prepay the
Loans (and/or provide cover for Letter of Credit Liabilities as
specified in paragraph (c) below) in the amount of and on the date of
each receipt by the Company or any Subsidiary of the Company of Net
Cash Proceeds from issuance subsequent to the Amendment and Restatement
Effective Date of Indebtedness other than Indebtedness incurred
pursuant to Section 9.08 (it being understood that this Section
3.02(b)(2) shall not constitute a waiver of any provision of Section
9.08).
(3) Asset Dispositions. During each fiscal year of the
Company, the Company shall prepay the Loans (and/or provide cover for
Letter of Credit Liabilities as specified in paragraph (c) below) in an
amount equal to the excess of (a) the sum of (x) the Net Cash Proceeds
received by the Company or any Subsidiary of the Company from any
disposition by such Person of any assets during such fiscal year, other
than a disposition permitted by clause (i) or (ii) of Section 9.12 plus
(y) any payments with respect to receivables retained by such Person
arising from the sale of goods or services at facilities disposed of in
asset dispositions during such fiscal year over (b) $1,000,000. Such
prepayments shall be made from time to time on the first Business Day
that the excess amount referred to above (less all amounts previously
applied to the prepayment of the Loans pursuant to this paragraph (3)
during such fiscal year) is $100,000 or more.
Credit Agreement
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Any prepayment pursuant to paragraphs (1) through (3) above shall automatically
reduce the Commitments in an amount equal to the amount specified in such
paragraphs (and to the extent that, after giving effect to such reduction, the
aggregate principal amount of Loans and the aggregate amount of Letter of Credit
Liabilities would exceed the Commitments, the Company shall, first, prepay Loans
and, second, provide cover for Letter of Credit Liabilities as specified in
paragraph (c) below, in an aggregate amount equal to such excess). The Company
shall notify the Administrative Agent promptly upon the occurrence of any event
giving rise to a prepayment or Commitment reduction under this Section 3.02(b).
(c) Cover for Letter of Credit Liabilities. In the event that
the Loans have been repaid in full, amounts payable under Section 3.02(b) shall
be applied to provide cash cover for outstanding Letters of Credit, in which
event the Company shall effect the same by paying to the Administrative Agent
immediately available funds in an amount equal to the required amount, which
funds shall be retained by the Administrative Agent in the Collateral Account as
collateral security for the Letter of Credit Liabilities until such time as the
Letters of Credit shall have been terminated and all of the Letter of Credit
Liabilities paid in full.
Section 4. Payments of Principal and Interest.
4.01 Repayment of Loans. The Company hereby promises to pay to
the Administrative Agent for the account of each Lender the entire outstanding
principal amount of such Lender's Loans, and each Loan shall mature, on the
Commitment Termination Date.
4.02 Interest. The Company will pay to the Administrative
Agent for the account of each Lender interest on the unpaid principal amount of
each Loan made by such Lender for the period commencing on the date of such Loan
to but excluding the date such Loan shall be paid in full, at the following
rates per annum:
(a) if such Loan is an ABR Loan, the Alternate Base Rate plus
the Applicable Margin; and
(b) if such Loan is a Eurodollar Loan, the Eurodollar Rate
plus the Applicable Margin.
Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable
Post-Default Rate
(x) on any principal of any Loan made by such Lender, on any
Reimbursement Obligation held by such Lender and on any other amount
payable by the Company hereunder or under the Note held by such Lender
to or for account of such Lender (but, if such amount is interest, only
to the extent legally enforceable), that shall not be paid in full when
due (whether at stated maturity, by acceleration, by mandatory
prepayment
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or otherwise), for the period from and including the due date thereof
to but excluding the date the same is paid in full and
(y) during any period when an Event of Default shall have
occurred under Section 10.01(a) hereof and for so long as such Event of
Default shall be continuing, on any principal of any Loan made by such
Lender.
Accrued interest on each Loan shall be payable (i) if such Loan is an ABR Loan,
on each Quarterly Date, (ii) if such Loan is a Eurodollar Loan, on the last day
of each Interest Period for such Loan (and, if such Interest Period exceeds
three months' duration, quarterly, commencing on the first quarterly anniversary
of the first day of such Interest Period), and (iii) in any event, upon the
payment, prepayment or conversion thereof, but only on the principal so paid or
prepaid or converted; provided that interest payable at the Post-Default Rate
shall be payable from time to time on demand of the Administrative Agent or the
Majority Lenders. Promptly after the determination of any interest rate provided
for herein or any change therein, the Administrative Agent shall notify the
Lenders and the Company thereof.
Notwithstanding the foregoing provisions of this Section 4.02,
if at any time the rate of interest set forth above on any Loan of any Lender
(the "Stated Rate" for such Loan) exceeds the maximum non-usurious interest rate
permissible for such Lender to charge commercial borrowers under applicable law
(the "Maximum Rate" for such Lender), the rate of interest charged on such Loan
of such Lender hereunder shall be limited to the Maximum Rate for such Lender.
In the event the Stated Rate for any Loan of a Lender that has
theretofore been subject to the preceding paragraph at any time is less than the
Maximum Rate for such Lender, the principal amount of such Loan shall bear
interest at the Maximum Rate for such Lender until the total amount of interest
paid to such Lender or accrued on its Loans hereunder equals the amount of
interest which would have been paid to such Lender or accrued on such Lender's
Loans hereunder if the Stated Rate had at all times been in effect.
In the event, upon payment in full of all amounts payable
hereunder, the total amount of interest paid to any Lender or accrued on such
Lender's Loans under the terms of this Agreement is less than the total amount
of interest which would have been paid to such Lender or accrued on such
Lender's Loans if the Stated Rate had, at all times, been in effect, then the
Company shall, to the extent permitted by applicable law, pay to the
Administrative Agent for the account of such Lender an amount equal to the
difference between (a) the lesser of (i) the amount of interest which would have
accrued on such Lender's Loans if the Maximum Rate for such Lender had at all
times been in effect or (ii) the amount of interest which would have accrued on
such Lender's Loans if the Stated Rate had at all times been in effect and (b)
the amount of interest actually paid to such Lender or accrued on its Loans
under this Agreement.
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In the event any Lender ever receives, collects or applies as
interest any sum in excess of the Maximum Rate for such Lender, such excess
amount shall be applied to the reduction of the principal balance of its Loans
or to other amounts (other than interest) payable hereunder, and if no such
principal is then outstanding, such excess or part thereof remaining shall be
paid to the Company.
Section 5. Payments; Pro Rata Treatment; Computations; Etc.
5.01 Payments. Except to the extent otherwise provided herein,
all payments of principal, interest, Reimbursement Obligations and other amounts
to be made by the Company hereunder and under the Notes shall be made in
Dollars, in immediately available funds, to the Administrative Agent at an
account in New York, New York specified by the Administrative Agent, not later
than 11:00 a.m. New York time on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day). The Administrative Agent, or any
Lender for whose account any such payment is made, may (but shall not be
obligated to) debit the amount of any such payment which is not made by such
time to any ordinary deposit account of the Company with the Administrative
Agent or such Lender, as the case may be. The Company shall, at the time of
making each payment hereunder or under any Note, specify to the Administrative
Agent the Loans or other amounts payable by the Company hereunder to which such
payment is to be applied (and in the event that it fails to so specify, or if an
Event of Default has occurred and is continuing, the Administrative Agent may
apply such payment for the benefit of the Lenders as it may elect in its sole
discretion, but subject to the other terms and conditions of this Agreement,
including without limitation, Section 5.02 hereof). Each payment received by the
Administrative Agent hereunder or under any Note for the account of a Lender
shall be paid promptly to such Lender, in immediately available funds, for the
account of such Lender's Applicable Lending Office. If the due date of any
payment hereunder or under any Note would otherwise fall on a day which is not a
Business Day such date shall be extended to the next succeeding Business Day and
interest shall be payable for any principal so extended for the period of such
extension.
5.02 Pro Rata Treatment. Except to the extent otherwise
provided herein: (a) each borrowing from the Lenders under Section 2.01 hereof
shall be made from the Lenders, each payment of commitment fees under Section
2.03 hereof shall be made for the account of the Lenders, and each termination
or reduction of the Commitments under Section 2.02 hereof shall be applied to
the Commitments of the Lenders, pro rata according to the Lenders' respective
percentages of the Commitments, (b) each payment by the Company of principal of
or interest on Loans of a particular Type (other than payments in respect of
Loans of individual Lenders provided for by Section 6 hereof) shall be made to
the Administrative Agent for the account of the Lenders pro rata in accordance
with the respective unpaid principal amounts of such Loans held by the Lenders
and (c) each conversion of Loans of a particular Type (other than conversions of
Loans of individual Lenders pursuant to Section 6.04 hereof) shall be made
Credit Agreement
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pro rata among the Lenders in accordance with the respective principal amounts
of such Loans held by the Lenders.
5.03 Computations. Interest and fees shall be computed on the
basis of a year of 360 days (or 365 or 366 days, as the case may be, in the case
of ABR Loans the interest rate payable on which is then based on the Prime Rate)
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which payable.
5.04 Minimum and Maximum Amounts; Types. Except for
prepayments made pursuant to Section 3.02(b) hereof, each borrowing, conversion
and prepayment of principal of Loans shall be in an aggregate principal amount
equal to (a) in the case of Eurodollar Loans, $1,000,000 or a larger multiple of
$100,000, and (b) in the case of ABR Loans, $500,000 or a larger multiple of
$100,000 (borrowings, conversions or prepayments of Loans of different Types or,
in the case of Eurodollar Loans, having different Interest Periods, at the same
time hereunder to be deemed separate borrowings, conversions and prepayments for
purposes of the foregoing, one for Type or Interest Period); provided that (i)
any Loan may be in the aggregate amount of the unused portion of the relevant
Commitments, (ii) Loans may be prepaid in full and (ii) any borrowing or
prepayment of Loans that are ABR Loans may be in an aggregate principal amount
equal to $100,000 or a larger multiple of $100,000.
5.05 Certain Notices. Notices to the Administrative Agent of
terminations or reductions of Commitments, of borrowings, conversions and
prepayments of Loans and of the duration of Interest Periods shall be
irrevocable and shall be effective only if received by the Administrative Agent
not later than 1:00 p.m. New York time on the number of Business Days prior to
the date of the relevant termination, reduction, borrowing, conversion and/or
prepayment specified below:
Number of
Business
Notice Days Prior
------ ----------
Termination or reduction of
Commitments 3
Borrowing or prepayment of
ABR Loans 1
Borrowing or prepayment of,
conversion of or into, or
duration of Interest Period
for, Eurodollar Loans 3
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Prepayments required pursuant
to Section 3.02(b) 1
Each such notice of termination or reduction shall specify the amount thereof to
be terminated or reduced. Each such notice of borrowing, conversion or
prepayment shall specify the amount and Type of the Loans to be borrowed,
converted or prepaid (subject to Sections 3.02(a) and 5.04 hereof), the date of
borrowing, conversion or prepayment (which shall be a Business Day) and, in the
case of Eurodollar Loans, the duration of the Interest Period therefor (subject
to the definition of Interest Period). Each such notice of duration of an
Interest Period shall specify the Loans to which such Interest Period is to
relate. The Administrative Agent shall promptly notify the affected Lenders of
the contents of each such notice. In the event that the Company fails to select
the duration of any Interest Period for any Eurodollar Loans within the time
period and otherwise as provided in this Section 5.05, such Loans (if
outstanding as Eurodollar Loans) will be automatically converted into ABR Loans
on the last day of the then current Interest Period for such Loans or (if
outstanding as ABR Loans) will remain as, or (if not then outstanding) will be
made as, ABR Loans.
5.06 Non-Receipt of Funds by the Administrative Agent. Unless
the Administrative Agent shall have been notified by a Lender or the Company
(the "Payor") prior to the date on which such Lender is to make payment to the
Administrative Agent of the proceeds of a Loan to be made by it hereunder or the
Company is to make a payment to the Administrative Agent for the account of one
or more of the Lenders, as the case may be (such payment being herein called the
"Required Payment"), which notice shall be effective upon receipt, that the
Payor does not intend to make the Required Payment to the Administrative Agent,
the Administrative Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to the Administrative Agent, the
recipient of such payment shall, on demand, pay to the Administrative Agent the
amount made available to it together with interest thereon in respect of the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Effective Rate for such
period.
5.07 Sharing of Payments; Waiver of Enforcement Without
Consent, Etc. (a) The Company agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Lender may
otherwise have, each Lender shall be entitled, at its option, to offset balances
held by it for the account of the Company at any of its offices, in Dollars or
in any other currency, against any principal of or interest on any of such
Lender's Loans or Reimbursement Obligations to the Company hereunder, or any
other obligation of the Company hereunder, which is not paid when due
(regardless of whether such balances are then due to the Company), in which case
it shall promptly notify the Company and the Administrative Agent thereof,
provided that such Lender's failure to give such notice shall not affect the
validity thereof. The Company agrees, to the fullest extent it may effectively
do so
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under applicable law, that any Person purchasing a participation in the
Loans made, or other obligations held, by another Person, whether or not
acquired pursuant to the foregoing arrangements, may exercise all rights of
set-off, banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans or other
obligations in the amount of such participation.
(b) If a Lender shall obtain payment of any principal of or
interest on any Loan made by it under this Agreement, or on any other obligation
then due to such Lender hereunder, through the exercise of any right of set-off,
banker's lien, counterclaim or similar right, or otherwise, it shall promptly
notify the Administrative Agent and purchase from the other Lenders
participations in the Loans made, or other obligations held, by the other
Lenders in such amounts, and make such other adjustments from time to time as
shall be equitable to the end that all the Lenders shall share the benefit of
such payment (net of any expenses which may be incurred by such Lender in
obtaining or preserving such benefit) pro rata in accordance with the unpaid
principal and interest on the Loans or other obligations then due to each of
them. To such end all the Lenders shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if such payment
is rescinded or must otherwise be restored (including the payment of interest to
the extent that the Lender obligated to return such funds is obligated to return
interest).
(c) Nothing contained herein shall require any Lender to
exercise any right of set-off, banker's lien, counterclaim or similar right or
shall affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness or obligation
of the Company.
(d) This Section 5.07 is for the benefit of the Lenders only
and does not constitute a waiver of any rights against the Company or any of its
Subsidiaries or against any property held as security for any obligations
hereunder or under any other Basic Document.
5.08 Withholding Tax Exemption. At least five Business Days
prior to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America or a state thereof agrees that it will deliver to
each of the Company and the Administrative Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Lender is entitled to receive payments under this Agreement and
the Notes without deduction or withholding of any United States federal income
taxes. Each Lender which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Company and the Administrative Agent two additional
copies of such form (or a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the Company
or the Administrative Agent, in each case certifying that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any
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United States federal income taxes, unless 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 advises the
Company and the Administrative Agent that it is not capable of receiving
payments without any deduction or withholding of United States federal income
tax.
Section 6. Yield Protection and Illegality.
6.01 Additional Costs.
(a) The Company shall pay to the Administrative Agent for the
account of each Lender from time to time such amounts as such Lender may
determine to be necessary to compensate it for any costs incurred by such Lender
which such Lender determines are attributable to its making or maintaining of
any Eurodollar Loans hereunder or its obligation to make any of such Loans
hereunder, or any reduction in any amount receivable by such Lender in respect
of any of such Loans or such obligation (such increases in costs and reductions
in amounts receivable being herein called "Additional Costs"), in each case
resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to such Lender
under this Agreement or its Notes in respect of any of such Loans
(other than changes which affect taxes measured by or imposed on the
overall net income of such Lender or of its Applicable Lending Office
for any of such Loans by the jurisdiction in which such Lender has its
principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of,
or any deposits with or other liabilities of, such Lender (including
any of such Loans or any deposits referred to in the definition of
"Eurodollar Base Rate" in Section 1.01 hereof); or
(iii) imposes any other condition affecting this Agreement (or any of
such extensions of credit or liabilities).
Each Lender will notify the Company through the Administrative Agent of any
event occurring after the date of this Agreement which will entitle such Lender
to compensation pursuant to this Section 6.01(a) as promptly as practicable
after it obtains knowledge thereof and determines to request such compensation,
and (if so requested by the Company through the Administrative Agent) will
designate a different Applicable Lending Office for the Eurodollar Loans of such
Lender if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender (provided that such Lender shall have no
obligation to so designate an Applicable Lending Office located in the United
States of America). Each Lender will furnish the
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Company with a statement setting forth the basis and amount of each request by
such Lender for compensation under this Section 6.01(a). If any Lender requests
compensation from the Company under this Section 6.01(a), the Company may, by
notice to such Lender through the Administrative Agent, suspend the obligation
of such Lender to make additional Eurodollar Loans to the Company until the
Regulatory Change giving rise to such request ceases to be in effect (in which
case the provisions of Section 6.04 hereof shall be applicable).
(b) Without limiting the effect of the foregoing provisions of
this Section 6.01, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender which includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement or
a category of extensions of credit or other assets of such Lender which includes
Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if such Lender so
elects by notice to the Company (with a copy to the Administrative Agent), the
obligation of such Lender to make Eurodollar Loans hereunder shall be suspended
until the date such Regulatory Change ceases to be in effect (in which case the
provisions of Section 6.04 hereof shall be applicable).
(c) Determinations and allocations by any Lender for purposes
of this Section 6.01 of the effect of any Regulatory Change on its costs of
maintaining its obligations to make Loans or of making or maintaining Loans or
on amounts receivable by it in respect of Loans, and of the additional amounts
required to compensate such Lender in respect of any Additional Costs, shall be
conclusive absent manifest error, provided that such determinations and
allocations are made on a reasonable basis.
(d) If any Lender demands compensation under this Section, the
Company may, at any time upon at least three (3) Business Days' prior notice to
such Lender through the Administrative Agent, convert in full the then
outstanding Eurodollar Loans of such Lender (in which case the Company shall be
obligated, if such conversion is made on a day that is not the last day of the
then current Interest Period applicable to such affected Eurodollar Loan, to
reimburse such Lender, in accordance with Section 6.05, for any resulting loss
or expense incurred by it) to an ABR Loan.
6.02 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, with respect to any Eurodollar Loans:
(a) the Administrative Agent determines (which determination
shall be conclusive) that quotations of interest rates for the relevant
deposits referred to in the definition of "Eurodollar Base Rate" in
Section 1.01 hereof are not being provided by the Reference Lenders in
the relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for such Loans for Interest Periods
therefor as provided in this Agreement; or
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(b) the Majority Lenders determine (which determination shall
be conclusive) and notify the Administrative Agent that the relevant
rates of interest referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 thereof upon the basis of which the rates of
interest for such Loans are to be determined do not accurately reflect
the cost to such Lenders of making or maintaining such Loans for
Interest Periods therefor;
then the Administrative Agent shall promptly notify the Company and each Lender
thereof, and so long as such condition remains in effect, the Lenders shall be
under no obligation to make Eurodollar Loans or to convert ABR Loans into
Eurodollar Loans and the Company shall, on the last day(s) of the then current
Interest Period(s) for the outstanding Eurodollar Loans, either prepay such
Loans or convert such Loans into ABR Loans in accordance with Section 3.02
hereof.
6.03 Illegality. Notwithstanding any other provision of this
Agreement to the contrary, in the event that it becomes unlawful for any Lender
or its Applicable Lending Office to (a) honor its obligation to make Eurodollar
Loans hereunder, or (b) maintain Eurodollar Loans hereunder, then such Lender
shall promptly notify the Company thereof through the Administrative Agent and
such Lender's obligation to make Eurodollar Loans hereunder shall be suspended
until such time as such Lender may again make and maintain Eurodollar Loans (in
which case the provisions of Section 6.04 hereof shall be applicable).
6.04 Substitute ABR Loans. If the obligation of any Lender to
make Eurodollar Loans shall be suspended pursuant to Section 6.01, 6.02 or 6.03
hereof, all Loans which would otherwise be made by such Lender as Eurodollar
Loans shall be made instead as ABR Loans (and, if an event referred to in
Section 6.01(b) or 6.03 hereof has occurred and such Lender so requests by
notice to the Company with a copy to the Administrative Agent, each Eurodollar
Loan of such Lender then outstanding shall be automatically converted into an
ABR Loan on the date specified by such Lender in such notice) and, to the extent
that Eurodollar Loans are so made as (or converted into) ABR Loans, all payments
of principal which would otherwise be applied to such Eurodollar Loans shall be
applied instead to such ABR Loans.
6.05 Compensation. The Company shall pay to the Administrative
Agent for the account of each Lender, upon the request of such Lender through
the Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense incurred by it as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Loan
made by such Lender on a date other than the last day of an Interest
Period for such Loan; or
(b) any failure by the Company to borrow a Eurodollar Loan to
be made by such Lender on the date for such borrowing specified in the
relevant notice of borrowing under Section 5.05 hereof
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but excluding, in any event, loss of margin for the period after any such
payment, prepayment or conversion or failure to borrow; provided that such
Lender shall have delivered to the Company a certificate as to the amount of
such loss and expense along with the basis for calculation thereof.
6.06 Capital Adequacy. If any Lender shall determine that the
adoption or implementation of any applicable law, rule, regulation or treaty
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its Applicable Lending Office) with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on capital of such Lender or any
Person controlling such Lender (a "Parent") as a consequence of its obligations
hereunder to a level below that which such Lender (or its Parent) could have
achieved but for such adoption, change or compliance (taking into consideration
its policies with respect to capital adequacy) by an amount deemed by such
Lender to be material, then from time to time, within 15 days after demand by
such Lender (with a copy to the Administrative Agent), the Company shall pay to
such Lender such additional amount or amounts as will compensate such Lender for
such reduction. A statement of any Lender claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive absent manifest error; provided that the
determination thereof is made on a reasonable basis; and provided further that
the Company shall not be obligated to compensate such Lender for any such
reduction occurring more than 180 days prior to the time such Lender first
notifies the Company of such adoption, implementation, change or compliance. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.
6.07 Substitution of Lender. If (i) the obligation of any
Lender to make Eurodollar Loans or the right of the Company to convert ABR Loans
of any Lender to Eurodollar Loans has been suspended pursuant to Section 6.03,
or (ii) any Lender has demanded compensation under Section 6.01 or 6.06, the
Company shall have the right, with the assistance of the Administrative Agent,
to seek a substitute bank or banks (which may be one or more of the Lenders)
satisfactory to the Company and the Administrative Agent to purchase the Notes
and assume the Commitments of such Lender. Any such Lender shall be obligated to
sell the Notes for cash without recourse to such substitute bank or banks and to
execute and deliver an appropriately completed assignment and assumption
agreement reasonably satisfactory to the Administrative Agent and the Company
and any other document or perform any act reasonably necessary to effect the
assumption of the rights and obligations of such substitute bank or banks.
6.08 Additional Costs in Respect of Letters of Credit. Without
limiting the obligations of the Company under Section 6.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore
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or hereafter issued by any government or governmental or supervisory authority
implementing at the national level the Basle Accord there shall be imposed,
modified or deemed applicable any tax, reserve, special deposit, capital
adequacy or similar requirement against or with respect to or measured by
reference to Letters of Credit issued or to be issued hereunder and the result
shall be to increase the cost to any Lender or Lenders of issuing (or purchasing
participations in) or maintaining its obligation hereunder to issue (or purchase
participations in) any Letter of Credit hereunder or reduce any amount
receivable by any Lender hereunder in respect of any Letter of Credit (which
increases in cost, or reductions in amount receivable, shall be the result of
such Lender's or Lenders' reasonable allocation of the aggregate of such
increases or reductions resulting from such event), then, upon demand by such
Lender or Lenders (through the Administrative Agent), the Company shall pay
immediately to the Administrative Agent for account of such Lender or Lenders,
from time to time as specified by such Lender or Lenders (through the
Administrative Agent), such additional amounts as shall be sufficient to
compensate such Lender or Lenders (through the Administrative Agent) for such
increased costs or reductions in amount. A statement as to such increased costs
or reductions in amount incurred by any such Lender or Lenders, submitted by
such Lender or Lenders to the Company, shall be conclusive in the absence of
manifest error as to the amount thereof.
Section 7. Conditions Precedent.
7.01 Amendment and Restatement Effective Date. The amendment
and restatement of the Credit Agreement herein provided shall become effective
on the date (the "Amendment and Restatement Effective Date") on which the
Administrative Agent shall notify the Company that it has received the following
documents and other evidence (with, in the case of clauses (a), (b), (c) and (d)
below, sufficient copies for each Lender), each of which shall be satisfactory
to the Administrative Agent (and to the extent specified below, to each Lender)
in form and substance (provided that such amendment and restatement shall not
become effective unless the Amendment and Restatement Effective Date occurs on
or before September 30, 1997):
(a) Corporate Documents. Certified copies of the charter and
by-laws (or equivalent documents) of each Obligor and of all corporate
authority for each Obligor (including, without limitation, board of
director resolutions and evidence of the incumbency, including specimen
signatures, of officers) with respect to the execution, delivery and
performance of such of the Basic Documents to which such Obligor is
intended to be a party and each other document to be delivered by such
Obligor from time to time in connection herewith and the extensions of
credit hereunder (and the Administrative Agent and each Lender may
conclusively rely on such certificate until it receives notice in
writing from such Obligor to the contrary).
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(b) Officer's Certificate. A certificate, dated the Amendment
and Restatement Effective Date, of a senior officer of the Company to
the effect set forth in the first sentence of Section 7.02 hereof.
(c) Opinion of Special New York Counsel to the Obligors. An
opinion, dated the Amendment and Restatement Effective Date, of
Sullivan & Worcester LLP, special New York counsel to the Obligors,
substantially in the form of Exhibit E hereto and covering such other
matters as the Administrative Agent or any Lender may reasonably
request.
(d) Opinion of Special New York Counsel to the Administrative
Agent. An opinion, dated the Amendment and Restatement Effective Date,
of Milbank, Tweed, Hadley & McCloy, special New York counsel to the
Administrative Agent, substantially in the form of Exhibit F hereto.
(e) Notes. The Notes, duly completed and executed for each
Lender.
(f) Counterparts. This Agreement, duly executed and delivered
by the Company and each of the Lenders and Non-Committing Lenders.
(g) Subsidiary Guaranty. The Subsidiary Guaranty, duly
executed and delivered by each Subsidiary Guarantor and the
Administrative Agent.
(h) Security Documents.
(i) The Company Pledge Agreement, duly executed and
delivered by the Company and the Administrative Agent,
together with the certificates identified in Annex I thereto,
accompanied by undated stock powers executed in blank.
(ii) The Subsidiary Pledge Agreement duly executed
and delivered by each Subsidiary Guarantor and the
Administrative Agent, in each case together with the
certificates identified in Annex I thereto under the names of
the respective Subsidiary Guarantor, in each case accompanied
by undated stock powers executed in blank.
In addition, each of the Obligors shall have taken such other action
(including, without limitation, delivering to the Administrative Agent,
for filing, appropriately completed and duly executed copies of Uniform
Commercial Code financing statements) as the Administrative Agent shall
have requested in order to perfect the security interests created
pursuant to the Company Pledge Agreement and the Subsidiary Pledge
Agreement.
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(i) Repayment of Existing Indebtedness. Evidence that the
principal of and interest on, and all other amounts owing in respect
of, the Indebtedness (including, without limitation, any contingent or
other amounts payable in respect of letters of credit, but excluding
Existing Letters of Credit) indicated on Schedule III hereto that is to
be repaid on the Amendment and Restatement Effective Date shall have
been (or shall be simultaneously) paid in full, that any commitments to
extend credit under the agreements or instruments relating to such
Indebtedness shall have been canceled or terminated and that all
Guarantees in respect of, and all Liens securing, any such Indebtedness
shall have been released (or arrangements for such release satisfactory
to the Majority Lenders shall have been made); in addition, the
Administrative Agent shall have received from any Person holding any
Lien securing any such Indebtedness, such Uniform Commercial Code
termination statements, mortgage releases and other instruments, in
each case in proper form for recording, as the Administrative Agent
shall have requested to release and terminate of record the Liens
securing such Indebtedness (or arrangements for such release and
termination satisfactory to the Majority Lenders shall have been made).
(j) Insurance. Certificates of insurance evidencing the
existence of all insurance required to be maintained by the Company
pursuant to Section 9.03 hereof, such certificates to be in such form
and contain such information as is specified in said Section 9.03. In
addition, the Company shall have delivered a certificate of a senior
financial officer of the Company setting forth the insurance obtained
by it in accordance with the requirements of said Section 9.03 and
stating that such insurance is in full force and effect and that all
premiums then due and payable thereon have been paid.
(k) Accrued Fees. Evidence that all fees (including without
limitation commitment fees) and other costs and expenses under the
Credit Agreement accrued to the Amendment and Restatement Effective
Date shall have been paid in full.
(l) Costs. Evidence of payment by the Company of such fees as
the Company shall have agreed to pay or deliver to any Lender or the
Administrative Agent in connection herewith, including, without
limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley
& McCloy, special New York counsel to the Administrative Agent, in
connection with the negotiation, preparation, execution and delivery of
this Agreement and the Notes and the other Basic Documents and the
extensions of credit hereunder (to the extent that statements for such
fees and expenses have been delivered to the Company).
(m) Other Documents. Such other documents as the
Administrative Agent or any Lender or special New York counsel to the
Administrative Agent may reasonably request.
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7.02 Initial and Subsequent Loans. The obligation of each
Lender to make any Loan to be made by it hereunder, and the obligation of the
Issuing Bank to issue any Letter of Credit hereunder, is subject to the
conditions precedent that, as of the date of such Loan or such issuance, and
before and after giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) the representations and warranties made by each of the
Company and the Subsidiary Guarantors in each Basic Document to which
it is a party shall be true on and as of the date of the making of such
Loan or such issuance, with the same force and effect as if made on and
as of such date; provided that the representations and warranties set
forth in Section 8.10 hereof need be true only as of the Amendment and
Restatement Effective Date; and
(c) the borrowing of such Loan by the Company hereunder or the
issuance of such Letter of Credit, as the case may be, and the related
incurrence of obligations by the Company, does not violate the
provisions of the Senior Subordinated Debt Indenture or any other
Senior Subordinated Debt Document.
Each notice of borrowing by the Company hereunder shall constitute a
certification by the Company to the effect set forth in the preceding sentence
(both as of the date of such notice and, unless the Company otherwise notifies
the Administrative Agent prior to the date of such borrowing or issuance, as of
the date of such borrowing or issuance).
Section 8. Representations and Warranties. The Company
represents and warrants to the Lenders and the Administrative Agent as follows:
8.01 Corporate Existence. Each of the Company and its
Subsidiaries: (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; (b) has all
requisite corporate power, and has all governmental licenses, authorizations,
consents, permits and approvals (including any license, authorization, consent,
permit and approval required under any Environmental Law) necessary to own its
assets and carry on its business as now being or as proposed to be conducted
(except such licenses, authorizations, consents and approvals the lack of which,
in the aggregate, will not have a Material Adverse Effect); and (c) is qualified
to do business in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify would have a Material Adverse Effect.
8.02 Information.
(a) The Company has heretofore furnished to each of the
Lenders consolidated balance sheets of the Company and its Subsidiaries as at
December 31, 1995 and December 31, 1996 and the related consolidated statements
of income, retained earnings and cash flows of the
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Company and its Subsidiaries for the fiscal years respectively ended on said
dates, with the opinion thereon of Arthur Andersen L.L.P., and the unaudited
consolidated balance sheets of the Company and its Subsidiaries as at March 31,
1997 and June 30, 1997 and the related consolidated statements of income,
retained earnings and cash flows of the Company and its Subsidiaries for the
three and six month periods respectively ended on such dates. All such financial
statements are complete and correct and fairly present the consolidated
financial condition of the Company and its Subsidiaries as at said dates and the
consolidated results of their operations for the fiscal years and three and six
month periods ended on said dates (subject, in the case of such financial
statements as at March 31, 1997 and June 30, 1997, to normal year-end audit
adjustments), all in accordance with generally accepted accounting principles
and practices applied on a consistent basis.
(b) The Company has disclosed to the Lenders in writing any
and all facts (other than general economic conditions) which materially and
adversely affect or may materially and adversely affect (to the extent it can
reasonably foresee) the business, assets, property, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries taken as a whole, or
the ability of the Company or any of the Subsidiary Guarantors to perform its
obligations under each Basic Document to which it is a party or the ability of
the Company or any Subsidiary of the Company to conduct its activities or
operations in the normal course of business at any of its owned or leased
properties. The information, reports, financial statements, exhibits and
schedules furnished in writing by or on behalf of the Obligors to the
Administrative Agent or any Lender in connection with the negotiation,
preparation or delivery of this Agreement and the other Basic Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole do not contain any untrue statement of material fact or omit to state
any material fact necessary to make the statements herein or therein, in light
of the circumstances under which they were made, not misleading. All written
information furnished after the date hereof by the Company and its Subsidiaries
to the Administrative Agent and the Lenders in connection with this Agreement
and the other Basic Documents and the transactions contemplated hereby and
thereby will be true, complete and accurate in every material respect, or (in
the case of projections) based on reasonable estimates, on the date as of which
such information is stated or certified.
(c) Since December 31, 1996, there has been no material
adverse change in the business, assets, property, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries taken as a whole or,
to the knowledge of the Company, in the ability of the Company or any of the
Subsidiary Guarantors to perform its obligations under each Basic Document to
which it is a party.
8.03 Litigation. There are no legal or arbitral proceedings or
any proceedings by or before any governmental or regulatory authority or agency,
now pending or, to the knowledge of the Company, threatened against or affecting
the Company or any of its Subsidiaries in which there is a reasonable
possibility of an adverse decision which could have a Material Adverse Effect
or, to the knowledge of the Company, which could have a material
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adverse effect on the ability of the Company or any of the Subsidiary Guarantors
to perform its obligations under each Basic Document to which it is a party.
8.04 No Breach. None of the execution and delivery of the
Basic Documents, the consummation of the transactions therein contemplated or
compliance with the terms and provisions thereof will conflict with or result in
a breach of, or require any consent under, the certificate of incorporation or
by-laws of the Company or any of its Subsidiaries, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any Basic Document, any other material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which it is bound or to which it is subject, or constitute a default
under any such lease, agreement or instrument, or (except for the Liens created
pursuant to, or permitted by, this Agreement and the Security Documents) result
in the creation or imposition of any Lien upon any of the revenues or assets of
the Company or any of its Subsidiaries pursuant to the terms of any such
agreement or instrument.
8.05 Corporate Action. Each of the Company and the Subsidiary
Guarantors has all necessary corporate power and authority to execute, deliver
and perform its obligations under the Basic Documents to which it is a party;
the execution, delivery and performance by the Company and the Subsidiary
Guarantors of the Basic Documents to which they are parties have been duly
authorized by all necessary corporate action; and this Agreement has been duly
and validly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company and each of the other Basic
Documents to which the Company or any of the Subsidiary Guarantors is to be a
party constitute its legal, valid and binding obligation, in each case
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or moratorium or other
similar laws relating to the enforcement of creditors' rights generally and by
general equitable principles.
8.06 Approvals. Each of the Company and the Subsidiary
Guarantors has obtained all authorizations, approvals and consents of, and has
made all filings and registrations with, any governmental or regulatory
authority or agency necessary for the execution, delivery or performance by it
of any Basic Document to which it is a party, or for the validity or
enforceability thereof, except for filings and recordings of the Liens created
pursuant to, or permitted by, the Security Documents.
8.07 Regulations U and X. None of the Company or any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U or X of the Board of Governors
of the Federal Reserve System) and no part of the proceeds of any Loan hereunder
will be used to purchase or carry any such margin stock.
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8.08 ERISA. The Company and each member of the Controlled
Group have fulfilled their obligations under the minimum funding standards of
ERISA and the Code with respect to each Plan and are in compliance in all
material respects with the presently applicable provisions of ERISA and the
Code, and have not incurred any liability to the PBGC or a Plan under Title IV
of ERISA (other than to make contributions or premium payments in the ordinary
course).
8.09 Taxes. Each of the Company and its Subsidiaries has filed
all United States Federal income tax returns and all other material tax returns
which are required to be filed by it and has paid all taxes due pursuant to such
returns or pursuant to any assessment received by it, except to the extent the
same may be contested as permitted by Section 9.02 hereof. The charges, accruals
and reserves on the books of such Persons in respect of taxes and other
governmental charges are, in the opinion of the Company, adequate.
8.10 Subsidiaries; Agreements; Etc.
(a) Schedule II hereto is a complete and correct list of all
Subsidiaries of the Company and of all Investments held by the Company or any of
its Subsidiaries in any joint venture or other Person. Except for the Liens
created by the Security Documents, the Company owns, free and clear of Liens,
all outstanding shares of such Subsidiaries and all such shares are validly
issued, fully paid and non-assessable and the Company (or the respective
Subsidiary of the Company) also owns, free and clear of Liens, all such
Investments.
(b) Schedule III hereto is a complete and correct list of all
credit agreements, indentures, capitalized leases, obligations in respect of
letters of credit, guaranties, joint venture agreements, and other material
instruments in effect as of the date hereof providing for, evidencing, securing
or otherwise relating to any Indebtedness or any Material Lease Obligations (as
hereinafter defined) of the Company or any of its Subsidiaries, and all
obligations of the Company or any of its Subsidiaries to issuers of surety or
appeal bonds issued for account of the Company or any of its Subsidiaries, and
such list correctly sets forth the names of the debtor or lessee and creditor or
lessor with respect to the Indebtedness or Material Lease Obligations
outstanding or to be outstanding and the property subject to any Lien securing
such Indebtedness or Material Lease Obligation. The Company has heretofore
delivered to the Administrative Agent a complete and correct copy of all such
credit agreements, indentures, capitalized leases, letter of credit obligations,
guaranties, joint venture agreements and other material instruments, including
any modifications or supplements thereto, as in effect on the date hereof. As
used herein, the term "Material Lease Obligations" shall mean any operating
lease which requires aggregate annual rentals during any period of twelve months
during the term of such lease in an amount in excess of $100,000.
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(c) None of the Subsidiaries of the Company is, on the date
hereof, subject to any indenture, agreement, instrument or other arrangement of
the type described in Section 9.22(d) hereof (other than the Senior Subordinated
Debt Indenture).
8.11 Investment Company Act. None of the Company or its
Subsidiaries is an investment company within the meaning of the Investment
Company Act of 1940, as amended, or, directly or indirectly, controlled by or
acting on behalf of any Person which is an investment company, within the
meaning of said Act.
8.12 Public Utility Holding Company Act. None of the Company
or its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
8.13 Ownership and Use of Properties. Each of the Company and
its Subsidiaries will at all times have legal title to or ownership of, or the
right to use pursuant to enforceable and valid agreements or arrangements, all
tangible property, both real and personal, and all franchises, licenses,
copyrights, patents and know-how which are material to the operation of its
business as proposed to be conducted.
8.14 Environmental Compliance.
(i) No notice, notification, demand, request for information, citation,
summons, complaint or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is
pending or, to the Company's knowledge, threatened by any governmental
or other entity with respect to any (A) alleged violation by the
Company or any Subsidiary of any Environmental Law, (B) alleged failure
by the Company or any Subsidiary to have any environmental permit,
certificate, license, approval, registration or authorization required
in connection with the conduct of its business or (C) generation,
treatment, storage, recycling, transportation or disposal or Release
(each a "Regulated Activity") of any Hazardous Substances;
(ii) neither the Company nor any Subsidiary has engaged in any
Regulated Activity other than as a generator (as such term is used in
RCRA) in compliance with all applicable Environmental Laws, and no
Regulated Activity, other than generation by the Company or any
Subsidiary in compliance with all applicable Environmental Laws, has
occurred on any property now or previously owned or leased by the
Company or any Subsidiary. No polychlorinated biphenyls, urea
formaldehyde, lead, asbestos or asbestos-containing material is or has
been present at any property now or previously owned or leased by the
Company or any other Subsidiary. There are no underground storage tanks
for Hazardous Substances, active or abandoned, at any property now or
previously owned or leased by the Company or any Subsidiary. No
Hazardous Substance has been Released at, on or under any property now
or previously owned or
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leased by the Company or any Subsidiary. No Hazardous Substance is
present in a reportable or threshold planning quantity where such a
quantity has been established by any Environmental Law at, on or under,
any property now or previously owned or leased by the Company or any
Subsidiary;
(iii) no real property now or previously owned or leased by the Company
or any Subsidiary is listed or, to the Company's knowledge, proposed
for listing, on the National Priorities List promulgated pursuant to
CERCLA, on CERCLIS, as defined in CERCLA, or on any similar state list
of sites requiring investigation or clean-up;
(iv) neither the Company nor any Subsidiary has transported or arranged
for the transportation (directly or indirectly) of any Hazardous
Substance to any location which is listed or to the Company's
knowledge, proposed for listing, under CERCLA (including on CERCLIS, as
defined in CERCLA) or on any similar state list or which is the subject
of federal, state or local enforcement actions or to the Company's
knowledge, other investigations which may lead to claims against the
Company or any Subsidiary for clean-up costs, remedial work, damages to
natural resources or for personal injury claims, including, but not
limited to, claims under CERCLA;
(v) there are no liens under Environmental Laws on any of the real
property or other assets owned or leased by the Company or any
Subsidiary, and no government actions have been taken or are in process
which could subject any of such properties or assets to such liens.
Neither the Company nor any Subsidiary would be required to place any
notice or restriction relating to Hazardous Substances at any property
owned by it in any deed to such property;
(vi) there has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Company has knowledge
in relation to the current or prior business of the Company or any
property or facility now or previously owned or leased by the Company
or any Subsidiary, which has not been delivered to the Lenders prior to
the date hereof; and
(vii) neither the Company nor any Subsidiary has assumed from any third
party, or indemnified any third party for, any Environmental Liability,
except for Environmental Liabilities of the Company and its Subsidiaries
(without duplication) that relate to or result from any matter referred to in
clauses (i) through (vii) (without duplication), which do not exceed in the
aggregate, at any time, $6,000,000.
8.15 Solvency. At the Amendment and Restatement Effective Date
and after giving effect to the consummation of the transactions contemplated by
this Agreement, the Company will (i) have capital, cash flows and sources of
working capital financing sufficient to carry on its business and transactions
and all business and transactions in which it is about to
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engage, (ii) be able to pay its debts as they mature, and (iii) have assets
(tangible and intangible) whose fair salable value exceeds its total liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities).
8.16 Capitalization. The authorized Capital Stock of the
Company consists, on the date hereof, of an aggregate of 23,000,000 shares
consisting of (i) 20,000,000 shares of Common Stock, par value $0.01 per share,
of which 11,781,724 shares are duly and validly issued and outstanding, (ii)
1,000,000 shares of Nonvoting Common Stock, par value $0.01 per share, of which
454,592 shares are duly and validly issued and outstanding and (iii) 2,000,000
shares of Preferred Stock, par value $0.01 per share, none of which is
outstanding. As of the date hereof, except as disclosed on Schedule IV hereto,
(x) there are no outstanding Equity Rights with respect to the Company and (y)
there are no outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem, or otherwise acquire any shares of Capital Stock of the
Company nor are there any outstanding obligations of the Company or any of its
Subsidiaries to make payments to any Person, such as "phantom stock" payments,
where the amount thereof is calculated with reference to the fair market value
or equity value of the Company or any of its Subsidiaries.
8.17 Senior Debt. The Indebtedness of the Company to the
Lenders hereunder and the Guarantees of such Indebtedness by the Subsidiaries of
the Company under the Subsidiary Guaranty constitute "Senior Debt" and "Senior
Bank Debt" (and, accordingly, "Designated Senior Debt") under and as defined in,
and for all purposes of, the Senior Subordinated Debt Indentures and the other
Senior Subordinated Debt Documents.
Section 9. Covenants. The Company agrees that, so long as any
of the Commitments are in effect and until payment in full of all Loans
hereunder, all interest thereon and all other amounts payable hereunder, unless
the Majority Lenders shall agree otherwise pursuant to Section 12.05 hereof:
9.01 Financial Statements and Other Information. The Company
shall deliver to each of the Lenders:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Company, consolidated statements of
income, retained earnings and cash flow of the Company and its
Subsidiaries for such year and the related consolidated balance sheet
as at the end of such year, setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year, and
accompanied by an opinion thereon of Arthur Andersen L.L.P. or other
independent certified public accountants of recognized national
standing, which opinion shall state that said consolidated financial
statements fairly present the consolidated financial condition and
results of operations of the Company and its Subsidiaries as at the end
of, and for, such fiscal year, and stating (or indicating in a footnote
to such financial
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statements) that, in making the examination necessary for their
above-described opinion (but without any special or additional
procedures for that purpose), they obtained no knowledge, except as
specifically stated, of any Default;
(b) as soon as available and in any event within 45 days after
the end of each fiscal quarter of the Company (or, in the case of the
last fiscal quarter in each fiscal year, within 90 days) consolidated
statements of income, retained earnings and cash flow of the Company
and its Subsidiaries for such fiscal quarter and for the portion of the
fiscal year ended at the end of such fiscal quarter, and the related
consolidated balance sheet as at the end of such fiscal quarter,
setting forth in each case in comparative form the corresponding
figures from the Company's operating budget for such fiscal year and
accompanied, in each case, by a certificate of the chief financial
officer or vice president-treasurer of the Company which certificate
shall state that said consolidated financial statements fairly present
the consolidated financial condition and results of operations of the
Company in accordance with GAAP (except for the absence of footnotes)
consistently applied as at the end of, and for, such fiscal quarter
(subject to normal year-end audit adjustments);
(c) within 30 days after the beginning of each fiscal year of
the Company, a copy of the consolidated operating budget, including,
without limitation, projection of the anticipated cash flow, of the
Company and its Subsidiaries for such fiscal year, such budget to be
accompanied by a certificate of the chief financial officer or vice
president-treasurer of the Company specifying the assumptions on which
such budget was prepared, stating that such officer has no reason to
question the reasonableness of any material assumptions on which such
budget was prepared and providing such other details as the
Administrative Agent may reasonably request;
(d) promptly upon the mailing thereof to the shareholders or
creditors of the Company generally, copies of all financial statements,
reports and proxy statements so mailed;
(e) promptly upon the filing thereof, copies of all
registration statements (other than any registration statements on Form
S-8 or its equivalent) and any reports which the Company shall have
filed with the Securities and Exchange Commission;
(f) if and when the Company or any member of the Controlled
Group (i) gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with respect
to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable
event, a copy of the notice of such reportable event given or required
to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA, a copy of such notice; or
(iii) receives notice from the PBGC under Title IV of ERISA
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of an intent to terminate or appoint a trustee to administer the Plan,
a copy of such notice;
(g) promptly following the delivery thereof to the Company or
to the Board of Directors or management of the Company, a copy of any
management letter or similar written report by independent public
accountants with respect to the financial condition, operations,
business or prospects of the Company;
(h) promptly after management of the Company knows or has
reason to know that any Default has occurred and is continuing, a
notice of such Default, describing the same in reasonable detail;
(i) within 45 days after the end of each fiscal quarter of the
Company, a report, certified by the Chief Financial Officer of the
Company, specifying the Capital Expenditures made by the Company during
such fiscal quarter (broken down to identify Maintenance Capital
Expenditures and other Capital Expenditures) and the Additional
Expenditures made by the Company during such fiscal quarter; and
(j) from time to time such other information regarding the
financial condition, operations, prospects or business of the Company
as the Administrative Agent or any Lender through the Administrative
Agent may reasonably request.
The Company will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of
its chief executive officer, chief financial officer or vice president-treasurer
(i) to the effect that, to the best of such Person's knowledge after due
inquiry, no Default has occurred and is continuing (or, if any Default has
occurred and is continuing, describing the same in reasonable detail) and (ii)
setting forth in reasonable detail the computations necessary to determine the
Applicable Leverage Ratio and to determine whether it was in compliance with
Sections 9.08 through 9.15 and 9.19 hereof as of the end of the respective
fiscal quarter or fiscal year.
9.02 Taxes and Claims. The Company will pay and discharge, and
will cause each of its Subsidiaries to pay and discharge, all material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any property belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien upon the property of the Company or such Subsidiary, provided that
neither the Company nor such Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim the payment of which is being contested in
good faith and by proper proceedings if it maintains adequate reserves with
respect thereto.
9.03 Insurance. The Company will maintain, and will cause each
of its Subsidiaries to maintain, insurance with responsible companies in such
amounts and against such risks as is usually carried by owners of similar
businesses and properties in the same
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general areas in which the Company and its Subsidiaries operate, provided that
in any event the Company shall maintain or cause to be maintained:
(1) Property Insurance -- insurance against loss or damage
covering all of the tangible real and personal property and
improvements of the Company and its Subsidiaries, by reason of any
Peril (as defined below), in amounts as shall be reasonable and
customary, but in no event less than the functional replacement cost of
all such real and personal property and improvements. Such policy shall
include insurance against loss of operating income earned from the
operation of the business of the Company and its Subsidiaries, by
reason of any Peril affecting the operation thereof, and insurance
against any other insurable loss of operating income by reason of any
business interruption affecting the Company to the extent covered by
standard business interruption policies in the States in which the
Properties are located.
(2) California Earthquake Insurance -- insurance against loss
or damage covering all of the tangible real and personal property and
improvements of the Company and its Subsidiaries, by reason of any
earthquake peril in California, in amounts as shall be reasonable,
customary and commercially available in the property/casualty insurance
markets.
Such insurance shall be written by financially responsible companies selected by
the Company, having an A.M. Best rating of "A-" or better and in a financial
size category acceptable to the Majority Lenders, or by other companies
acceptable to the Majority Lenders.
For purposes hereof, the term "Peril" shall mean,
collectively, (i) earthquake outside California, (ii) fire, smoke, lightning,
flood, windstorm, hail, explosion, riot and civil commotion, vandalism and
malicious mischief and (iii) all other perils covered by the "all-risk"
endorsement then in use in the States in which the Properties are located.
9.04 Maintenance of Existence; Conduct of Business. The
Company will preserve and maintain, and will cause each of its Subsidiaries to
preserve and maintain, its corporate existence and all of its rights, privileges
and franchises necessary or desirable in the normal conduct of its business, and
will conduct its business in a regular manner; provided that nothing herein
shall prevent (i) the merger and dissolution of any Subsidiary of the Company
into the Company or any Wholly-Owned Subsidiary of the Company so long as the
Company or such Wholly-Owned Subsidiary is the surviving corporation or (ii) the
abandonment of any right, privilege or franchise (including any lease) not
material in the aggregate to the business of the Company and its Subsidiaries.
9.05 Maintenance of and Access to Properties.
(a) The Company will keep, and will cause each of its
Subsidiaries to keep, all of its properties necessary in its business in good
working order and condition (having regard
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to the condition of such properties at the time such properties were acquired by
the Company or such Subsidiary), ordinary wear and tear excepted, and will
permit representatives of the Lenders to inspect such properties and, upon
reasonable notice and at reasonable times, to examine and make extracts and
copies from the books and records of the Company and any such Subsidiary.
(b) The Company will, and will cause its Subsidiaries to, do
all things necessary to preserve and keep in full force and effect all
trademarks, patents, service marks, trade names, copyrights, franchises and
Licenses, and any rights with respect thereto, which are necessary for and
material to the conduct of the business of the Company and its Subsidiaries
taken as a whole.
9.06 Compliance with Applicable Laws. The Company will comply,
and will cause each of its Subsidiaries to comply, with the requirements of all
applicable laws, rules, regulations and orders of any governmental body or
regulatory authority (including, without limitation, ERISA and all Environmental
Laws), a breach of which would have a Material Adverse Effect, except where
contested in good faith and by proper proceedings.
9.07 Litigation. The Company will promptly give to the
Administrative Agent (which shall promptly notify each Lender) notice in writing
of (i) all judgments against it or any of its Subsidiaries (other than judgments
fully covered by insurance) which individually exceed $100,000 or in the
aggregate exceed $1,000,000 and (ii) all litigation and of all proceedings of
which it is aware before any courts, arbitrators or governmental or regulatory
agencies affecting the Company or any of its Subsidiaries except litigation or
proceedings which, if adversely determined, would not in the reasonable opinion
of the Company have a Material Adverse Effect.
9.08 Indebtedness. The Company will not, and will not permit
any of its Subsidiaries to, create, incur or suffer to exist any Indebtedness
except: (i) Indebtedness to the Lenders hereunder; (ii) the Indebtedness
existing on the Amendment and Restatement Effective Date and set forth in
Schedule III hereto (including any extensions, renewals or refunding of such
Indebtedness, so long as the principal amount of such Indebtedness is not
increased); (iii) 1997 Senior Subordinated Debt in an aggregate outstanding
principal amount not exceeding $300,000,000; and (iv) so long as no Default
shall have occurred or be continuing hereunder at the time of such creation or
incurrence, Permitted Indebtedness.
9.09 Leverage Ratio. The Company will not, as at the end of
any fiscal quarter, permit the ratio, calculated as at the end of such fiscal
quarter for the period of four fiscal quarters then ended, of (i) the excess of
(x) the aggregate outstanding principal amount of Funded Indebtedness of the
Company and its Subsidiaries at such date over (y) the aggregate amount of cash
and Liquid Investments of the Company and Subsidiaries as of such date to (ii)
EBITDA for such period (the "Leverage Ratio") to exceed the ratio set forth
below for the period in which such fiscal quarter ends:
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<TABLE>
<CAPTION>
Period Leverage Ratio
------ --------------
<S> <C> <C>
From the Amendment and Restatement Effective Date
through December 31, 1998 6.00 to 1
From January 1, 1999
through June 30, 1999 5.75 to 1
From July 1, 1999
through December 31, 1999 5.25 to 1
From January 1, 2000
through June 30, 2000 4.75 to 1
From July 1, 2000
and at all times thereafter 4.50 to 1
</TABLE>
9.10 Interest Coverage Ratio. The Company will not, as at the
end of any fiscal quarter, permit the ratio, calculated as at the end of such
fiscal quarter for the period of four fiscal quarters then ended, of (i) EBITDA
for such period to (ii) Interest Expense for such period to be less than the
ratio set forth below for the period in which such fiscal quarter ends:
<TABLE>
<CAPTION>
Period Interest Coverage Ratio
------ -----------------------
<S> <C> <C>
From the Amendment and Restatement Effective Date
through December 31, 1998 1.70 to 1
From January 1, 1999
through June 30, 1999 1.85 to 1
From July 1, 1999
through June 30, 2000 2.00 to 1
From July 1, 2000
through December 31, 2000 2.25 to 1
From January 1, 2001
and at all times thereafter 2.50 to 1
</TABLE>
For purposes of calculating any ratio set forth in this
Section, if the Company elects pursuant to the penultimate sentence of the
definition of EBITDA to include in EBITDA for the period to which such ratio
relates the pro forma amounts referred to in such sentence, there shall be
included in Interest Expense for such period, on a pro forma basis, interest
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accruing during such period on Indebtedness (and the interest portion of
payments under Capitalized Lease Obligations) assumed or incurred by the Company
and its Subsidiaries (on a consolidated basis) in connection with any Permitted
Acquisition having Acquisition Consideration of more than $500,000 during such
period.
9.11 Fixed Charges Coverage Ratio. The Company will not, as at
the end of any fiscal quarter, permit the ratio, calculated as at the end of
such fiscal quarter for the period of four fiscal quarters then ended, of (i)
Adjusted EBITDA for such period to (ii) Fixed Charges for such period to be less
than the ratio set forth below for the period in which such fiscal quarter ends:
Fixed Charges
Period Coverage Ratio
------ --------------
From the Amendment and Restatement Effective Date
through December 31, 1998 1.20 to 1
From January 1, 1999
through December 31, 1999 1.40 to 1
From January 1, 2000
through December 31, 2000 1.75 to 1
From January 1, 2001
and at all times thereafter 1.75 to 1
For purposes of calculating any ratio set forth in this
Section, if the Company elects pursuant to the penultimate sentence of the
definition of EBITDA to include in EBITDA for the period to which such ratio
relates the pro forma amounts referred to in such sentence, there shall be
included in Fixed Charges for such period, on a pro forma basis, principal
payable and interest accruing during such period on Indebtedness (and the
interest portion of payments under Capitalized Lease Obligations) assumed or
incurred by the Company and its Subsidiaries (on a consolidated basis) in
connection with any Permitted Acquisition having Acquisition Consideration of
more than $500,000 during such period.
9.12 Mergers, Asset Dispositions, Etc. Except as expressly
permitted by Section 9.04, the Company will not, and will not permit any of its
Subsidiaries to, be a party to any merger or consolidation, or sell, lease,
assign, transfer or otherwise dispose of any assets, or acquire assets from any
Person, except:
(i) dispositions and acquisitions of inventory in the
ordinary course of business;
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(ii) dispositions of worn out or obsolete tools or equipment
no longer used or useful in the business of the Company and its
Subsidiaries, provided that no single disposition of tools or equipment
shall have a fair market value (determined in good faith by the Company
at the time of such disposition) in excess of $3,000,000;
(iii) Capital Expenditures to the extent permitted under
Section 9.19 hereof;
(iv) acquisitions of Investments permitted under Section
9.14 hereof and dispositions thereof (other than (x) dispositions of
Investments in any Subsidiary of the Company not otherwise permitted
hereunder and (y) dispositions of Investments referred to in clause
(viii) of said Section 9.14);
(v) other dispositions of assets during any fiscal year
having an aggregate fair market value (determined in good faith at the
time of such disposition by the Board of Directors of the Company) not
exceeding $5,000,000 in respect of Qualifying Sale-Leaseback
Transactions or $5,000,000 in respect of all other dispositions;
(vi) subject to compliance with the provisions of Section
9.22(b) hereof, the sale, lease, assignment, transfer or other
disposition of any assets by any Subsidiary of the Company to the
Company or any Wholly-Owned Subsidiary thereof;
(vii) Large Volume Account Capitalized Expenditures; and
(viii) so long as no Default shall have occurred or be
continuing hereunder at the time of such Acquisition, Permitted
Acquisitions and related Additional Expenditures.
For purposes of this Section 9.12, "Permitted Acquisition"
shall mean Acquisitions complying with the following:
(a) Maximum Periodic Consideration. Without the consent of the
Majority Lenders, the aggregate amount of Acquisition Consideration
(including Stock Consideration) paid in respect of Acquisitions shall
not exceed (i) $350,000,000 during the fourth quarter of 1997, provided
that up to $175,000,000 may be carried forward to the first quarter of
1998 solely in conjunction with the contemplated acquisition currently
referred to as the "Toy" acquisition if such acquisition occurs in such
quarter, or (ii) $150,000,000 in any year after 1997, subject to
adjustment as provided in clause (i) herein; provided that the
aggregate amount of Acquisition Consideration excluding Stock
Consideration paid in respect of Acquisitions shall not exceed (x)
$250,000,000 in the fourth quarter of 1997, provided that up to
$125,000,000 may be carried forward to the first quarter of 1998 solely
in conjunction with said "Toy" acquisition if such acquisition occurs
in such quarter, or (y) $100,000,000 in any year after 1997, subject to
adjustment as provided in clause (x) herein.
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(b) Maximum Individual Consideration. Without the consent of
the Majority Lenders, the Acquisition Consideration (including Stock
Consideration) payable in respect of any single Acquisition or series
of related Acquisitions shall not exceed $65,000,000, provided that
said "Toy" acquisition and the contemplated acquisition currently
referred to as the "Health" acquisition shall not be subject to the
limitation in this clause (b).
(c) Lines of Business, Etc. All such Acquisitions shall be of
assets relating to the records management business (or of 100% of the
stock of corporations whose assets consist substantially of such
assets) or through the merger of such a corporation into a Subsidiary
of the Company, which shall be the surviving corporation.
For purposes of this definition, any deferred non-contingent consideration
payable in respect of an Acquisition shall be discounted to net present value at
the rate of 10% per annum.
9.13 Liens. The Company will not, and will not permit any of
its Subsidiaries to, create or suffer to exist any Lien upon any property or
assets, now owned or hereafter acquired, securing any Indebtedness or other
obligation, except: (i) the Liens created pursuant to the Security Documents;
(ii) the Liens existing on the Amendment and Restatement Effective Date set
forth in Schedule III and Liens arising out of the refinancing, extension,
renewal or refunding of any Indebtedness secured by any Lien set forth on
Schedule III, provided that the principal amount of such Indebtedness is not
increased and is not secured by any additional assets; (iii) Liens contemplated
by clauses (ii), (iv) and (v) of the definition of Permitted Indebtedness; (iv)
attachment, judgment or other similar Liens arising in connection with
litigation or other legal proceedings, provided that either (A) the claims in
respect of such Liens are fully covered by insurance or (B) the execution or
other enforcement of such Liens is effectively stayed and the claims secured
thereby are in an amount not to exceed $1,000,000 in the aggregate and are being
contested in good faith by appropriate proceedings diligently prosecuted; (v)
Liens on properties or assets of an Excluded Subsidiary securing Indebtedness of
such Excluded Subsidiary permitted hereunder; and (vi) other Liens arising in
the ordinary course of the business of the Company or such Subsidiary which are
not incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not materially detract from the value of its
property or assets or materially impair the use thereof in the operation of its
business.
9.14 Investments. The Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, make or permit to remain
outstanding any advances, loans or other extensions of credit or capital
contributions (other than prepaid expenses in the ordinary course of business)
to (by means of transfers of property or assets or otherwise), or purchase or
own any stocks, bonds, notes, debentures or other securities of, any Person (all
such transactions being herein called "Investments"), except:
(i) operating deposit accounts with any bank or financial
institution;
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(ii) Liquid Investments (including Liquid Investments in the
name and under the control of the Administrative Agent (or a collateral
sub-agent for the Administrative Agent) as contemplated by the Security
Documents);
(iii) subject to Section 9.16 hereof, Investments in accounts
and chattel paper as defined in the Uniform Commercial Code) and notes
receivable acquired in the ordinary course of business as presently
conducted;
(iv) Investments in an insurer required as a condition to the
provision by such insurer of insurance coverage contemplated by Section
9.03; provided that the aggregate amount of Investments outstanding
pursuant to this clause (iv) during the term of this Agreement shall
not exceed $1,500,000;
(v) (x) equity Investments in Wholly-Owned Subsidiaries of the
Company, (y) additional equity Investments in Subsidiaries of the
Company (other than Wholly-Owned Subsidiaries) with the prior written
consent of the Majority Lenders, and (z) Investments in the form of
loans, advances or other obligations owed by any Wholly-Owned
Subsidiary to the Company, and Investments in the form of loans,
advances or other obligations owed by the Company to any Wholly-Owned
Subsidiary; provided that the aggregate amount of Investments by the
Company permitted by subclauses (x) or (z) of this clause (v) in any
Subsidiary of the Company that is a mortgagor under any Permitted
Mortgage shall not exceed, in the aggregate for all such Subsidiaries,
$10,000,000 at any one time outstanding;
(vi) Investments consisting of loans or advances to officers
and directors of the Company and its Subsidiaries in an amount not to
exceed $350,000 in the aggregate during any fiscal year (and in any
event not to exceed $750,000 at any one time outstanding) and loans or
advances made to employees of the Company to permit such employees to
exercise options to purchase Capital Stock of the Company;
(vii) (x) Investments in Persons that are not Subsidiaries or
Affiliates of the Company, (y) Investments in Excluded Subsidiaries,
and guarantees by the Company of Indebtedness of Excluded Subsidiaries
to the extent such Indebtedness is permitted hereunder and (z) other
Investments in Subsidiaries of the Company (to the extent such
Investments are not permitted under clause (v) of this Section 9.14);
provided that the aggregate outstanding amount of Investments made
pursuant to this clause (vii) shall not at any time exceed $5,000,000;
(viii) Investments consisting of Permitted Acquisitions under
Section 9.12 hereof;
(ix) subject to Section 9.16 hereof and on terms and pursuant
to documentation in all respects reasonably satisfactory to the
Administrative Agent, Investments in
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Affiliates of the Company (which are not Wholly-Owned Subsidiaries of
the Company) to facilitate the construction or acquisition of records
management facilities including, without limitation, the acquisition of
real estate for development purposes; and
(x) subordinated Guarantees of Senior Subordinated Debt by
Subsidiaries of the Company pursuant to the Senior Subordinated Debt
Documents.
9.15 Restricted Payments. The Company will not, and will not
permit any of its Subsidiaries to, declare or make any Restricted Payment,
except that the Company may:
(i) provided that no Default has occurred and is continuing,
purchase shares of any class of Capital Stock, or options to purchase
such shares, of the Company from employees or former employees of the
Company or its Subsidiaries in amounts not to exceed $500,000 in any
fiscal year and $1,000,000 in the aggregate after the Amendment and
Restatement Effective Date;
(ii) make additional Restricted Payments constituting the
purchase, redemption, retirement or other acquisition of shares of any
class of Capital Stock of the Company (such Restricted Payments, "Stock
Repurchases"), subject to the satisfaction of each of the following
conditions on the date of such Stock Repurchase and after giving effect
thereto:
(a) no Default shall have occurred and be continuing;
and
(b) the aggregate amount of Stock Repurchases made
during each period set forth in the schedule below shall not
exceed the amount set forth below opposite such period:
Cumulative
Period Amount
------ ------
From the Amendment and Restatement Effective Date
to and including December 31, 1997 $ 5,000,000
From the Amendment and Restatement Effective Date
to and including December 31, 1998 $10,000,000
From the Amendment and Restatement Effective Date
to and including December 31, 1999 $15,000,000
In addition, the aggregate amount of all Stock Repurchases made after
the Amendment and Restatement Effective Date shall not in any event
exceed $20,000,000.
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Nothing herein shall be deemed to prohibit the payment of dividends by any
Subsidiary of the Company to the Company or to any other Subsidiary of the
Company.
9.16 Transactions with Affiliates. Except as otherwise
expressly permitted by this Agreement, the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly:
(i) make any Investment in an Affiliate of the Company;
(ii) transfer, sell, lease, assign or otherwise dispose of any
assets to an Affiliate of the Company;
(iii) merge into or consolidate with or purchase or acquire
assets from an Affiliate of the Company; or
(iv) enter into any other transaction directly or indirectly
with or for the benefit of an Affiliate of the Company (including,
without limitation, guarantees and assumptions of obligations of an
Affiliate of the Company);
provided that (a) any Affiliate of the Company who is an individual may serve as
a director, officer or employee of the Company and receive reasonable
compensation or indemnification in connection with his or her services in such
capacity; (b) the Company or a Subsidiary of the Company may enter into any
transaction with an Affiliate of the Company providing for the leasing of
property, the rendering or receipt of services or the purchase or sale of
inventory and other assets in the ordinary course of business if the monetary or
business consideration arising therefrom would be substantially as advantageous
to the Company or such Subsidiary as the monetary or business consideration
which would obtain in a comparable arm's length transaction with a Person
similarly situated to the Company but not an Affiliate of the Company; and (c)
the Company may make Investments in Affiliates permitted by Section 9.14(ix)
hereof and may create Residual Assurances for the benefit of an Affiliate
permitted by Section 9.24 hereof in either case in connection with the
construction and/or acquisition of records management facilities to be leased to
the Company or a Subsidiary, so long as, taking such transaction as a whole
(giving effect to such Investment or Residual Assurance, and the lease of such
facility to the Company or such Subsidiary) such Affiliate is not
disproportionately benefitted.
9.17 Subordinated Indebtedness. The Company will not, nor will
it permit any of its Subsidiaries to, purchase, redeem, retire or otherwise
acquire for value, or set apart any money for a sinking, defeasance or other
analogous fund for the purchase, redemption, retirement or other acquisition of,
or make any voluntary payment or prepayment of the principal of or interest on,
or any other amount owing in respect of, any Subordinated Indebtedness, except
for:
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(i) regularly scheduled payments or prepayments of principal
and interest in respect thereof required pursuant to the instruments
evidencing such Subordinated Indebtedness; and
(ii) so long as no Default has occurred and is continuing,
scheduled payments of principal of (not to exceed $2,000,000 during
each fiscal year of the Company) and interest on, and expenses and
indemnities incurred in connection with, Additional Subordinated
Indebtedness.
9.18 Lines of Businesses. Neither the Company nor any of its
Subsidiaries shall engage to any substantial extent in any business activity
other than the records management business or activities related thereto.
9.19 Capital Expenditures. The Company will not permit the
aggregate amount of Capital Expenditures made in any fiscal year of the Company
to exceed $40,000,000. If the aggregate amount of Capital Expenditures for any
fiscal year shall be less than the amount permitted to be made in such fiscal
year, then the shortfall shall be added to the amount of Capital Expenditures
permitted for the immediately succeeding fiscal year.
9.20 Modification of Other Agreements. The Company will not
request or consent to any modification, supplement or waiver of any of the
provisions of any instrument or document evidencing or governing Subordinated
Indebtedness except on terms and pursuant to documentation in all respects
reasonably satisfactory to the Administrative Agent.
9.21 Interest Rate Protection. The Company shall at all times
maintain a program reasonably acceptable to the Administrative Agent providing
for the hedging or mitigation of interest rate risk.
9.22 Certain Obligations Respecting Subsidiaries.
(a) The Company will, and will cause each of its Subsidiaries
to, take such action from time to time as shall be necessary to ensure that the
Company and each of its Subsidiaries at all times owns (subject only to the Lien
of the Security Documents) all of the issued and outstanding shares of each
class of Capital Stock of each of such Person's Subsidiaries (other than, in
each case, Capital Stock of Excluded Subsidiaries). Without limiting the
generality of the foregoing, the Company shall not, and shall not permit any of
its Subsidiaries to, sell, transfer or otherwise dispose of any shares of stock
in any Subsidiary (other than an Excluded Subsidiary) owned by them, nor permit
any Subsidiary of the Company (other than an Excluded Subsidiary) to issue any
shares of Capital Stock of any class whatsoever to any Person (other than to the
Company or to another Wholly-Owned Subsidiary or pursuant to Section 9.12
hereof). In the event that any such additional shares of Capital Stock shall be
issued by any Subsidiary of the Company, the Company agrees forthwith to deliver
to the Administrative Agent pursuant to the Security Documents the certificates
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evidencing such shares of stock, accompanied by undated stock powers executed in
blank and shall take such other action as the Administrative Agent shall request
to perfect the security interest created therein pursuant to the Security
Documents.
(b) The Majority Lenders shall have the right from time to
time to require the Company, pursuant to a written request from the
Administrative Agent, to cause such Subsidiaries of the Company as may be
specified in such request to become parties to the Subsidiary Guaranty or to
execute and deliver such other guaranties, in form and substance satisfactory to
the Majority Lenders, guaranteeing payment of the Company's obligations
hereunder. Any such request shall be made by the Majority Lenders in the good
faith and reasonable exercise of their discretion. Within 30 days after any such
request, the Company shall, and shall cause the appropriate Subsidiaries of the
Company to, (i) execute and deliver to the Administrative Agent such number of
copies as the Administrative Agent may specify of documents creating such
guaranties and (ii) do all other things which may be necessary or which the
Administrative Agent may reasonably request in order to confer upon and confirm
to the Lenders the benefits of such security.
(c) Notwithstanding anything to the contrary in this Section
9.22, if:
(x) the obligations of an Excluded Subsidiary under the
Subsidiary Guaranty; or
(y) the pledge by the Company or any of its Subsidiaries of
more than 66% of the aggregate Voting Stock of an Excluded Subsidiary
would, as determined in a resolution of the Board of Directors of the Company
delivered to the Administrative Agent, create a tax disadvantage that is
material in relation to the aggregate amount of the Investment or proposed
Investment therein by the Company and its Subsidiaries, then:
(I) such Excluded Subsidiary shall not be required to be or
become a party to the Subsidiary Guaranty or otherwise Guarantee the
obligations of the Company hereunder; and
(II) the Company and its Subsidiaries shall not be required to
pledge more than 66% of the aggregate Voting Stock of such Excluded
Subsidiary to the Administrative Agent under the Security Documents.
(d) The Company will not permit any of its Subsidiaries (other
than Excluded Subsidiaries) to enter into, after the date hereof, any indenture,
agreement, instrument or other arrangement (other than the Senior Subordinated
Debt Indenture) that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon, the incurrence or payment of Indebtedness, the granting of Liens, the
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declaration or payment of dividends, the making of loans, advances or
Investments or the sale, assignment, transfer or other disposition of Property.
9.23 Environmental Matters. The Company will promptly give to
the Lenders notice in writing of any complaint, order, citation, notice or other
written communication from any Person with respect to, or if the Company becomes
aware after due inquiry of, (i) the existence or alleged existence of a
violation of any applicable Environmental Law or the incurrence of any
liability, obligation, remedial action, loss, damage, cost, expense, fine,
penalty or sanction resulting from any air emission, water discharge, noise
emission, asbestos, Hazardous Substance or any other environmental, health or
safety matter at, upon, under or within any property now or previously owned,
leased, operated or used by the Company or any of its Subsidiaries or any part
thereof, or due to the operations or activities of the Company, any Subsidiary
or any other Person on or in connection with such property or any part thereof
(including receipt by the Company or any Subsidiary of any notice of the
happening of any event involving the Release or cleanup of any Hazardous
Substance), (ii) any Release on such property or any part thereof in a quantity
that is reportable under any applicable Environmental Law, (iii) the
commencement of any cleanup pursuant to or in accordance with any applicable
Environmental Law of any Hazardous Substances on or about such property or any
part thereof and (iv) any pending or threatened proceeding for the termination,
suspension or non-renewal of any permit required under any applicable
Environmental Law, in each of the cases (i), (ii), (iii) and (iv), (x) which
could result in liability or expenses in excess of $1,000,000 or (y) which
individually or in the aggregate could have a Material Adverse Effect.
9.24 Residual Assurances. The Company will not, and will not
permit any of its Subsidiaries to, create, incur or suffer to exist any Residual
Assurances, except that (notwithstanding Sections 9.08 and 9.14) the Company may
create a Residual Assurance with respect of the construction or acquisition of
any records management facility by any Affiliate of the Company so long as (a)
the maximum liability of the Company in respect of such Residual Assurance does
not exceed 15% of the fair market value (as determined in good faith by the
Board of Directors of the Company) of the completed records management facility,
and (b) the maximum liability of the Company in respect of all Residual
Assurances does not exceed $3,000,000 in the aggregate.
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9.25 Senior Subordinated Debt. On or before December 31, 1997,
the Company shall issue 1997 Senior Subordinated Debt in an aggregate principal
amount not less than $150,000,000, and shall provide evidence thereof, in form
and substance satisfactory to the Administrative Agent (which evidence shall
include, without limitation, a certificate of a senior financial officer of the
Company to the effect that the Company has received net cash proceeds, prior to
the payment of any transaction expenses, from the issuance of the 1997 Senior
Subordinated Debt in an aggregate amount at least equal to $150,000,000).
Section 10. Defaults.
10.01 Events of Default. If one or more of the following
events (herein called "Events of Default") shall occur and be continuing:
(a) default in the payment of any principal of or interest on
any Loan, any Reimbursement Obligation or any other amount payable
hereunder when due; or
(b) the Company or any of its Subsidiaries shall default in
the payment when due of any principal of or interest on any
Indebtedness having an outstanding principal amount of at least
$1,000,000 (other than the Loans); or any event or condition shall
occur which results in the acceleration of the maturity of any such
Indebtedness or enables (or, with the giving of notice or lapse of time
or both, would enable) the holder of any such Indebtedness or any
Person acting on such holder's behalf to accelerate the maturity
thereof; or
(c) any representation or warranty made or deemed made by the
Company or any Subsidiary Guarantor in any Basic Document, or in any
certificate or financial information furnished to any Lender or the
Administrative Agent pursuant to the provisions of any Basic Document,
shall prove to have been false or misleading in any material respect as
of the time made or furnished; or
(d) (i) the Company shall default in the performance of any of
its obligations under Sections 9.08 through 9.24 hereof; (ii) any
Subsidiary Guarantor shall default in the performance of any of its
obligations under the Subsidiary Guaranty beyond any applicable grace
period; (iii) the Company or any Subsidiary Guarantor shall default in
the performance of any of its other obligations in any Basic Document,
and such default described in this subclause (iii) shall continue
unremedied for a period of 25 days after notice thereof to the Company
by the Administrative Agent or the Majority Lenders (through the
Administrative Agent); or
(e) the Company or any of its Subsidiaries shall admit in
writing its inability to, or be generally unable to, pay its debts as
such debts become due; or
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(f) the Company or any of its Subsidiaries shall (i) apply for
or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) make a general assignment for
the benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case under the
Bankruptcy Code, or (vi) take any corporate action for the purpose of
effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the
application or consent of the Company or any of its Subsidiaries in any
court of competent jurisdiction, seeking (i) its liquidation,
reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of such Person or of all or any
substantial part of its assets, or (iii) similar relief in respect of
such Person under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and
such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 days;
or an order for relief against such Person shall be entered in an
involuntary case under the Bankruptcy Code; or
(h) a final judgment or judgments for the payment of money
shall be rendered by a court or courts against the Company or any of
its Subsidiaries in excess of $500,000 in the aggregate, and the same
shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured,
within 30 days from the date of entry thereof, or the Company or such
Subsidiary shall not, within said period of 30 days, or such longer
period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) the Company or any member of the Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess of
$500,000 which it shall have become liable to pay to the PBGC or to a
Plan under Title IV of ERISA; or notice of intent to terminate a Plan
or Plans having aggregate Unfunded Liabilities in excess of $500,000
shall be filed under Title IV of ERISA by the Company or any member of
the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of
ERISA to terminate or to cause a trustee to be appointed to administer
any such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans against the Company or any member
of the Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA;
or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree
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adjudicating that any such Plan or Plans must be terminated; or there
shall occur a complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c)(5) of ERISA, with respect to, one or
more Multiemployer Plans which could cause the Company or one or more
members of the Controlled Group to incur a current payment obligation
in excess of $500,000; or
(j) without limiting the generality of clause (d) above, any
of the insurance required to be maintained (or caused to be maintained)
by the Company under Section 9.03 hereof shall be terminated and not
simultaneously replaced with other insurance satisfactory to the
Majority Lenders; or
(k) any Change of Control shall occur; or
(l) (i) any Security Document or the Subsidiary Guaranty shall
cease, for any reason, to be in full force and effect (other than as
provided therein) or any party thereto (other than the Lenders) shall
so assert in writing; or (ii) any Security Document shall cease to be
effective to grant a Lien on the collateral described therein with the
priority purported to be created thereby; or
(m) the Company and/or any Subsidiary of the Company has
incurred or incurs Environmental Liabilities (without duplication) in
excess of $5,000,000 in the aggregate at any time, which Environmental
Liabilities would, under GAAP, be reflected in the financial statements
(or the footnotes thereto) of the Company.
THEREUPON: the Administrative Agent may (and, if directed by the Majority
Lenders, shall) (a) declare the Commitments terminated (whereupon the
Commitments shall be terminated) and/or (b) declare the principal amount then
outstanding of and the accrued interest on the Loans, the Reimbursement
Obligations, and commitment fees and all other amounts payable hereunder and
under the Notes to be forthwith due and payable, whereupon such amounts shall be
and become immediately due and payable, without notice (including, without
limitation, notice of intent to accelerate), presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by the
Company; provided that in the case of the occurrence of an Event of Default with
respect to the Company referred to in clause (f) or (g) of this Section 10.01,
the Commitments shall be automatically terminated and the principal amount then
outstanding of and the accrued interest on the Loans, the Reimbursement
Obligations, and commitment fees and all other amounts payable hereunder and
under the Notes shall be and become automatically and immediately due and
payable, without notice (including, without limitation, notice of intent to
accelerate), presentment, demand, protest or other formalities of any kind, all
of which are hereby expressly waived by the Company.
In addition, upon the occurrence and during the continuance of
any Event of Default (if the Administrative Agent has declared the principal
amount then outstanding of, and accrued interest on, the Loans and all other
amounts payable by the Company hereunder and
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under the Notes to be due and payable), the Company agrees that it shall, if
requested by the Administrative Agent or the Majority Lenders through the
Administrative Agent (and, in the case of any Event of Default referred to in
clause (f) or (g) of this Section 10.01 with respect to the Company, forthwith,
without any demand or the taking of any other action by the Administrative Agent
or such Lenders) provide cover for the Letter of Credit Liabilities by paying to
the Administrative Agent immediately available funds in an amount equal to the
then aggregate undrawn face amount of all Letters of Credit, which funds shall
be held by the Administrative Agent in the Collateral Account as collateral
security in the first instance for the Letter of Credit Liabilities.
Section 11. The Administrative Agent.
11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder and under the other Basic Documents with such powers as are
specifically delegated to the Administrative Agent by the terms hereof and
thereof, together with such other powers as are reasonably incidental thereto.
The Administrative Agent (which term as used in this Section 11 shall include
reference to its affiliates and its own and its affiliates' officers, directors,
employees and agents): (a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and the other Basic Documents, and shall
not by reason of this Agreement or any other Basic Document be a trustee for any
Lender; (b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or any
other Basic Document, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Basic Document, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Basic Document or
any other document referred to or provided for herein or therein or for any
failure by the Company or any of the Subsidiary Guarantors or any other Person
to perform any of its obligations hereunder or thereunder; (c) shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Basic Document except to the extent requested by
the Majority Lenders; and (d) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other Basic Document or any
other document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or willful
misconduct. The Administrative Agent may employ agents and attorneys-in-fact and
shall not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
11.02 Reliance by Administrative Agent. The Administrative
Agent shall be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telex, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by the
Administrative Agent. As to any matters not expressly provided for by this
Agreement or any other Basic
Credit Agreement
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-69-
Document, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder and thereunder in accordance
with instructions signed by the Majority Lenders and such instructions of the
Majority Lenders and any action taken or failure to act pursuant thereto shall
be binding on all of the Lenders.
11.03 Defaults. The Administrative Agent shall not be deemed
to have knowledge of the occurrence of a Default unless the Administrative Agent
has received notice from a Lender or the Company specifying such Default and
stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 11.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interests of the Lenders. The
Administrative Agent shall deliver to the Lenders a copy of any written
declaration made pursuant to the last paragraph of Section 10.01 hereof.
11.04 Rights as a Lender. With respect to its Commitments and
the Loans made by it, Chase in its capacity as a Lender hereunder shall have the
same rights and powers hereunder as any other Lender and may exercise the same
as though it were not acting as the Administrative Agent and the term "Lender"
or "Lenders" shall, unless the context otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent may
(without having to account therefor to any Lender) accept deposits from, lend
money to and generally engage in any kind of banking, trust or other business
with the Company and the Subsidiary Guarantors (and their respective Affiliates)
as if it were not acting as the Administrative Agent, and the Administrative
Agent may accept fees and other consideration from the Company (in addition to
the agency fees and arrangement fees heretofore agreed to between the Company
and the Administrative Agent) for services in connection with this Agreement or
otherwise without having to account for the same to the Lenders.
11.05 Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 12.03 or 12.04
hereof, but without limiting the obligations of the Company under said Sections
12.03 and 12.04), ratably in accordance with the principal amount of their
respective Loans and Reimbursement Obligations outstanding, or if no Loans or
Reimbursement Obligations are outstanding, ratably in accordance with their
respective Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against the Administrative Agent in any way relating to or arising out
of this Agreement or any other Basic Document or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including, without limitation, the costs
Credit Agreement
----------------
<PAGE>
-70-
and expenses which the Company is obligated to pay under Sections 12.03 and
12.04 hereof but excluding, unless a Default has occurred and is continuing,
normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
11.06 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and decision to enter into this Agreement and that it will,
independently and without reliance upon the 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 analysis and decisions in taking or not
taking action under this Agreement or any of the other Basic Documents. The
Administrative Agent shall not be required to keep itself informed as to the
performance or observance by the Company and the Subsidiary Guarantors of this
Agreement or any of the other Basic Documents or any other document referred to
or provided for herein or therein or to inspect the properties or books of the
Company or any of the Subsidiary Guarantors. Except for notices, reports and
other documents and information expressly required to be furnished to the
Lenders by the Administrative Agent hereunder or the other Basic Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Company or any of the Subsidiary Guarantors (or any
of their affiliates) which may come into the possession of the Administrative
Agent.
11.07 Failure to Act. Except for action expressly required of
the Administrative Agent hereunder and under the other Basic Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction by the Lenders of their indemnification
obligations under Section 11.05 hereof against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action.
11.08 Resignation or Removal of Administrative Agent. Subject
to the appointment and acceptance of a successor Administrative Agent as
provided below, the Administrative Agent may resign at any time by giving notice
thereof to the Lenders and the Company and the Administrative Agent may be
removed at any time with or without cause by the Majority Lenders. Upon any such
resignation or removal the Majority Lenders shall have the right to appoint a
successor Administrative Agent reasonably acceptable to the Company. Upon any
such resignation or removal, the Administrative Agent that resigned or was
removed shall, to the extent that its annual agency fee was paid in advance, pay
to the Company an amount equal to such fee multiplied by a fraction the
numerator of which shall be the number of days remaining on the date of such
resignation or removal until the next anniversary of the Amendment and
Restatement Effective Date, and the denominator of which shall be 365. If no
Credit Agreement
----------------
<PAGE>
-71-
successor Administrative Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Administrative Agent (the "Notice Date"), then
the retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent reasonably acceptable to the Company. Any
successor Administrative Agent shall be (i) a Lender or (ii) if no Lender has
accepted such appointment within 30 days after the Notice Date, a bank which has
an office in New York, New York with a combined capital and surplus of at least
$250,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Section 11 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Administrative Agent.
11.09 Consents under Basic Documents. Without the prior
written consent of the Majority Lenders, the Administrative Agent will not
consent to any modification, supplement or waiver under any of the Basic
Documents or any of the other documents described in Section 9.20 hereof.
11.10 Collateral Sub-Agents. Each Lender by its execution and
delivery of this Agreement agrees, as contemplated by the Security Documents,
that, in the event it shall hold any Liquid Investments referred to therein,
such Liquid Investments shall be held in the name and under the control of such
Lender and such Lender shall hold such Liquid Investments as a collateral
sub-agent for the Administrative Agent thereunder.
Section 12. Miscellaneous.
12.01 Waiver. No failure on the part of the Administrative
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under any Basic Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The remedies
provided in the Basic Documents are cumulative and not exclusive of any remedies
provided by law.
12.02 Notices. All notices and other communications provided
for herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made by telecopy or other
writing and telecopied, mailed or delivered to the intended recipient (a) in the
case of the Company or the Administrative Agent, at the "Address for Notices"
specified below its name on the signature pages hereof and (b) in the case of
any Lender, at its address (or telecopy number) set forth in its Administrative
Credit Agreement
----------------
<PAGE>
-72-
Questionnaire; or, as to any party, at such other address as shall be designated
by such party in a notice to the Company and the Administrative Agent given in
accordance with this Section 12.02. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier (and receipt is electronically confirmed), personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
12.03 Expenses, Etc. The Company agrees to pay or reimburse
each of the Lenders and the Administrative Agent for paying: (a) the reasonable
fees and expenses of Milbank, Tweed, Hadley & McCloy, special counsel to the
Administrative Agent, in connection with (i) the preparation, execution and
delivery of this Agreement (including the Exhibits hereto) and the Security
Documents and the making of the Loans hereunder and (ii) any modification,
supplement or waiver of any of the terms of this Agreement or any other Basic
Document (including, without limitation, the amendment and restatement evidenced
hereby); (b) all reasonable costs and expenses of the Lenders and the
Administrative Agent (including reasonable counsels' fees in connection with the
enforcement of this Agreement or any other Basic Document or any bankruptcy,
insolvency or other proceedings); (c) all mortgage, intangible, transfer, stamp,
documentary or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of this Agreement or any other
Basic Document or any other document referred to herein or therein; and (d) all
costs, expenses, taxes, assessments and other charges incurred in connection
with any filing, registration, recording or perfection of any security interest
contemplated by this Agreement, any Security Document or any document referred
to herein or therein.
12.04 Indemnification. The Company shall indemnify the
Administrative Agent, the Lenders and each affiliate thereof and their
respective directors, officers, employees and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims or damages to which
any of them may become subject, insofar as such losses, liabilities, claims or
damages arise out of, relate to or result from any (i) Loan by any Lender
hereunder or (ii) breach by the Company of this Agreement or any other Basic
Document or (iii) any Environmental Liabilities (whether known or unknown) or
(iv) any investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing, and the Company shall
reimburse the Administrative Agent and each Lender, and each affiliate thereof
and their respective directors, officers, employees and agents, upon demand for
any reasonable expenses (including legal fees) incurred in connection with any
such investigation or proceeding; but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified.
12.05 Amendments, Etc. No amendment or waiver of any provision
of this Agreement or the Notes, nor any consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall be agreed or
consented to by the Majority Lenders and the Company, and each such waiver or
consent shall be effective only in the specific
Credit Agreement
----------------
<PAGE>
-73-
instance and for the specific purpose for which given; provided that no
amendment, waiver or consent shall, unless in writing and signed by all the
Lenders, do any of the following: (i) increase any Commitment of any of the
Lenders or subject the Lenders to any additional obligations; (ii) reduce the
principal of, or interest on, any Loan, Reimbursement Obligation or fee
hereunder; (iii) postpone any date fixed for any payment of principal of, or
interest on, any Loan, Reimbursement Obligation or fee hereunder pursuant to
Sections 2.03, 2.08, 4.01 or 4.02 hereof; (iv) change the percentage of any of
the Commitments or of the aggregate unpaid principal amount of any of the Loans
or Letter of Credit Liabilities, or the number of Lenders, which shall be
required for the Lenders or any of them to take any action under this Agreement;
(v) change any provision contained in Sections 2.07, 6, 7.01, 12.03 or 12.04
hereof or this Section 12.05 or Section 12.08 hereof; (vi) change any provision
of Section 3.02(b) hereof; (vii) release all or substantially all of the
security for the obligations of the Company under this Agreement or any Note; or
(viii) release all or substantially all of the Subsidiary Guarantors from their
obligations under the Subsidiary Guaranty. Notwithstanding anything in this
Section 12.05 to the contrary, no amendment, waiver or consent shall be made
with respect to Section 11 without the consent of the Administrative Agent.
12.06 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns except that the Company may not assign its rights or
obligations hereunder or under the Notes without the prior written consent of
all of the Lenders. Each Lender may assign all or a portion of its rights and
obligations under this Agreement and the Notes (i) to any affiliate thereof,
(ii) to any other Lender or (iii) with the consent of the Administrative Agent,
of the Issuing Bank and of the Company, which consents shall not be unreasonably
withheld, to any other bank or financial institution (provided that any such
partial assignment shall not, unless the Company and the Administrative Agent
otherwise agree, be less than $5,000,000). Upon execution by the assignor and
the assignee of an instrument pursuant to which the assignee assumes such rights
and obligations, payment by such assignee to such assignor of an amount equal to
the purchase price agreed between such assignor and such assignee and delivery
to the Administrative Agent and the Company of an executed copy of such
instrument together with payment by such assignee to the Administrative Agent of
a processing fee of $2,500, such assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same rights and benefits as
it would have if it were a Lender hereunder and the assignor shall be, to the
extent of such assignment (unless otherwise provided therein), released from its
obligations under this Agreement. Each Lender may (without the consent of any
other party to this Agreement) sell participations in all or any part of any
Loan or Loans made by it to another bank or other entity, in which event the
participant shall not have any rights under this Agreement (except as provided
in the next succeeding sentence hereof), or in the case of a Loan, such Lender's
Note (the participant's rights against such Lender in respect of such
participation to be those set forth in the agreement executed by such Lender in
favor of the participant relating thereto, which agreement shall not give the
participant the right to consent to any modification, amendment or waiver other
than one described in clause (i), (ii), (iii) or (vi) of Section 12.05 hereof).
The Company agrees that each participant shall be entitled to the
Credit Agreement
----------------
<PAGE>
-74-
benefits of Sections 5.07 and 6 with respect to its participation; provided that
no participant shall be entitled to receive any greater amount pursuant to such
Sections 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. Each Lender may furnish any
information concerning the Company and its Subsidiaries in the possession of
such Lender from time to time to assignees and participants (including
prospective assignees and participants) which have agreed in writing to be bound
by the provisions of Section 12.07 hereof. The Administrative Agent and the
Company may, for all purposes of this Agreement, treat any Lender as the holder
of any Note drawn to its order (and owner of the Loans evidenced thereby) until
written notice of assignment, participation or other transfer shall have been
received by them from such Lender.
In addition to the assignments and participations permitted
under the foregoing provisions of this Section 12.06, any Lender may (without
notice to the Company, the Administrative Agent, the Issuing Bank or any other
Lender and without payment of any fee) assign and pledge all or any portion of
its Loans and its Notes to any Federal Reserve Bank as collateral security
pursuant to Regulation A of the Board of Governors of the Federal Reserve System
and any Operating Circular issued by such Federal Reserve Bank, and such Loans
and Notes shall be fully transferrable as provided therein. No such assignment
pursuant to the preceding sentence shall release the assigning Lender from its
obligations hereunder.
12.07 Confidentiality. Each Lender agrees to exercise all
reasonable efforts to keep any information delivered or made available by the
Company to it which has not been publicly disclosed confidential from anyone
other than persons employed or retained by such Lender who are or are expected
to become engaged in evaluating, approving, structuring or administering the
Loans; provided that nothing herein shall prevent any Lender from disclosing
such information (i) to any other Lender, (ii) to its officers, directors,
employees, agents, attorneys and accountants who have a need to know such
information in accordance with customary banking practices and who receive such
information having been made aware of the restrictions set forth in this
Section, (iii) upon the order of any court or administrative agency, (iv) upon
the request or demand of any regulatory agency or authority having jurisdiction
over such Lender, (v) to the extent reasonably required in connection with any
litigation to which the Administrative Agent, any Lender, the Company, any
Subsidiary Guarantor or their respective affiliates may be a party, (vi) to the
extent reasonably required in connection with the exercise of any remedy
hereunder, (vii) to such Lender's legal counsel and independent auditors, and
(viii) to any actual or proposed participant or assignee of all or part of its
rights hereunder which has agreed in writing to be bound by the provisions of
this Section 12.07.
12.08 Survival. The obligations of the Company under Sections
6.01, 6.05, 6.06, 6.08, 12.03 and 12.04 hereof and the obligations of the
Lenders under Section 11.05 shall survive the repayment of the Loans and the
termination of the Commitments.
Credit Agreement
----------------
<PAGE>
-75-
12.09 Captions. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
12.10 Counterparts; Integration. This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement
constitutes the entire agreement and understanding among the parties hereto and
supersedes any and all prior agreements and understandings, oral and written,
relating to the subject matter hereof.
12.11 Additional Lenders. The Company, each of the Lenders and
the Administrative Agent may at any time agree to add one or more lenders to
this Agreement pursuant to an instrument in writing specifying such new lender's
Commitments (and the reduction in Commitments of the existing Lenders as a
result thereof in such manner as the Company, each of the Lenders and the
Administrative Agent agree) and under which such new lender would agree to be
bound by the provisions of this Agreement. Upon the execution of such instrument
(and the satisfaction of such conditions and other terms as shall therein be
specified) such additional lender or lenders shall be deemed a "Lender" or
"Lenders" for the purposes of this Agreement and shall enjoy all rights and
assume all obligations on the part of the Lenders set forth in this Agreement
and the Lenders whose Commitments are then being reduced shall be released from
their Commitments to the extent of such reduction.
12.12 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. THE COMPANY HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE COMPANY, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Credit Agreement
----------------
<PAGE>
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
IRON MOUNTAIN INCORPORATED
By /s/
-------------------------------
Title:
Address for Notices:
745 Atlantic Avenue
Boston, Massachusetts 02111
Attention: John F. Kenny, Jr.
Executive Vice President
and Chief Financial Officer
Fax No.: (617) 357-4604
Copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Harry E. Ekblom, Jr.
Fax No.: (617) 338-2880
Credit Agreement
----------------
<PAGE>
-77-
LENDERS
-------
Commitment
- ----------
$28,000,000 THE CHASE MANHATTAN BANK
By /s/
----------------------------
Title:
$24,500,000 BANKBOSTON, N.A.
By /s/
----------------------------
Title:
$24,500,000 THE BANK OF NEW YORK
By /s/
----------------------------
Title:
$24,500,000 CIBC INC.
By /s/
----------------------------
Title:
$24,500,000 FLEET NATIONAL BANK
By /s/
----------------------------
Title:
Credit Agreement
----------------
<PAGE>
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$23,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By /s/
----------------------------
Title:
$23,000,000 THE SUMITOMO BANK, LIMITED
By /s/
----------------------------
Title:
By /s/
----------------------------
Title:
$23,000,000 UNION BANK OF CALIFORNIA, N.A.
By /s/
----------------------------
Title:
$15,000,000 THE BANK OF NOVA SCOTIA
By /s/
----------------------------
Title:
Credit Agreement
----------------
<PAGE>
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$15,000,000 HELLER FINANCIAL, INC.
By /s/
----------------------------
Title:
$15,000,000 NATIONAL CITY BANK
By /s/
----------------------------
Title:
$10,000,000 GIROCREDIT BANK AG DER SPARKASSEN,
GRAND CAYMAN ISLAND BRANCH
By /s/
----------------------------
Title:
By /s/
----------------------------
Title:
Credit Agreement
----------------
<PAGE>
-80-
NON-COMMITTING LENDER
---------------------
BANK OF IRELAND GRAND CAYMAN
By /s/
----------------------------
Title:
Credit Agreement
----------------
<PAGE>
-81-
ADMINISTRATIVE AGENT
--------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/
-------------------------
Title:
Address for Notices:
The Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Nathaniel Ivspivey
Telecopier No.: (212) 552-7920
Telephone No.: (212) 552-5662
Credit Agreement
----------------
<PAGE>
SCHEDULE I
Commitments; Non-Committing Lenders
-----------------------------------
A. Commitments
<TABLE>
<CAPTION>
Lender Commitment under Amount of Increase Commitment under
- ------ Credit Agreement or Decrease this Agreement
---------------- ----------- --------------
<S> <C> <C> <C>
THE CHASE MANHATTAN BANK $18,000,000.00 $+10,000,000.00 $28,000,000
THE BANK OF NEW YORK $16,500,000.00 + 8,000,000.00 24,500,000
CIBC INC. $16,500,000.00 + 8,000,000.00 24,500,000
BANKBOSTON, N.A. $16,500,000.00 + 8,000,000.00 24,500,000
FLEET NATIONAL BANK $16,500,000.00 + 8,000,000.00 24,500,000
THE BANK OF NOVA SCOTIA $12,000,000.00 + 3,000,000.00 15,000,000
NATIONAL CITY BANK $12,000,000.00 + 3,000,000.00 15,000,000
THE SUMITOMO BANK, LIMITED $12,000,000.00 +11,000,000.00 23,000,000
UNION BANK OF CALIFORNIA, N.A. $12,000,000.00 +11,000,000.00 23,000,000
GIROCREDIT BANK AG DER SPARKASSEN, $ 9,000,000.00 + 1,000,000.00 10,000,000
GRAND CAYMAN ISLAND BRANCH
HELLER FINANCIAL, INC. -0- +15,000,000.00 15,000,000
CREDIT LYONNAIS NEW YORK BRANCH -0- +23,000,000.00 23,000,000
B. Non-Committing Lender
BANK OF IRELAND GRAND CAYMAN $ 9,000,000.00 - 9,000,000.00 -0-
</TABLE>
Credit Agreement
----------------
<PAGE>
EXHIBIT A
[Form of Note]
PROMISSORY NOTE
$_______________ September 26, 1997
New York, New York
FOR VALUE RECEIVED, IRON MOUNTAIN INCORPORATED, a Delaware
corporation (the "Company"), hereby promises to pay to __________________ (the
"Bank"), for account of its respective Applicable Lending Offices provided for
by the Credit Agreement referred to below, at the principal office of The Chase
Manhattan Bank at 1 Chase Manhattan Plaza, New York, New York 10081, the
principal sum of _______________ Dollars (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Loans made by the Bank to the
Company under the Credit Agreement), in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.
The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Loan made by the Bank to the Company, and each
payment made on account of the principal thereof, shall be recorded by the Bank
on its books and, prior to any transfer of this Note, endorsed by the Bank on
the schedule attached hereto or any continuation thereof, provided that the
failure of the Bank to make any such recordation or endorsement shall not affect
the obligations of the Company to make a payment when due of any amount owing
under the Credit Agreement or hereunder in respect of the Loans made by the
Bank.
This Note is one of the Notes referred to in the Second
Amended and Restated Credit Agreement dated as of September 30, 1996 (as amended
and restated as of September 26, 1997 and as the same may be further modified
and supplemented and in effect from time to time, the "Credit Agreement")
between the Company, the lenders party thereto (including the Bank) and The
Chase Manhattan Bank, as Administrative Agent, and evidences Loans made by the
Bank thereunder. Terms used but not defined in this Note have the respective
meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of Loans upon the terms and conditions specified therein.
Note
----
<PAGE>
-2-
Except as permitted by Section 12.06 of the Credit Agreement,
this Note may not be assigned by the Bank to any other Person.
This Note shall be governed by, and construed in accordance
with, the law of the State of New York.
IRON MOUNTAIN INCORPORATED
By_________________________
Title:
Note
----
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made, Continued or Converted under
the within-described Credit Agreement to the Company, on the dates, in the
principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Prin-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------ ---- -------- -------- --------- ------ -------
Note
----
<PAGE>
EXHIBIT B
AMENDED AND RESTATED SUBSIDIARY GUARANTY
AMENDED AND RESTATED SUBSIDIARY GUARANTY dated as of September
30, 1996, amended and restated as of September 26, 1997, between each of the
corporations identified under the caption "SUBSIDIARY GUARANTORS" on the
signature pages hereto (each individually, a "Subsidiary Guarantor" and,
collectively, the "Subsidiary Guarantors"); and THE CHASE MANHATTAN BANK, as
agent for the lenders or other financial institutions or entities party, as
lenders, to the Credit Agreement referred to below (in such capacity, together
with its successors in such capacity, the "Administrative Agent").
Iron Mountain Incorporated, a Delaware corporation (the
"Company"), certain lenders and the Administrative Agent are parties to a Second
Amended and Restated Credit Agreement dated as of September 30, 1996 (the
"Existing Credit Agreement"), amended and restated as of September 26, 1997 (as
so amended and restated and as further modified and supplemented and in effect
from time to time, the "Credit Agreement"), providing, subject to the terms and
conditions thereof, for extensions of credit (by making of loans and issuing
letters of credit) to be made by said lenders to the Company in an aggregate
principal or face amount not exceeding $250,000,000. In addition, the Company
and one or more of the Subsidiary Guarantors may from time to time be obligated
to one or more of the Lenders and/or any of their affiliates under one or more
Interest Rate Agreements (as defined in the Credit Agreement) (such obligations
being herein referred to as "Interest Rate Obligations").
Certain Subsidiary Guarantors and the Administrative Agent are
party to a Subsidiary Guaranty dated as of September 30, 1996 (as amended to but
excluding the date hereof, the "Existing Subsidiary Guaranty") relating to the
Existing Credit Agreement.
In connection with the amendment and restatement of the
Existing Credit Agreement, the Subsidiary Guarantors and the Administrative
Agent wish to amend and restate the Existing Subsidiary Guaranty as set forth
herein. To induce the Lenders to enter into the Credit Agreement, to extend
credit thereunder and to enter into one or more Interest Rate Agreements as
aforesaid, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Subsidiary Guarantor has
agreed to guarantee the Guaranteed Obligations (as hereinafter defined).
Accordingly, the parties hereto agree that effective on the date hereof, the
Existing Subsidiary Guaranty is amended and restated in its entirety as set
forth below:
Section 1. Definitions. Terms defined in the Credit Agreement
are used herein as defined therein. In addition, as used herein, "Loan
Documents" shall mean the Credit Agreement, the Notes, the Letter of Credit
Documents and the Security Documents.
Subsidiary Guaranty
-------------------
<PAGE>
-2-
Section 2. The Guarantee.
2.01 The Guarantee. The Subsidiary Guarantors hereby jointly
and severally guarantee to each Lender and the Administrative Agent and their
respective successors and assigns (and each Subsidiary Guarantor that was a
party to the Existing Subsidiary Guarantee, as in effect before giving effect to
the amendment and restatement thereof effected hereby, hereby jointly and
severally confirms to each Lender and the Administrative Agent and their
respective successors and assigns its guarantee of) the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) of the
principal of and interest on the Loans made by the Lenders to, and the Note(s)
held by each Lender of, the Company and all other amounts from time to time
owing to the Lenders or the Administrative Agent by the Company under the Loan
Documents (including, without limitation, all Reimbursement Obligations) and all
Interest Rate Obligations owing by the Obligors to the Lenders and their
affiliates, in each case strictly in accordance with the terms thereof (such
obligations being herein collectively called the "Guaranteed Obligations"). The
Subsidiary Guarantors hereby further jointly and severally agree that if the
Company (or, in the case of Interest Rate Obligations, any Subsidiary Guarantor)
shall fail to pay in full when due (whether at stated maturity, by acceleration
or otherwise) any of the Guaranteed Obligations, the Subsidiary Guarantors will
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.
2.02 Obligations Unconditional. The obligations of the
Subsidiary Guarantors under Section 2.01 hereof are absolute and unconditional,
joint and several, irrespective of the value, genuineness, validity, regularity
or enforceability of the Credit Agreement, the Notes or any other agreement or
instrument referred to herein or therein, or any substitution, release or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 2.02 that the obligations of the Subsidiary
Guarantors hereunder shall be absolute and unconditional, joint and several,
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Subsidiary Guarantors hereunder
which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Subsidiary Guarantors, the time for any performance of or compliance
with any of the Guaranteed Obligations shall be extended, or such
performance or compliance shall be waived;
Subsidiary Guaranty
-------------------
<PAGE>
-3-
(ii) any of the acts mentioned in any of the provisions of the
Credit Agreement or the Notes or any other agreement or instrument
referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall
be accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of,
the Administrative Agent or any Lender or Lenders as security for any
of the Guaranteed Obligations shall fail to be perfected.
The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that the
Administrative Agent or any Lender exhaust any right, power or remedy or proceed
against the Company under the Credit Agreement or the Notes or any other
agreement or instrument referred to herein or therein, or against any other
Person under any other guarantee of, or security for, any of the Guaranteed
Obligations.
2.03 Reinstatement. The obligations of the Subsidiary
Guarantors under this Section 2 shall be automatically reinstated if and to the
extent that for any reason any payment by or on behalf of the Company in respect
of the Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, and the Subsidiary
Guarantors jointly and severally agree that they will indemnify the
Administrative Agent and each Lender on demand for all reasonable costs and
expenses (including, without limitation, fees of counsel) incurred by the
Administrative Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
2.04 Subrogation. The Subsidiary Guarantors hereby jointly and
severally agree that until the payment and satisfaction in full of all
Guaranteed Obligations and the expiration or termination of the Commitments and
all Letter of Credit Liabilities of the Lenders under the Credit Agreement they
shall not exercise any right or remedy arising by reason of any performance by
them of their guarantee in Section 2.01 hereof, whether by subrogation or
otherwise, against the Company or any other guarantor of any of the Guaranteed
Obligations or any security for any of the Guaranteed Obligations.
Subsidiary Guaranty
-------------------
<PAGE>
-4-
2.05 Remedies. The Subsidiary Guarantors jointly and severally
agree that, as between the Subsidiary Guarantors and the Lenders, the
obligations of the Company under the Credit Agreement and the Notes may be
declared to be forthwith due and payable as provided in Section 10 of the Credit
Agreement (and shall be deemed to have become automatically due and payable in
the circumstances provided in said Section 10) for purposes of Section 2.01
hereof notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable) as
against the Company and that, in the event of such declaration (or such
obligations being deemed to have become automatically due and payable), such
obligations (whether or not due and payable by the Company) shall forthwith
become due and payable by the Subsidiary Guarantors for purposes of said Section
2.01.
2.06 Instrument for the Payment of Money. Each Subsidiary
Guarantor hereby acknowledges that the guarantee in this Section 2 constitutes
an instrument for the payment of money, and consents and agrees that any Lender
or the Administrative Agent, at its sole option, in the event of a dispute by
such Subsidiary Guarantor in the payment of any moneys due hereunder, shall have
the right to bring motion-action under New York CPLR Section 3213.
2.07 Continuing Guarantee. The guarantee in this Section 2 is
a continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
2.08 Rights of Contribution. The Subsidiary Guarantors hereby
agree, as between themselves, that if any Subsidiary Guarantor shall become an
Excess Funding Subsidiary Guarantor (as defined below) by reason of the payment
by such Subsidiary Guarantor of any Guaranteed Obligations, each other
Subsidiary Guarantor shall, on demand of such Excess Funding Subsidiary
Guarantor (but subject to the next sentence), pay to such Excess Funding
Subsidiary Guarantor an amount equal to such Subsidiary Guarantor's Pro Rata
Share (as defined below and determined, for this purpose, without reference to
the Properties, debts and liabilities of such Excess Funding Subsidiary
Guarantor) of the Excess Payment (as defined below) in respect of such
Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to any
Excess Funding Subsidiary Guarantor under this Section 2.08 shall be subordinate
and subject in right of payment to the prior payment in full of the obligations
of such Subsidiary Guarantor under the other provisions of this Section 2 and
such Excess Funding Subsidiary Guarantor shall not exercise any right or remedy
with respect to such excess until payment and satisfaction in full of all of
such obligations.
For purposes of this Section 2.08, (i) "Excess Funding
Subsidiary Guarantor" shall mean, in respect of any Guaranteed Obligations, a
Subsidiary Guarantor that has paid an amount in excess of its Pro Rata Share of
such Guaranteed Obligations, (ii) "Excess Payment" shall mean, in respect of any
Guaranteed Obligations, the amount paid by an Excess Funding
Subsidiary Guaranty
-------------------
<PAGE>
-5-
Subsidiary Guarantor in excess of its Pro Rata Share of such Guaranteed
Obligations and (iii) "Pro Rata Share" shall mean, for any Subsidiary Guarantor,
the ratio (expressed as a percentage) of (x) the amount by which the aggregate
fair saleable value of all Properties of such Subsidiary Guarantor (excluding
any shares of stock of any other Subsidiary Guarantor) exceeds the amount of all
the debts and liabilities of such Subsidiary Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of such Subsidiary Guarantor hereunder and any obligations of any
other Subsidiary Guarantor that have been Guaranteed by such Subsidiary
Guarantor) to (y) the amount by which the aggregate fair saleable value of all
Properties of all of the Subsidiary Guarantors exceeds the amount of all the
debts and liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of the Company and the
Subsidiary Guarantors hereunder) of all of the Subsidiary Guarantors, determined
(A) with respect to any Subsidiary Guarantor that is a party hereto on the date
hereof, as of the date hereof, and (B) with respect to any other Subsidiary
Guarantor, as of the date such Subsidiary Guarantor becomes a Subsidiary
Guarantor hereunder.
2.09 General Limitation on Guarantee Obligations. In any
action or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 2.01 hereof would otherwise, taking into account the provisions of
Section 2.08 hereof, be held or determined to be void, invalid or unenforceable,
or subordinated to the claims of any other creditors, on account of the amount
of its liability under said Section 2.01, then, notwithstanding any other
provision hereof to the contrary, the amount of such liability shall, without
any further action by such Subsidiary Guarantor, the Administrative Agent, the
Lenders or any other Person, be automatically limited and reduced to the highest
amount that is valid and enforceable and not subordinated to the claims of other
creditors as determined in such action or proceeding.
Section 3. Miscellaneous.
3.01 No Waiver. No failure on the part of the Administrative
Agent or any Lender to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any Lender of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
3.02 Notices. All notices, requests, consents and demands
hereunder shall be in writing and telecopied or delivered to the intended
recipient (in the case of the Subsidiary Guarantors) at the "Address for
Notices" specified on the signature pages hereof and (in the
Subsidiary Guaranty
-------------------
<PAGE>
-6-
case of the Administrative Agent) at the address specified in Section 12.02 of
the Credit Agreement or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
3.03 Expenses. The Subsidiary Guarantors jointly and severally
agree to reimburse each of the Lenders and the Administrative Agent for all
reasonable costs and expenses of the Lenders and the Administrative Agent
(including, without limitation, the reasonable fees and expenses of legal
counsel) in connection with (i) any Default and any enforcement or collection
proceeding resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this Section
3.03.
3.04 Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by
each Subsidiary Guarantor and the Administrative Agent (with the consent of the
Lenders as specified in Section 11.09 of the Credit Agreement). Any such
amendment or waiver shall be binding upon the Administrative Agent and each
Lender, each holder of any of the Guaranteed Obligations and each Subsidiary
Guarantor.
3.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of each
Subsidiary Guarantor, the Administrative Agent, the Lenders and each holder of
any of the Guaranteed Obligations (provided, however, that no Subsidiary
Guarantor shall assign or transfer its rights hereunder without the prior
written consent of the Administrative Agent).
3.06 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
3.07 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
3.08 Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the law of the State of
New York. Each
Subsidiary Guaranty
-------------------
<PAGE>
-7-
Subsidiary Guarantor hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of the
Supreme Court of the State of New York sitting in New York County (including its
Appellate Division), and of any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Subsidiary Guarantor
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any objection that it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
3.09 Waiver of Jury Trial. EACH OF THE SUBSIDIARY GUARANTORS,
THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
3.10 Agents and Attorneys-in-Fact. The Administrative Agent
may employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
3.11 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
Subsidiary Guaranty
-------------------
<PAGE>
-8-
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Subsidiary Guaranty Agreement to be duly executed and
delivered as of the day and year first above written.
SUBSIDIARY GUARANTORS
IRON MOUNTAIN RECORDS
MANAGEMENT, INC.
By ________________________
Title:
IRON MOUNTAIN/SAFESITE, INC.
By ________________________
Title:
DATA SECURITIES INTERNATIONAL, INC.
By ________________________
Title:
IM-3 ACQUISITION CORP.
By ________________________
Title:
CRITERION PROPERTY, INC.
By ________________________
Title:
Subsidiary Guaranty
-------------------
<PAGE>
-9-
CRITERION ATLANTIC PROPERTY, INC.
By ________________________
Title:
CRITICAL FILES SECURITY, INC.
By ________________________
Title:
HOLLYWOOD PROPERTY, INC.
By ________________________
Title:
IM SAN DIEGO, INC.
By ________________________
Title:
IRON MOUNTAIN CONSULTING SERVICES,
INC.
By ________________________
Title:
Subsidiary Guaranty
-------------------
<PAGE>
-10-
IRON MOUNTAIN DATA PROTECTION
SERVICES,INC.
By ________________________
Title:
IRON MOUNTAIN RECORDS MANAGEMENT
OF OHIO,INC.
By ________________________
Title:
METRO BUSINESS ARCHIVES, INC.
By ________________________
Title:
IRON MOUNTAIN WILMINGTON, INC.
By ________________________
Title:
IRON MOUNTAIN RECORDS MANAGEMENT
OF MARYLAND, INC.
By ________________________
Title:
Subsidiary Guaranty
-------------------
<PAGE>
-11-
IRON MOUNTAIN RECORDS MANAGEMENT
OF FLORIDA, INC.
By ________________________
Title:
IRON MOUNTAIN RECORDS MANAGEMENT
OF MINNESOTA, INC.
By ________________________
Title:
IRON MOUNTAIN RECORDS MANAGEMENT
OF MISSOURI LLC
By ________________________
Title:
IRON MOUNTAIN RECORDS MANAGEMENT
OF BOSTON, INC.
By ________________________
Title:
IRON MOUNTAIN RECORDS MANAGEMENT
OF MICHIGAN, INC.
By ________________________
Title:
Subsidiary Guaranty
-------------------
<PAGE>
-12-
IRON MOUNTAIN RECORDS MANAGEMENT
OF WISCONSIN, INC.
By ________________________
Title:
IRON MOUNTAIN RECORDS MANAGEMENT
OF SAN ANTONIO, INC.
By ________________________
Title:
IRON MOUNTAIN RECORDS MANAGEMENT
OF SAN ANTONIO - FP, INC.
By ________________________
Title:
WILLAMETTE ARCHIVES, INC.
By ________________________
Title:
IM EARHART, INC.
By ________________________
Title:
Subsidiary Guaranty
-------------------
<PAGE>
-13-
IM BILLERICA, INC.
By ________________________
Title:
IM-AEI ACQUISITION CORP.
By ________________________
Title:
ARCHIVES EXPRESS INCORPORATED
By ________________________
Title:
Address for Notices for all Subsidiary Guarantors:
c/o Iron Mountain Incorporated
745 Atlantic Avenue
Boston, Massachusetts 02111
Attention: John F. Kenny, Jr.
Executive Vice President
and Chief Financial Officer
Telecopy Number: (617) 350-7881
Copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Harry E. Ekblom, Jr.
Telecopy Number: (617) 338-2880
Subsidiary Guaranty
-------------------
<PAGE>
-14-
THE ADMINISTRATIVE AGENT
------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
By ________________________
Title:
Subsidiary Guaranty
-------------------
<PAGE>
EXHIBIT C
AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT
AMENDED AND RESTATED COMPANY PLEDGE AGREEMENT dated as of
September 30, 1996, amended and restated as of September 26, 1997, between IRON
MOUNTAIN INCORPORATED, a corporation duly organized and validly existing under
the laws of the State of Delaware (the "Company"); and THE CHASE MANHATTAN BANK,
as administrative agent for the lenders or other financial institutions or
entities party, as lenders, to the Credit Agreement referred to below (in such
capacity, together with its successors in such capacity, the "Administrative
Agent").
The Company, certain lenders and the Administrative Agent are
parties to a Second Amended and Restated Credit Agreement dated as of September
30, 1996 (the "Existing Credit Agreement"), amended and restated as of September
26, 1997 (as so amended and restated, and as further modified and supplemented
and in effect from time to time, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for extensions of credit (by making of loans
and issuing letters of credit) to be made by said lenders to the Company in an
aggregate principal or face amount not exceeding $250,000,000. In addition, the
Company and one or more of the Subsidiary Guarantors (as defined in the Credit
Agreement) may from time to time be obligated to one or more of the Lenders
and/or any of their affiliates under one or more Interest Rate Agreements (as so
defined) (such obligations being herein referred to as "Interest Rate
Obligations").
The Company and the Administrative Agent are party to a
Company Pledge Agreement dated as of September 30, 1996 (as amended to but
excluding the date hereof, the "Existing Company Pledge Agreement") relating to
the Existing Credit Agreement.
The Company and the Administrative Agent wish to amend and
restate the Existing Company Pledge Agreement as provided herein. To induce the
Lenders to enter into the Credit Agreement, to extend credit thereunder and to
enter into one or more Interest Rate Agreements as aforesaid, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined) as security for the Secured Obligations
(as so defined). Accordingly, the parties hereto agree that effective on the
date hereof, the Existing Company Pledge Agreement is continued, amended and
restated in its entirety as set forth herein:
Section 1. Definitions. Terms defined in the Credit Agreement
are used herein as defined therein. In addition, as used herein:
"Collateral" shall have the meaning ascribed thereto in
Section 3 hereof.
Company Pledge Agreement
------------------------
<PAGE>
-2-
"Collateral Account" shall have the meaning ascribed thereto
in Section 4.01 hereof.
"Issuers" shall mean, collectively, the respective
corporations identified on Annex 1 hereto under the caption "Issuer".
"Loan Documents" shall mean the Credit Agreement, the Notes,
the Letter of Credit Documents and the Security Documents.
"Pledged Stock" shall have the meaning ascribed thereto in
Section 3(a) hereof.
"Secured Obligations" shall mean, collectively, (a) the
principal of and interest on the Loans made by the Lenders to, and the
Note(s) held by each Lender of, the Company and all other amounts from
time to time owing to the Lenders or the Administrative Agent by the
Company under the Loan Documents (including, without limitation, all
Reimbursement Obligations), (b) all Interest Rate Obligations owing by
the Obligors to the Lenders and their respective affiliates and (c) all
obligations of the Company to the Lenders and the Administrative Agent
hereunder.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect from time to time in the State of New York.
Section 2. Representations and Warranties. The Company
represents and warrants to the Lenders and the Administrative Agent
that:
(a) The Company is the sole beneficial owner of the Collateral
and no Lien exists or will exist upon the Collateral at any time (and
no right or option to acquire the same exists in favor of any other
Person), except for Liens permitted under Section 9.13 of the Credit
Agreement and except for the pledge and security interest in favor of
the Administrative Agent for the benefit of the Lenders created or
provided for herein, which pledge and security interest constitute a
first priority perfected pledge and security interest in and to all of
the Collateral.
(b) The Pledged Stock represented by the certificates
identified in Annex 1 hereto is, and all other Pledged Stock in which
the Company shall hereafter grant a security interest pursuant to
Section 3 hereof will be, duly authorized, validly existing, fully paid
and non-assessable and none of such Pledged Stock is or will be subject
to any restriction (other than restrictions under Federal and state
securities laws) that would be effective to prevent or hinder the
Administrative Agent from freely transferring the Pledged Stock in
accordance with the terms hereof.
Company Pledge Agreement
------------------------
<PAGE>
-3-
(c) The Pledged Stock represented by the certificates
identified in Annex 1 hereto constitutes all of the issued and
outstanding shares of Capital Stock of any class of the Issuers
beneficially owned by the Company on the date hereof (whether or not
registered in the name of the Company) and said Annex 1 correctly
identifies, as at the date hereof, the respective Issuers of such
Pledged Stock, the respective class and par value of the shares
comprising such Pledged Stock and the respective number of shares (and
registered owners thereof) represented by each such certificate.
Section 3. The Pledge. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations, the Company hereby pledges and grants to
the Administrative Agent, for the benefit of the Lenders as hereinafter
provided, a security interest in, and confirms and continues the pledge and
security interest created pursuant to the Existing Company Pledge Agreement in,
all of the Company's right, title and interest in the following property,
whether now owned by the Company or hereafter acquired and whether now existing
or hereafter coming into existence (all being collectively referred to herein as
"Collateral"):
(a) the shares of Capital Stock of the Issuers represented by
the certificates identified in Annex 1 hereto and all other shares of
Capital Stock of whatever class of the Issuers, now or hereafter owned
by the Company, in each case together with the certificates
representing the same (collectively, the "Pledged Stock");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Credit
Agreement, in the event of any consolidation or merger in which an
Issuer is not the surviving corporation, all shares of each class of
the Capital Stock of the successor corporation (unless such successor
corporation is the Company itself) formed by or resulting from such
consolidation or merger;
(d) the balance from time to time in the Collateral Account;
and
(e) all proceeds of and to any of the property of the Company
described in the preceding clauses of this Section 3 (including,
without limitation, all causes of action,
Company Pledge Agreement
------------------------
<PAGE>
-4-
claims and warranties now or hereafter held by the Company in respect
of any of the items listed above) and, to the extent related to any
property described in said clauses or such proceeds, all books,
correspondence, credit files, records, invoices and other papers.
Section 4. Cash Proceeds of Collateral.
4.01 Collateral Account. There is hereby established with the
Administrative Agent a cash collateral account (the "Collateral Account") in the
name and under the control of the Administrative Agent into which there shall be
deposited from time to time the cash proceeds of any of the Collateral required
to be delivered to the Administrative Agent pursuant hereto and into which the
Company may from time to time deposit any additional amounts that it wishes to
pledge to the Administrative Agent for the benefit of the Lenders as additional
collateral security hereunder or that, as provided in Sections 3.02(c) and 10 of
the Credit Agreement, it is required to pledge as additional collateral security
hereunder. The balance from time to time in the Collateral Account shall
constitute part of the Collateral hereunder and shall not constitute payment of
the Secured Obligations until applied as hereinafter provided. Except as
expressly provided in the next sentence, the Administrative Agent shall remit
the collected balance outstanding to the credit of the Collateral Account to or
upon the order of the Company as the Company shall from time to time instruct.
However, at any time following the occurrence and during the continuance of an
Event of Default, the Administrative Agent may (and, if instructed by the
Lenders as specified in Section 11.03 of the Credit Agreement, shall) in its (or
their) discretion apply or cause to be applied (subject to collection) the
balance from time to time outstanding to the credit of the Collateral Account to
the payment of the Secured Obligations in the manner specified in Section 5.09
hereof. The balance from time to time in the Collateral Account shall be subject
to withdrawal only as provided herein. In addition to the foregoing, the Company
agrees that if the proceeds of any Collateral hereunder shall be received by it,
the Company shall as promptly as possible deposit such proceeds into the
Collateral Account. Until so deposited, all such proceeds shall be held in trust
by the Company for and as the property of the Administrative Agent and shall not
be commingled with any other funds or property of the Company.
4.02 Investment of Balance in Collateral Account. Amounts on
deposit in the Collateral Account shall be invested from time to time in such
Liquid Investments as the Company (or, after the occurrence and during the
continuance of an Event of Default, the Administrative Agent) shall determine,
which Liquid Investments shall be held in the name and be under the control of
the Administrative Agent, provided that (i) at any time after the occurrence and
during the continuance of an Event of Default, the Administrative Agent may
(and, if instructed by the Lenders as specified in Section 11.03 of the Credit
Agreement, shall) in its (or their) discretion at any time and from time to time
elect to liquidate any such Liquid
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Investments and to apply or cause to be applied the proceeds thereof to the
payment of the Secured Obligations in the manner specified in Section 5.09
hereof and (ii) if requested by the Company, such Liquid Investments may be held
in the name and under the control of one or more of the Lenders (and in that
connection each Lender, pursuant to Section 11.10 of the Credit Agreement) has
agreed that such Liquid Investments shall be held by such Lender as a collateral
sub-agent for the Administrative Agent hereunder).
4.03 Cover for Letter of Credit Liabilities. Amounts deposited
into the Collateral Account as cover for Letter of Credit Liabilities under the
Credit Agreement pursuant to Section 3.02(c) or Section 10 thereof shall be held
by the Administrative Agent in a separate sub-account (designated "Letter of
Credit Liabilities Sub-Account") and all amounts held in such sub-account shall
constitute collateral security first for the Letter of Credit Liabilities
outstanding from time to time and second as collateral security for the other
Secured Obligations hereunder.
Section 5. Further Assurances; Remedies. In furtherance of the
grant of the pledge and security interest pursuant to Section 3 hereof, the
Company hereby agrees with each Lender and the Administrative Agent as follows:
5.01 Delivery and Other Perfection. The Company shall:
(a) if any of the shares, securities, moneys or property
required to be pledged by the Company under clauses (a), (b) and (c) of
Section 3 hereof are received by the Company, forthwith either (x)
transfer and deliver to the Administrative Agent such shares or
securities so received by the Company (together with the certificates
for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of
which thereafter shall be held by the Administrative Agent, pursuant to
the terms of this Agreement, as part of the Collateral or (y) take such
other action as the Administrative Agent shall deem necessary or
appropriate to duly record the Lien created hereunder in such shares,
securities, moneys or property in said clauses (a), (b) and (c);
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Administrative
Agent) to create, preserve, perfect or validate the security interest
granted pursuant hereto or to enable the Administrative Agent to
exercise and enforce its rights hereunder with respect to such pledge
and security interest, including, without limitation, causing any or
all of the Collateral to be transferred of record into the name of the
Administrative Agent or its nominee (and the Administrative Agent
agrees that if any Collateral is transferred into its name or the
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name of its nominee, the Administrative Agent will thereafter promptly
give to the Company copies of any notices and communications received
by it with respect to the Collateral);
(c) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement; and
(d) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect
and make abstracts from its books and records pertaining to the
Collateral, and permit representatives of the Administrative Agent to
be present at the Company's place of business to receive copies of all
communications and remittances relating to the Collateral, and forward
copies of any notices or communications received by the Company with
respect to the Collateral, all in such manner as the Administrative
Agent may require.
5.02 Other Financing Statements and Liens. Except as otherwise
permitted under Section 9.13 of the Credit Agreement, without the prior written
consent of the Administrative Agent (granted with the authorization of the
Lenders as specified in Section 11.09 of the Credit Agreement), the Company
shall not file or suffer to be on file, or authorize or permit to be filed or to
be on file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Administrative Agent is not named as the
sole secured party for the benefit of the Lenders.
5.03 Preservation of Rights. The Administrative Agent shall
not be required to take steps necessary to preserve any rights against prior
parties to any of the Collateral.
5.04 Collateral.
(1) The Company will cause the Collateral to constitute at all
times 100% of the total number of shares of each class of Capital Stock of each
Issuer then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral for all purposes not
inconsistent with the terms of this Agreement, the Credit Agreement, the Notes
or any other instrument or agreement referred to herein or therein, provided
that the Company agrees that it will not vote the Collateral in any manner that
is inconsistent with the terms of this Agreement, the Credit Agreement, the
Notes or any such other instrument or agreement; and the Administrative Agent
shall execute and deliver to the Company or cause to be executed and delivered
to the Company all such proxies, powers
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of attorney, dividend and other orders, and all such instruments, without
recourse, as the Company may reasonably request for the purpose of enabling the
Company to exercise the rights and powers that it is entitled to exercise
pursuant to this Section 5.04(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any dividends on
the Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long
as such Event of Default shall continue, and whether or not the Administrative
Agent or any Lender exercises any available right to declare any Secured
Obligation due and payable or seeks or pursues any other relief or remedy
available to it under applicable law or under this Agreement, the Credit
Agreement, the Notes or any other agreement relating to such Secured Obligation,
all dividends and other distributions on the Collateral shall be paid directly
to the Administrative Agent and retained by it in the Collateral Account as part
of the Collateral, subject to the terms of this Agreement, and, if the
Administrative Agent shall so request in writing, the Company agrees to execute
and deliver to the Administrative Agent appropriate additional dividend,
distribution and other orders and documents to that end, provided that if such
Event of Default is cured, any such dividend or distribution theretofore paid to
the Administrative Agent shall, upon request of the Company (except to the
extent theretofore applied to the Secured Obligations), be returned by the
Administrative Agent to the Company.
5.05 Events of Default, Etc. During the period during which an
Event of Default shall have occurred and be continuing:
(a) the Administrative Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral
as if the Administrative Agent were the sole and absolute owner thereof
(and the Company agrees to take all such action as may be appropriate
to give effect to such right);
(b) the Administrative Agent in its discretion may, in its
name or in the name of the Company or otherwise, demand, sue for,
collect or receive any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral, but
shall be under no obligation to do so; and
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(c) the Administrative Agent may, upon ten business days'
prior written notice to the Company of the time and place, with respect
to the Collateral or any part thereof that shall then be or shall
thereafter come into the possession, custody or control of the
Administrative Agent, the Lenders or any of their respective agents,
sell, lease, assign or otherwise dispose of all or any part of such
Collateral, at such place or places as the Administrative Agent deems
best, and for cash or for credit or for future delivery (without
thereby assuming any credit risk), at public or private sale, without
demand of performance or notice of intention to effect any such
disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and the
Administrative Agent or any Lender or anyone else may be the purchaser,
lessee, assignee or recipient of any or all of the Collateral so
disposed of at any public sale (or, to the extent permitted by law, at
any private sale) and thereafter hold the same absolutely, free from
any claim or right of whatsoever kind, including any right or equity of
redemption (statutory or otherwise), of the Company, any such demand,
notice and right or equity being hereby expressly waived and released.
The Administrative Agent may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the sale may be so
adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05 shall be applied in accordance with Section 5.09 hereof.
The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Administrative Agent may be compelled, with respect to any
sale of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Company acknowledges that any such private sales may be at prices and on terms
less favorable to the Administrative Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Administrative Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective Issuer or
issuer thereof to register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Company shall remain liable for any
deficiency.
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5.07 Removals, Etc. Without at least 30 days' prior written
notice to the Administrative Agent, the Company shall not (i) maintain any of
its books and records with respect to the Collateral at any office or maintain
its principal place of business at any place other than at the address indicated
beneath the signature of the Company to the Credit Agreement or (ii) change its
name, or the name under which it does business, from the name shown on the
signature pages hereto.
5.08 Private Sale. The Administrative Agent and the Lenders
shall incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 5.05 hereof conducted in a
commercially reasonable manner. The Company hereby waives any claims against the
Administrative Agent or any Lender arising by reason of the fact that the price
at which the Collateral may have been sold at such a private sale was less than
the price that might have been obtained at a public sale or was less than the
aggregate amount of the Secured Obligations.
5.09 Application of Proceeds. Except as otherwise herein
expressly provided and except as provided below in this Section 5.09, the
proceeds of any collection, sale or other realization of all or any part of the
Collateral pursuant hereto, and any other cash at the time held by the
Administrative Agent under Section 4 hereof or this Section 5, shall be applied
by the Administrative Agent:
First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable
out-of-pocket costs and expenses of the Administrative Agent and the
fees and expenses of its agents and counsel, and all reasonable
expenses incurred and advances made by the Administrative Agent in
connection therewith;
Next, to the payment in full of the Secured Obligations, in
each case equally and ratably in accordance with the respective amounts
thereof then due and owing or as the Lenders holding the same may
otherwise agree; and
Finally, to the payment to the Company, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.03 hereof shall be applied first to the Letter of Credit
Liabilities outstanding from time to time and second to the other Secured
Obligations in the manner provided above in this Section 5.09.
As used in this Section 5, "proceeds" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, Collateral, including any
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thereof received under any reorganization, liquidation or adjustment of debt of
the Company or any issuer of or obligor on any of the Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement to the Administrative Agent while no Event of Default
has occurred and is continuing, upon the occurrence and during the continuance
of any Event of Default the Administrative Agent is hereby appointed the
attorney-in-fact of the Company for the purpose of carrying out the provisions
of this Section 5 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Administrative Agent shall be entitled under this Section 5 to make collections
in respect of the Collateral, the Administrative Agent shall have the right and
power to receive, endorse and collect all checks made payable to the order of
the Company representing any dividend, payment or other distribution in respect
of the Collateral or any part thereof and to give full discharge for the same.
5.11 Perfection. Prior to or concurrently with the execution
and delivery of this Agreement, the Company shall deliver to the Administrative
Agent all certificates identified in Annex 1 hereto, accompanied by undated
stock powers duly executed in blank.
5.12 Termination. When all Secured Obligations shall have been
paid in full and the Commitments of the Lenders under the Credit Agreement and
all Letter of Credit Liabilities shall have expired or been terminated, this
Agreement shall terminate, and the Administrative Agent shall forthwith cause to
be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect thereof, to or on the order of the Company.
5.13 Further Assurances. The Company agrees that, from time to
time upon the written request of the Administrative Agent, the Company will
execute and deliver such further documents and do such other acts and things as
the Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement.
Section 6. Miscellaneous.
6.01 No Waiver. No failure on the part of the Administrative
Agent or any Lender to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any Lender of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right,
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power or remedy. The remedies herein are cumulative and are not exclusive of any
remedies provided by law.
6.02 Notices. All notices, requests, consents and demands
hereunder shall be in writing and telecopied or delivered to the intended
recipient at its "Address for Notices" specified pursuant to Section 12.02 of
the Credit Agreement and shall be deemed to have been given at the times
specified in said Section 12.02.
6.03 Expenses. The Company agrees to reimburse each of the
Lenders and the Agent for all reasonable costs and expenses of the Lenders and
the Administrative Agent (including, without limitation, the reasonable fees and
expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (w)
performance by the Administrative Agent of any obligations of the Company in
respect of the Collateral that the Company has failed or refused to perform, (x)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral and defending or asserting rights and claims of
the Administrative Agent in respect thereof, by litigation or otherwise, (y)
judicial or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 6.03, and all such costs and expenses shall be Secured Obligations
entitled to the benefits of the collateral security provided pursuant to Section
3 hereof.
6.04 Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by the
Company and the Administrative Agent (with the consent of the Lenders as
specified in Section 11.09 of the Credit Agreement). Any such amendment or
waiver shall be binding upon the Administrative Agent and each Lender, each
holder of any of the Secured Obligations and the Company.
6.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Company, the Administrative Agent, the Lenders and each holder of any of the
Secured Obligations (provided, however, that the Company shall not assign or
transfer its rights hereunder without the prior written consent of the
Administrative Agent).
6.06 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
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6.07 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
6.08 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
6.09 Agents and Attorneys-in-Fact. The Administrative Agent
may employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
6.10 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this
Company Pledge Agreement to be duly executed and delivered as of the day and
year first above written.
IRON MOUNTAIN INCORPORATED
By _________________________
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By _________________________
Title:
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ANNEX 1
PLEDGED STOCK
-------------
[See Section 2(b) and (c)]
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ---- ----- ----------------
Iron Mountain 4 the Company 10,000 shares of
Records common stock,
Management, par value
Inc. $.01 per share
Iron Mountain 2 the Company 12,500 shares of
Records preferred stock,
Management, par value
Inc. $.01 per share
Iron Mountain/ 2 the Company 100 shares of
Safesite, Inc. common stock,
par value $.01
per share
Data Securities 2 the Company 100 shares of common
International, Inc. stock, par value
$.01 per share
IM-3 Acquisition 1 the Company 100 shares of common
Corp. stock, par value
$.01 per share
Annex 1 to Company Pledge Agreement
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EXHIBIT D
AMENDED AND RESTATED SUBSIDIARY PLEDGE AGREEMENT
AMENDED AND RESTATED SUBSIDIARY PLEDGE AGREEMENT dated as of
September 30, 1996, amended and restated as of September 26, 1997, between each
of the corporations identified under the caption "PLEDGORS" on the signature
pages hereto (each individually, a "Pledgor" and, collectively, the "Pledgors");
and THE CHASE MANHATTAN BANK, as agent for the lenders or other financial
institutions or entities party, as lenders, to the Credit Agreement referred to
below (in such capacity, together with its successors in such capacity, the
"Administrative Agent").
Iron Mountain Incorporated, a Delaware corporation (the
"Company"), certain lenders and the Administrative Agent are parties to a Second
Amended and Restated Credit Agreement dated as of September 30, 1996 (the
"Existing Credit Agreement"), amended and restated as of September 26, 1997 (as
so amended and restated, and as further modified and supplemented and in effect
from time to time, the "Credit Agreement"), providing, subject to the terms and
conditions thereof, for extensions of credit (by making of loans and issuing
letters of credit) to be made by said lenders to the Company in an aggregate
principal or face amount not exceeding $250,000,000. In addition, the Company
and one or more of the Subsidiary Guarantors (as defined in the Credit
Agreement) may from time to time be obligated to one or more of the Lenders
and/or any of their affiliates under one or more Interest Rate Agreements (as so
defined) (such obligations being herein referred to as the "Interest Rate
Obligations").
The Pledgors and the Administrative Agent are party to a
Subsidiary Pledge Agreement dated as of September 30, 1996 (as amended to but
excluding the date hereof, the "Existing Subsidiary Pledge Agreement") relating
to the Existing Credit Agreement.
The Pledgors and the Administrative Agent wish to amend and
restate the Existing Subsidiary Pledge Agreement as provided herein. To induce
the Lenders to enter into the Credit Agreement, to extend credit thereunder and
to enter into one or more Interest Rate Agreements as aforesaid, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Pledgor has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined) as security for the Secured Obligations
(as so defined). Accordingly, the parties hereto agree that effective on the
date hereof, the Existing Subsidiary Pledge Agreement is continued, amended and
restated in its entirety as set forth herein:
Section 1. Definitions. Terms defined in the Credit Agreement
are used herein as defined therein. In addition, as used herein:
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"Collateral" shall have the meaning ascribed thereto in
Section 3 hereof.
"Collateral Account" shall have the meaning ascribed thereto
in Section 4.01 hereof.
"Issuers" shall mean, collectively, the respective
corporations identified beneath the names of the Pledgors on Annex 1
hereto under the caption "Issuer".
"Loan Documents" shall mean the Credit Agreement, the Notes,
the Letter of Credit Documents and the Security Documents.
"Missouri LLC" shall mean Iron Mountain Records Management
Company of Missouri LLC and its successors.
"Missouri LLC Agreement" shall mean the Limited Liability
Company Agreement of Iron Mountain Records Management Company of
Missouri LLC dated as of April 24, 1996 adopted and agreed to by Iron
Mountain Records Management, Inc. and Iron Mountain Records Management
of Maryland, Inc., as amended by Section 6.01 hereof and as the same
shall, without prejudice to Section 6.02 hereof, be further amended,
modified and supplemented and in effect from time to time.
"Pledged LLC Interests" shall have the meaning ascribed
thereto in Section 3(d) hereof.
"Pledged Stock" shall have the meaning ascribed thereto in
Section 3(a) hereof.
"Secured Obligations" shall mean, collectively, (a) all
obligations of the Pledgors in respect of their Guarantee under Section
2 of the Subsidiary Guaranty, (b) the principal of and interest on the
Loans made by the Lenders to, and the Note(s) held by each Lender of,
the Company and all other amounts from time to time owing to the
Lenders or the Administrative Agent by the Company under the Loan
Documents including, without limitation, all Reimbursement Obligations,
(c) all Interest Rate Obligations owing by the Obligors to the Lenders
and their respective affiliates and (d) all obligations of the Pledgors
to the Lenders and the Administrative Agent hereunder.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect from time to time in the State of New York.
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Section 2. Representations and Warranties. Each Pledgor
represents and warrants to the Lenders and the Administrative Agent that:
(a) Such Pledgor is the sole beneficial owner of the
Collateral in which it purports to grant a security interest pursuant
to Section 3 hereof and no Lien exists or will exist upon such
Collateral at any time (and no right or option to acquire the same
exists in favor of any other Person), except for the pledge and
security interest in favor of the Administrative Agent for the benefit
of the Lenders created or provided for herein, which pledge and
security interest constitute a first priority perfected pledge and
security interest in and to all of such Collateral.
(b) The Pledged Stock represented by the certificates
identified under the name of such Pledgor in Annex 1 hereto is, and all
other Pledged Stock in which such Pledgor shall hereafter grant a
security interest pursuant to Section 3 hereof will be, duly
authorized, validly existing, fully paid and non-assessable and none of
such Pledged Stock is or will be subject to any restriction (other than
restrictions under Federal and state securities laws) that would be
effective to prevent or hinder the Administrative Agent from freely
transferring the Pledged Stock in accordance with the terms hereof.
(c) The Pledged Stock represented by the certificates
identified under the name of such Pledgor in Annex 1 hereto constitutes
all of the issued and outstanding shares of capital stock of any class
of the Issuers beneficially owned by such Pledgor on the date hereof
(whether or not registered in the name of such Pledgor) and said Annex
1 correctly identifies, as at the date hereof, the respective Issuers
of such Pledged Stock, the respective class and par value of the shares
comprising such Pledged Stock and the respective number of shares (and
registered owners thereof) represented by each such certificate.
(d) The Pledged LLC Interests have been, and all other Pledged
LLC Interests in which such Pledgor shall hereafter grant a security
interest pursuant to Section 3 hereof will be, duly authorized, validly
existing, fully paid and non-assessable and none of such Pledged LLC
Interests is or will be subject to any contractual restriction, upon
the transfer of such Pledged LLC Interests (except for any such
restriction contained herein or in the Missouri LLC Agreement).
(e) The Pledged LLC Interests constitute all of the ownership
interests of the Missouri LLC beneficially owned by such Pledgor on the
date hereof (whether or not registered in the name of such Pledgor),
the Pledgors are the registered owners of all such ownership interests
and the Pledgors are all of the "Members" of the Missouri LLC (as such
term is defined therein).
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Section 3. The Pledge. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations, each Pledgor hereby pledges and grants to
the Administrative Agent, for the benefit of the Lenders as hereinafter
provided, a security interest in, and confirms and continues the pledge and
security interest created pursuant to the Existing Subsidiary Pledge Agreement
in, all of such Pledgor's right, title and interest in the following property,
whether now owned by such Pledgor or hereafter acquired and whether now existing
or hereafter coming into existence (all being collectively referred to herein as
"Collateral"):
(a) the shares of Capital Stock of the Issuers represented by
the certificates identified in Annex 1 hereto under the name of such
Pledgor and all other shares of capital stock of whatever class of the
Issuers, now or hereafter owned by such Pledgor, in each case together
with the certificates evidencing the same (collectively, the "Pledged
Stock");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of such Pledgor under
any provision prohibiting such action hereunder, in the event of any
consolidation or merger in which an Issuer is not the surviving
corporation, all shares of each class of the capital stock of the
successor corporation (unless such successor corporation is such
Pledgor itself) formed by or resulting from such consolidation or
merger;
(d) the ownership interests of such Pledgor in the Missouri
LLC, all certificates (if any) representing or evidencing such
ownership interests and all right, title and interest in, to and under
the Missouri LLC Agreement (including without limitation all of the
right, title and interest (if any) as a member to participate in the
operation or management of the Missouri LLC and all of its ownership
interests under the Missouri LLC Agreement), and all present and future
rights of such Pledgor to receive payment of money or other
distribution of payments arising out of or in connection with its
ownership interests and its rights under the Missouri LLC Agreement,
now or hereafter owned by such Pledgor, in each case together with any
certificates evidencing the same (collectively, the "Pledged LLC
Interests"); and
(e) the balance from time to time in the Collateral Account;
and
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(f) all proceeds of and to any of the property of such Pledgor
described in the preceding clauses of this Section 3 (including,
without limitation, all causes of action, claims and warranties now or
hereafter held by any Pledgor in respect of any of the items listed
above) and, to the extent related to any property described in said
clauses or such proceeds, all books, correspondence, credit files,
records, invoices and other papers.
Section 4. Cash Proceeds of Collateral.
4.01 Collateral Account. There is hereby established with the
Administrative Agent a cash collateral account (the "Collateral Account") in the
name and under the control of the Administrative Agent into which there shall be
deposited from time to time the cash proceeds of any of the Collateral required
to be delivered to the Administrative Agent pursuant hereto and into which the
Pledgors may from time to time deposit any additional amounts that any of them
wishes to pledge to the Administrative Agent for the benefit of the Lenders as
additional collateral security hereunder. The balance from time to time in the
Collateral Account shall constitute part of the Collateral hereunder and shall
not constitute payment of the Secured Obligations until applied as hereinafter
provided. Except as expressly provided in the next sentence, the Administrative
Agent shall remit the collected balance outstanding to the credit of the
Collateral Account to or upon the order of the respective Pledgor as such
Pledgor shall from time to time instruct. However, at any time following the
occurrence and during the continuance of an Event of Default, the Administrative
Agent may (and, if instructed by the Lenders as specified in Section 11.03 of
the Credit Agreement, shall) in its (or their) discretion apply or cause to be
applied (subject to collection) the balance from time to time outstanding to the
credit of the Collateral Account to the payment of the Secured Obligations in
the manner specified in Section 5.09 hereof. The balance from time to time in
the Collateral Account shall be subject to withdrawal only as provided herein.
In addition to the foregoing, each Pledgor agrees that if the proceeds of any
Collateral hereunder shall be received by it, such Pledgor shall as promptly as
possible deposit such proceeds into the Collateral Account. Until so deposited,
all such proceeds shall be held in trust by such Pledgor for and as the property
of the Administrative Agent and shall not be commingled with any other funds or
property of such Pledgor.
4.02 Investment of Balance in Collateral Account. Amounts on
deposit in the Collateral Account shall be invested from time to time in such
Liquid Investments as the respective Pledgor (or, after the occurrence and
during the continuance of an Event of Default, the Administrative Agent) shall
determine, which Liquid Investments shall be held in the name and be under the
control of the Administrative Agent, provided that (i) at any time after the
occurrence and during the continuance of an Event of Default, the Administrative
Agent may (and, if instructed by the Lenders as specified in Section 11.03 of
the Credit Agreement, shall)
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in its (or their) discretion at any time and from time to time elect to
liquidate any such Liquid Investments and to apply or cause to be applied the
proceeds thereof to the payment of the Secured Obligations in the manner
specified in Section 5.09 hereof and (ii) if requested by the respective
Pledgor, such Liquid Investments may be held in the name and under the control
of one or more of the Lenders (and in that connection each Lender, pursuant to
Section 11.09 of the Credit Agreement) has agreed that such Liquid Investments
shall be held by such Lender as a collateral sub-agent for the Administrative
Agent hereunder).
4.03 Cover for Letter of Credit Liabilities. Amounts deposited
into the Collateral Account as cover for Letter of Credit Liabilities under the
Credit Agreement pursuant to Section 3.02(c) or Section 10 thereof shall be held
by the Administrative Agent in a separate sub-account (designated "Letter of
Credit Liabilities Sub-Account") and all amounts held in such sub-account shall
constitute collateral security first for the Letter of Credit Liabilities
outstanding from time to time and second as collateral security for the other
Secured Obligations hereunder.
Section 5. Further Assurances; Remedies. In furtherance of the
grant of the pledge and security interest pursuant to Section 3 hereof, the
Pledgors hereby jointly and severally agree with each Lender and the
Administrative Agent as follows:
5.01 Delivery and Other Perfection. Each Pledgor shall:
(a) if any of the shares, securities, moneys or property
required to be pledged by such Pledgor under clauses (a), (b) and (c)
of Section 3 hereof are received by such Pledgor, forthwith either (x)
transfer and deliver to the Administrative Agent such shares or
securities so received by such Pledgor (together with the certificates
for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of
which thereafter shall be held by the Administrative Agent, pursuant to
the terms of this Agreement, as part of the Collateral or (y) take such
other action as the Administrative Agent shall deem necessary or
appropriate to duly record the Lien created hereunder in such shares,
securities, moneys or property in said clauses (a), (b) and (c);
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Administrative
Agent) to create, preserve, perfect or validate the security interest
granted pursuant hereto or to enable the Administrative Agent to
exercise and enforce its rights hereunder with respect to such pledge
and security interest, including, without limitation, causing any or
all of the Collateral to be transferred of record into the name of the
Administrative Agent or its nominee (and the
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Administrative Agent agrees that if any Collateral is transferred into
its name or the name of its nominee, the Administrative Agent will
thereafter promptly give to the respective Pledgor copies of any
notices and communications received by it with respect to the
Collateral pledged by such Pledgor hereunder);
(c) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
(d) with respect to the ownership interests in the Missouri
LLC held by such Pledgor, execute and deliver written instructions to
the Missouri LLC to register the Lien created hereunder in such
ownership interests in the registration books maintained by the
Missouri LLC for such purpose and cause such Pledgor to execute and
deliver to the Administrative Agent a written confirmation to the
effect that the Lien created hereunder in such ownership interests has
been duly registered in such registration books; and
(e) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect
and make abstracts from its books and records pertaining to the
Collateral, and permit representatives of the Administrative Agent to
be present at such Pledgor's place of business to receive copies of all
communications and remittances relating to the Collateral, and forward
copies of any notices or communications received by such Pledgor with
respect to the Collateral, all in such manner as the Administrative
Agent may require.
5.02 Other Financing Statements and Liens. Without the prior
written consent of the Administrative Agent (granted with the authorization of
the Lenders as specified in Section 11.09 of the Credit Agreement), no Pledgor
shall file or suffer to be on file, or authorize or permit to be filed or to be
on file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Administrative Agent is not named as the
sole secured party for the benefit of the Lenders.
5.03 Preservation of Rights. The Administrative Agent shall
not be required to take steps necessary to preserve any rights against prior
parties to any of the Collateral.
5.04 Collateral.
(1) The Pledgors will cause the Collateral to constitute at
all times 100% of the total number of shares of each class of capital stock of
each Issuer then outstanding.
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(2) So long as no Event of Default shall have occurred and be
continuing, the Pledgors shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral for all purposes not
inconsistent with the terms of this Agreement, the Credit Agreement, the Notes
or any other instrument or agreement referred to herein or therein, provided
that the Pledgors jointly and severally agree that they will not vote the
Collateral in any manner that is inconsistent with the terms of this Agreement,
the Credit Agreement, the Notes or any such other instrument or agreement; and
the Administrative Agent shall execute and deliver to the Pledgors or cause to
be executed and delivered to the Pledgors all such proxies, powers of attorney,
dividend and other orders, and all such instruments, without recourse, as the
Pledgors may reasonably request for the purpose of enabling the Pledgors to
exercise the rights and powers that they are entitled to exercise pursuant to
this Section 5.04(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Pledgors shall be entitled to receive and retain any dividends
on the Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long
as such Event of Default shall continue, and whether or not the Administrative
Agent or any Lender exercises any available right to declare any Secured
Obligation due and payable or seeks or pursues any other relief or remedy
available to it under applicable law or under this Agreement, the Credit
Agreement, the Notes or any other agreement relating to such Secured Obligation,
all dividends and other distributions on the Collateral shall be paid directly
to the Administrative Agent and retained by it in the Collateral Account as part
of the Collateral, subject to the terms of this Agreement, and, if the
Administrative Agent shall so request in writing, the Pledgors jointly and
severally agree to execute and deliver to the Administrative Agent appropriate
additional dividend, distribution and other orders and documents to that end,
provided that if such Event of Default is cured, any such dividend or
distribution theretofore paid to the Administrative Agent shall, upon request of
the Pledgors (except to the extent theretofore applied to the Secured
Obligations), be returned by the Administrative Agent to the Pledgors.
5.05 Events of Default, Etc. During the period during which an
Event of Default shall have occurred and be continuing:
(a) the Administrative Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of
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ownership pertaining to the Collateral as if the Administrative Agent
were the sole and absolute owner thereof (and each Pledgor agrees to
take all such action as may be appropriate to give effect to such
right);
(b) the Administrative Agent in its discretion may, in its
name or in the name of the Pledgors or otherwise, demand, sue for,
collect or receive any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral, but
shall be under no obligation to do so;
(c) upon notice thereof to the Missouri LLC and the Company by
the Administrative Agent, (i) the Administrative Agent may transfer the
Membership Interests of each Pledgor into the name of the
Administrative Agent and (ii) the Administrative Agent shall be
admitted as a Member of the Missouri LLC in the place of the Pledgors;
and
(d) the Administrative Agent may, upon ten business days'
prior written notice to the Pledgors of the time and place, with
respect to the Collateral or any part thereof that shall then be or
shall thereafter come into the possession, custody or control of the
Administrative Agent, the Lenders or any of their respective agents,
sell, lease, assign or otherwise dispose of all or any part of such
Collateral, at such place or places as the Administrative Agent deems
best, and for cash or for credit or for future delivery (without
thereby assuming any credit risk), at public or private sale, without
demand of performance or notice of intention to effect any such
disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and the
Administrative Agent or any Lender or anyone else may be the purchaser,
lessee, assignee or recipient of any or all of the Collateral so
disposed of at any public sale (or, to the extent permitted by law, at
any private sale) and thereafter hold the same absolutely, free from
any claim or right of whatsoever kind, including any right or equity of
redemption (statutory or otherwise), of the Pledgors, any such demand,
notice and right or equity being hereby expressly waived and released.
The Administrative Agent may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the sale may be so
adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05 shall be applied in accordance with Section 5.09 hereof.
The Pledgors recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Administrative Agent may be compelled, with respect to any
sale of all or any part of the Collateral, to limit
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purchasers to those who will agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. The Pledgors acknowledge that any such private
sales may be at prices and on terms less favorable to the Administrative Agent
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agree that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Administrative Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Collateral for the period of time necessary
to permit the respective Issuer or issuer thereof to register it for public
sale.
5.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Pledgors shall remain liable for any
deficiency.
5.07 Removals, Etc. Without at least 30 days' prior written
notice to the Administrative Agent, no Pledgor shall (i) maintain any of its
books and records with respect to the Collateral at any office or maintain its
principal place of business at any place other than at the address indicated
beneath its signature hereto or (ii) change its corporate name, or the name
under which it does business, from the name shown on the signature pages hereto.
5.08 Private Sale. The Administrative Agent and the Lenders
shall incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 5.05 hereof conducted in a
commercially reasonable manner. Each Pledgor hereby waives any claims against
the Administrative Agent or any Lender arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations.
5.09 Application of Proceeds. Except as otherwise herein
expressly provided and except as provided below in this Section 5.09, the
proceeds of any collection, sale or other realization of all or any part of the
Collateral pursuant hereto, and any other cash at the time held by the
Administrative Agent under Section 4 hereof or this Section 5, shall be applied
by the Administrative Agent:
First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable
out-of-pocket costs and expenses of the Administrative Agent and the
fees and expenses of its agents and counsel, and all reasonable
expenses incurred and advances made by the Administrative Agent in
connection therewith;
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Next, to the payment in full of the Secured Obligations, in
each case equally and ratably in accordance with the respective amounts
thereof then due and owing or as the Lenders holding the same may
otherwise agree; and
Finally, to the payment to the respective Pledgor, or their
respective successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.03 hereof shall be applied first to the Letter of Credit
Liabilities outstanding from time to time and second to the other Secured
Obligations in the manner provided above in this Section 5.09.
As used in this Section 5, "proceeds" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Pledgors or any issuer of or obligor on
any of the Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement to the Administrative Agent while no Event of Default
has occurred and is continuing, upon the occurrence and during the continuance
of any Event of Default the Administrative Agent is hereby appointed the
attorney-in-fact of each Pledgor for the purpose of carrying out the provisions
of this Section 5 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Administrative Agent shall be entitled under this Section 5 to make collections
in respect of the Collateral, the Administrative Agent shall have the right and
power to receive, endorse and collect all checks made payable to the order of
any Pledgor representing any dividend, payment or other distribution in respect
of the Collateral or any part thereof and to give full discharge for the same.
5.11 Perfection. Prior to or concurrently with the execution
and delivery of this Agreement, each Pledgor shall (i) deliver to the
Administrative Agent all certificates identified in Annex 1 hereto, accompanied
by undated stock powers duly executed in blank, (ii) register the pledge
hereunder of its ownership interests in the Missouri LLC for purposes of Article
8 of the Uniform Commercial Code and (iii) deliver to the Administrative Agent
any certificates representing the Pledged LLC Interests, accompanied by undated
powers duly executed in blank.
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5.12 Termination. When all Secured Obligations shall have been
paid in full and the Commitments of the Lenders under the Credit Agreement and
all Letter of Credit Liabilities shall have expired or been terminated, this
Agreement shall terminate, and the Administrative Agent shall forthwith cause to
be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect thereof, to or on the order of the respective Pledgor.
5.13 Further Assurances. Each Pledgor agrees that, from time
to time upon the written request of the Administrative Agent, such Pledgor will
execute and deliver such further documents and do such other acts and things as
the Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement.
Section 6. Missouri LLC Agreement.
6.01 No Amendments. No Pledgor shall amend, modify or
supplement any of the provisions of the Missouri LLC Agreement without the prior
written consent of the Administrative Agent, such consent not to be unreasonably
withheld.
Section 7. Miscellaneous.
7.01 No Waiver. No failure on the part of the Administrative
Agent or any Lender to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any Lender of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
7.02 Notices. All notices, requests, consents and demands
hereunder shall be in writing and telecopied or delivered to the intended
recipient (in the case of the Pledgors) at the "Address for Notices" specified
on the signature pages hereof and (in the case of the Administrative Agent) at
the address specified in Section 12.02 of the Credit Agreement or, as to any
party, at such other address as shall be designated by such party in a notice to
each other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
7.03 Expenses. The Pledgors jointly and severally agree to
reimburse each of the Lenders and the Administrative Agent for all reasonable
costs and expenses of the Lenders
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and the Administrative Agent (including, without limitation, the reasonable fees
and expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (w)
performance by the Administrative Agent of any obligations of the Pledgors in
respect of the Collateral that the Pledgors have failed or refused to perform,
(x) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral and defending or asserting rights and claims of
the Administrative Agent in respect thereof, by litigation or otherwise, (y)
judicial or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 7.03, and all such costs and expenses shall be Secured Obligations
entitled to the benefits of the collateral security provided pursuant to Section
3 hereof.
7.04 Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by
each Pledgor and the Administrative Agent (with the consent of the Lenders as
specified in Section 11.09 of the Credit Agreement). Any such amendment or
waiver shall be binding upon the Administrative Agent and each Lender, each
holder of any of the Secured Obligations and each Pledgor.
7.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of each
Pledgor, the Administrative Agent, the Lenders and each holder of any of the
Secured Obligations (provided, however, that no Pledgor shall assign or transfer
its rights hereunder without the prior written consent of the Administrative
Agent).
7.06 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
7.07 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
7.08 Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the law of the State of
New York. Each Pledgor hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of the
Supreme Court of the State of New York sitting in New York County (including its
Appellate Division), and of any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
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Agreement or the transactions contemplated hereby. Each Pledgor hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
7.09 Waiver of Jury Trial. EACH OF THE PLEDGORS, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
7.10 Agents and Attorneys-in-Fact. The Administrative Agent
may employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
7.11 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this
Subsidiary Pledge Agreement to be duly executed and delivered as of the day and
year first above written.
PLEDGORS
IRON MOUNTAIN RECORDS
MANAGEMENT, INC.
By ________________________
Title:
IRON MOUNTAIN RECORDS MANAGEMENT
OF MARYLAND, INC.
By ________________________
Title:
IM - AEI ACQUISITION CORP.
By ________________________
Title:
Address for Notices for all
Pledgors:
c/o Iron Mountain Incorporated
745 Atlantic Avenue
Boston, Massachusetts 02111
Attention: John F. Kenny, Jr.
Executive Vice President
and Chief Financial Officer
Telecopy Number: (617) 350-7881
Copy to:
Subsidiary Pledge Agreement
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Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Harry E. Ekblom, Jr.
Telecopy Number: (617) 338-2880
THE ADMINISTRATIVE AGENT
------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
By ________________________
Title:
Subsidiary Pledge Agreement
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<PAGE>
ANNEX 1
PLEDGED STOCK
-------------
[See Section 2(b) and (c)]
Pledgor: IRON MOUNTAIN RECORDS MANAGEMENT, INC. ("IMRM")
-----------------------------------------------
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ---- ----- ----------------
CRITERION 1 IMRM 1,000 shares of
PROPERTY, common stock,
INC. par value
$.01 per share
CRITERION 1 IMRM 100 shares of
ATLANTIC common stock,
PROPERTY, par value
INC. $.01 per share
HOLLYWOOD 2 IMRM 380 shares of
PROPERTY, common stock,
INC. par value
$.01 per share
IRON MOUNTAIN 1 IMRM 100 shares of
DATA PROTECTION common stock,
SERVICES, INC. par value
$1.00 per share
IRON MOUNTAIN 2 IMRM 100 shares of
CONSULTING common stock,
SERVICES, INC. par value
$1.00 per share
IRON MOUNTAIN 1 IMRM 100 shares of
RECORDS MANAGE- common stock,
MENT OF OHIO, INC. par value
$.01 per share
Annex 1 to Subsidiary Pledge Agreement
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IRON MOUNTAIN 1 IMRM 50 shares of
RECORDS MANAGE- beneficial interest
MENT OF MISSOURI
LLC
METRO BUSINESS 3 IMRM 100 shares of
ARCHIVES, INC. common stock,
no par value
per share
IM SAN DIEGO, INC. 1 IMRM 100 shares of
common stock, par value
$1.00 per share
IRON MOUNTAIN 1 IMRM 100 shares of
RECORDS MANAGE- common stock,
MENT OF MARYLAND, par value
INC. $.01 per share
IRON MOUNTAIN 2 IMRM 100 shares of
RECORDS MANAGE- common stock,
MENT OF FLORIDA, par value
INC. $.01 per share
IRON MOUNTAIN 1 IMRM 100 shares of
RECORDS MANAGE- common stock,
MENT OF BOSTON, par value
INC. $.01 per share
IRON MOUNTAIN 1 IMRM 100 shares of
WILMINGTON, common stock,
INC. par value
$.01 per share
IRON MOUNTAIN 1 IMRM 100 shares of
RECORDS MANAGE- common stock,
MENT OF MINNESOTA, par value
INC. $.01 per share
Annex 1 to Subsidiary Pledge Agreement
--------------------------------------
<PAGE>
-3-
IRON MOUNTAIN 1 IMRM 100 shares of
RECORDS MANAGE- common stock,
MENT OF MICHIGAN, par value
INC. $1.00 per share
IRON MOUNTAIN 2 IMRM 100 shares of
RECORDS MANAGE- common stock,
MENT OF WISCONSIN, par value
INC. $1.00 per share
WILLAMETTE 5 IMRM 100 shares of
ARCHIVES, INC. common stock,
no par value
per share
IM EARHART, INC. 1 IMRM 100 shares of
common stock,
par value
$1.00 per share
IM BILLERICA, INC. 1 IMRM 100 shares of
common stock,
par value
$1.00 per share
IRON MOUNTAIN 1 IMRM 100 shares of
RECORDS MANAGE- common stock,
MENT OF SAN ANTONIO, par value
INC. $1.00 per share
IRON MOUNTAIN 1 IMRM 100 shares of
RECORDS MANAGE- common stock,
MET OF SAN ANTONIO-FP, par value
INC. $1.00 per share
IM-AEI ACQUISITION 2 IMRM 100 shares of
CORP. common stock,
par value
$1.00 per share
Annex 1 to Subsidiary Pledge Agreement
--------------------------------------
<PAGE>
-4-
CRITICAL FILES 5 IMRM 6000 shares of
SECURITY, INC. common stock,
par value
$.10 per share
Pledgor: IRON MOUNTAIN RECORDS MANAGEMENT
OF MARYLAND INC. ("IMRM-MD")
----------------------------
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ---- ----- ----------------
IRON MOUNTAIN 2 IMRM-MD 50 shares of
RECORDS MANAGE- beneficial interest
MENT OF MISSOURI
LLC
Pledgor: IM-AEI ACQUISITION CORP. ("IM-AEI")
-----------------------------------
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ---- ----- ----------------
ARCHIVES EXPRESS 3 IM-AEI 5000 shares of
INCORPORATED common stock,
no par value
per share
Annex 1 to Subsidiary Pledge Agreement
--------------------------------------
<PAGE>
EXHIBIT E
[Form of Opinion of Counsel to the Obligors]
[Amendment and Restatement Effective Date]
To the Lenders party to the
Credit Agreement referred to
below
The Chase Manhattan Bank,
as Administrative Agent
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
We have acted as counsel to Iron Mountain Incorporated (the
"Company"), and its subsidiaries and affiliates, in connection with (i) the
Second Amended and Restated Credit Agreement dated as of September 30, 1996,
amended and restated as of September 26, 1997 (the "Credit Agreement"), between
the Company, the lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent, providing for extensions of credit to be made by said
lenders to the Company in an aggregate principal or face amount not exceeding
$250,000,000 and (ii) the various other agreements, instruments and other
documents referred to in the next following paragraph. All capitalized terms
used but not defined herein have the respective meanings given to such terms in
the Credit Agreement or, if not defined in the Credit Agreement, in Annex 1
hereto. This opinion letter is being delivered pursuant to Section 7.01(c) of
the Credit Agreement.
In rendering the opinions expressed below, we have examined
the following agreements, instruments and other documents:
(a) the Credit Agreement;
(b) the Notes;
(c) the Subsidiary Guaranty;
Opinion of Counsel to the Obligators
------------------------------------
<PAGE>
-2-
(d) the Company Pledge Agreement;
(e) the Subsidiary Pledge Agreement (the Subsidiary
Pledge Agreement, together with the Company Pledge
Agreement, the "Collateral Documents"); and
(f) such records of the Obligors and such other documents
as we have deemed necessary as a basis for the
opinions expressed below.
The agreements, instruments and other documents referred to in the foregoing
lettered clauses (other than clause (f) above) are collectively referred to as
the "Credit Documents".
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity with authentic original documents of all documents submitted to
us as copies. When relevant facts were not independently established, we have
relied upon statements of governmental officials and upon representations made
in or pursuant to the Credit Documents and certificates of appropriate
representatives of the Obligors.
In rendering the opinions expressed below, we have assumed,
with respect to all of the documents referred to in this opinion letter, that
(except, to the extent set forth in the opinions expressed below, as to the
Obligors):
(i) such documents have been duly authorized by, have
been duly executed and delivered by, and constitute
legal, valid, binding and enforceable obligations of,
all of the parties to such documents;
(ii) all signatories to such documents have been duly
authorized; and
(iii) all of the parties to such documents are duly
organized and validly existing and have the power and
authority (corporate or other) to execute, deliver
and perform such documents.
Based upon and subject to the foregoing and subject also to
the comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Each Subsidiary of the Company is a
Opinion of Counsel to the Obligators
------------------------------------
<PAGE>
-3-
corporation duly organized, validly existing and in good standing under
the laws of the respective state indicated opposite its name in
Schedule III to the Credit Agreement.
2. Each Obligor has all requisite corporate power to execute
and deliver, and to perform its obligations and to incur liabilities
under, the Credit Documents to which it is a party.
3. The execution, delivery and performance by each Obligor of,
and the incurrence by each Obligor of liabilities under, each Credit
Document to which such Obligor is a party have been duly authorized by
all necessary corporate action on the part of such Obligor.
4. Each Credit Document has been duly executed and delivered
by each Obligor party thereto.
5. Each Credit Document constitutes the legal, valid and
binding obligation of each Obligor party thereto, enforceable against
each Obligor party thereto in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or transfer or other similar laws relating to or
affecting the rights of creditors generally and except as the
enforceability of the Credit Documents is subject to the application of
general principles of equity (regardless of whether considered in a
proceeding in equity or at law), including, without limitation, (a) the
possible unavailability of specific performance, injunctive relief or
any other equitable remedy and (b) concepts of materiality,
reasonableness, good faith and fair dealing.
6. No authorization, approval or consent of, and no filing or
registration with, any governmental or regulatory authority or agency
of the United States of America or the State of New York is required on
the part of any Obligor for the execution, delivery or performance by
any Obligor of, or for the incurrence by any Obligor of any liabilities
under, any of the Credit Documents to which such Obligor is a party.
7. The execution, delivery and performance by each Obligor of,
and the consummation by each Obligor of the transactions contemplated
by, the Credit Documents to which such Obligor is a party do not and
will not (a) violate any provision of the charter or by-laws of any
Obligor, (b) violate any provision of the Delaware General Corporation
Law, (c) violate any applicable law, rule or regulation of the United
States of America or the State of New York, (d) violate any order,
writ, injunction or decree of any court or governmental authority or
agency or any arbitral award applicable to any of the Obligors and
their respective Subsidiaries of which we
Opinion of Counsel to the Obligators
------------------------------------
<PAGE>
-4-
have knowledge (after due inquiry) or (e) result in a breach of,
constitute a default under, require any consent under, or result in the
acceleration or required prepayment of any indebtedness pursuant to the
terms of, any agreement or instrument of which we have knowledge (after
due inquiry) to which any of the Obligors and their respective
Subsidiaries is a party or by which any of them is bound or to which
any of them is subject, or (except for the Liens created pursuant to
the Security Agreement) result in the creation or imposition of any
Lien upon any Property of any Obligor pursuant to the terms of any such
agreement or instrument.
8. We have no knowledge (after due inquiry) of any legal or
arbitral proceedings, or any proceedings by or before any governmental
or regulatory authority or agency, pending or threatened against or
affecting the Obligors or any of their respective Subsidiaries or any
of their respective Properties that, if adversely determined, could
have a Material Adverse Effect.
9. The issued and outstanding shares of Capital Stock of each
Issuer (as defined in each Collateral Document) consists of the type
and number of shares described in Annex 1 to such Collateral Document.
All of said shares have been duly and validly issued and are fully paid
and nonassessable. The ownership interests of Iron Mountain Records
Management of Missouri LLC consists of ___________. All of said
ownership interests have been duly and validly issued and are fully
paid and nonassessable.
10. Each Collateral Document is effective to create, in favor
of the Administrative Agent for the benefit of the Administrative Agent
and the Lenders, a valid security interest under the Uniform Commercial
Code as in effect in the State of New York (the "UCC") in all of the
right, title and interest of the Company and the Pledgors (as defined
in the Subsidiary Pledge Agreement) in, to and under the Collateral as
collateral security for the payment when due of the Secured
Obligations, except that (a) such security interest will continue in
Collateral after its sale, exchange or other disposition and in any
Proceeds thereof only to the extent provided in Section 9-306 of the
UCC, (b) such security interest in any portion of the Collateral in
which an Obligor acquires rights after the commencement of a case under
the Bankruptcy Code in respect of such Obligor may be limited by
Section 552 of the Bankruptcy Code and (c) the creation of a security
interest in any portion of the Collateral constituting an Investment
Security requires the transfer thereof to the Administrative Agent
pursuant to Section 8-313(1) of the UCC, which transfer (i) in the case
of a Certificated Security may be effected in the manner contemplated
by paragraph 11(b) below and (ii) in the case of an Uncertificated
Security may be effected in the manner contemplated by paragraph 11(c)
below.
Opinion of Counsel to the Obligators
------------------------------------
<PAGE>
-5-
11. The security interest referred to in paragraph 10 above in
the types of Collateral described below will be perfected as described
below:
(a) such security interest in that portion of the
Collateral consisting of General Intangibles will, upon the
creation of such security interest, be perfected by filing the
Financing Statements in the filing offices listed in Annex 2
hereto for the jurisdictions listed in said Annex 2; provided
that, if an Obligor moves its chief executive office to
another jurisdiction, the effectiveness of the Financing
Statements naming such Obligor as debtor will cease on the
expiration of four months after such change or, if earlier,
when perfection would have otherwise ceased, unless such
security interest becomes perfected under the law of such
other jurisdiction prior to such expiration;
(b) such security interest in that portion of the
Collateral consisting of an Instrument, negotiable Document or
a Certificated Security will, upon the creation of such
security interest (in the case of an Instrument or negotiable
Document), be perfected, and (in the case of a Certificated
Security) be created and perfected, by the Administrative
Agent taking possession in the State of New York of such
Instrument, Certificated Security or negotiable Document, and
such perfected security interest will remain perfected
thereafter so long as such Instrument, Certificated Security
or negotiable Document is retained by the Administrative Agent
in its possession in the State of New York;
(c) such security interest in that portion of the
Collateral consisting of an Uncertificated Security will be
created and perfected when such security interest is
registered to the Administrative Agent, and such perfected
security interest will remain perfected thereafter so long as
such Uncertificated Security is registered to the
Administrative Agent;
(d) to the extent not expressly covered by the
foregoing subparagraphs of this paragraph 11, such security
interest in that portion of the Collateral consisting of
Proceeds may be perfected as and to the extent provided in
Section 9-306 of the UCC; and
(e) anything in this paragraph 11 to the contrary
notwithstanding, compliance with a statute or treaty described
in Section 9-302(3) of the UCC is required in order to perfect
such security interest in any portion of the Collateral that
is subject to any such statute or treaty.
Opinion of Counsel to the Obligators
------------------------------------
<PAGE>
-6-
The foregoing opinions are subject to the following comments
and qualifications:
(A) The enforceability of Sections 12.04 of the Credit
Agreement (and any similar provisions in any of the other Credit
Documents) may be limited by laws limiting the enforceability of
provisions exculpating or exempting a party, or requiring
indemnification of a party for, liability for its own action or
inaction, to the extent the action or inaction involves gross
negligence, recklessness, willful misconduct or unlawful conduct.
(B) Clause (iii) of the second sentence of Section 2.02 of the
Subsidiary Guaranty may not be enforceable to the extent that the
Guaranteed Obligations (as defined in the Subsidiary Guaranty) are
materially modified.
(C) The enforceability of provisions in the Credit Documents
to the effect that terms may not be waived or modified except in
writing may be limited under certain circumstances.
(D) We express no opinion as to (i) the effect of the laws of
any jurisdiction in which any Lender is located (other than the State
of New York) that limit the interest, fees or other charges such Lender
may impose, (ii) the second sentence of Section 5.07(a) of the Credit
Agreement, (iii) Section 2.06 of the Subsidiary Guaranty and (iv) the
second sentence of Section 12.12 of the Credit Agreement, insofar as
such sentence relates to the subject matter jurisdiction of the United
States District Court for the Southern District of New York to
adjudicate any controversy related to any of the Credit Documents.
(E) We express no opinion as to the applicability to the
obligations of the Subsidiary Guarantors (or the enforceability of such
obligations) of Section 548 of the Bankruptcy Code, Article 10 of the
New York Debtor Creditor Law or any other provision of law relating to
fraudulent conveyances, transfers or obligations.
(F) We wish to point out that the obligations of the Obligors,
and the rights and remedies of the Administrative Agent and the
Lenders, under each Collateral Document may be subject to possible
limitations upon the exercise of remedial or procedural provisions
contained in such Collateral Document, provided that such limitations
do not, in our opinion (but subject to the other comments and
qualifications set forth in this opinion letter), make the remedies and
procedures that will be afforded to the Administrative Agent and the
Lenders inadequate for the practical realization of the
Opinion of Counsel to the Obligators
------------------------------------
<PAGE>
-7-
substantive benefits purported to be provided to the Administrative
Agent and the Lenders by such Collateral Document.
(G) With respect to our opinion in paragraphs 9, 10 or 11
above, we express no opinion as to the creation, perfection or priority
of any security interest in (or other lien on) any Collateral to the
extent that, pursuant to Section 9-104 of the UCC, Article 9 of the UCC
does not apply thereto.
(H) With respect to our opinion in paragraph 11(a) above, we
have assumed that the Financing Statements will be filed in the
appropriate filing offices for the jurisdictions listed on Annex 2
hereto no later than 10 days after the initial extension of credit
under the Credit Agreement. We also wish to point out that the
acquisition by any Obligor after the initial Loan under the Credit
Agreement of any interest in any Property that becomes subject to the
Lien of the Security Agreement may constitute a voidable preference
under Section 547 of the Bankruptcy Code.
(I) We express no opinion as to the existence of, or the
right, title or interest of the Obligors in, to or under any of the
Collateral.
(J) Except as expressly provided in paragraphs 9 through 11
above, we express no opinion as to the creation, perfection or priority
of any security interest in, or other Lien on, the Collateral.
(K) The effectiveness of the Financing Statements will lapse
on the expiration of a five year period from their date of filing, or
(if later) five years from the last date as to which such Financing
Statements were effective following the proper filing of continuation
statements with respect thereto, unless continuation statements are
filed within six months prior to the expiration of the applicable five
year period, and, if any Obligor so changes its name, identity or
corporate structure that the Financing Statements naming such Obligor
as debtor become seriously misleading, the Financing Statements naming
such Obligor as debtor will be ineffective to perfect a security
interest in Collateral acquired by such Obligor more than four months
after such change.
(L) Our opinion in paragraph 11 above, and our observations in
paragraph (K) above, insofar as it relates to the perfection and the
effect of perfection and non-perfection of security interests under the
law of States listed in Annex 2 hereto (other than the State of New
York), are based solely upon a review of the relevant statutory text of
Articles 3, 8 and 9 of the UCC as set forth in the CCH Secured
Opinion of Counsel to the Obligators
------------------------------------
<PAGE>
-8-
Transactions Guide for such States as on file in our offices on
September 30, 1996, in each case without regard to the decisional law
of such States.
At the request of our clients, this opinion letter is,
pursuant to Section 7.01(c) of the Credit Agreement, provided to you by us in
our capacity as counsel to the Obligors and may not be relied upon by any Person
for any purpose other than in connection with the transactions contemplated by
the Credit Agreement without, in each instance, our prior written consent.
Very truly yours,
Opinion of Counsel to the Obligators
------------------------------------
<PAGE>
Annex 1
DEFINED TERMS
"Account" means an "account" within the meaning of Section
9-106 of the UCC.
"Certificated Security" means a "certificated security" within
the meaning of Section 8-102(1)(a) of the UCC.
"Collateral" means the "Collateral" under and as defined in
the Collateral Documents.
"Document" means a "document" within the meaning of Section
9-105(1)(f) of the UCC.
"General Intangibles" means "general intangibles" within the
meaning of Section 9-106 of the UCC.
"Instrument" means an "instrument" within the meaning of
Section 9-105(1)(i) of the UCC, other than a Certificated Security.
"Issuer" means an "Issuer" under and as defined in the
Collateral Documents.
"Investment Security" means a "security" as such term is
defined in Section 8-102(1)(c) of the UCC.
"Proceeds" means "proceeds" within the meaning of Section
9-306(1) of the UCC.
"Secured Obligations" means the "Secured Obligations" under
and as defined in the Collateral Documents.
"Uncertificated Security" means an "uncertificated security"
within the meaning of Section 8-102(1)(b) of the UCC.
Opinion of Counsel to the Obligators
------------------------------------
<PAGE>
Annex 2
LIST OF FILING OFFICES
Opinion of Counsel to the Obligators
------------------------------------
<PAGE>
EXHIBIT F
[Form of Opinion of Special New York Counsel to the
Administrative Agent]
[Amendment and Restatement Effective Date]
To the Lenders party to the
Credit Agreement referred to
below
The Chase Manhattan Bank,
as Administrative Agent
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
We have acted as special New York counsel to the
Administrative Agent in connection with (i) the Second Amended and Restated
Credit Agreement dated as of September 30, 1996, amended and restated as of
September 26, 1997 (the "Credit Agreement"), between Iron Mountain Incorporated
(the "Company"), the lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent, providing for extensions of credit to be made by said
lenders to the Company in an aggregate principal or face amount not exceeding
$250,000,000 at any one time outstanding and (ii) the various other agreements
and other documents referred to in the next following paragraph. All capitalized
terms used but not defined herein have the respective meanings given to such
terms in the Credit Agreement or, if not defined in the Credit Agreement, in
Annex 1 hereto. This opinion letter is being delivered pursuant to Section
7.01(d) of the Credit Agreement.
In rendering the opinions expressed below, we have examined
the following (collectively, the "Credit Documents"):
(a) the Credit Agreement;
(b) the Notes;
Opinion of Special New York Counsel to the
Administrative Agent
--------------------
<PAGE>
-2-
(c) the Subsidiary Guaranty;
(d) the Company Pledge Agreement; and
(e) the Subsidiary Pledge Agreement (the Subsidiary
Pledge Agreement, together with the Company Pledge
Agreement, the "Collateral Documents").
In rendering the opinions expressed below, we have assumed,
with respect to all of the documents referred to in this opinion letter, that:
(i) such documents have been duly authorized by, have
been duly executed and delivered by, and (except to
the extent set forth in the opinions below as to the
Obligors) constitute legal, valid, binding and
enforceable obligations of, all of the parties to
such documents;
(ii) all signatories to such documents have been duly
authorized; and
(iii) all of the parties to such documents are duly
organized and validly existing and have the power and
authority (corporate or other) to execute, deliver
and perform such documents.
Based upon and subject to the foregoing and subject also to
the comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. Each of the Credit Documents constitutes the legal, valid
and binding obligation of each Obligor party thereto, enforceable
against such Obligor in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or transfer or other similar laws relating to or
affecting the rights of creditors generally and except as the
enforceability of the Credit Documents is subject to the application of
general principles of equity (regardless of whether considered in a
proceeding in equity or at law), including, without limitation, (a) the
possible unavailability of specific performance, injunctive relief or
any other equitable remedy and (b) concepts of materiality,
reasonableness, good faith and fair dealing.
2. Each Collateral Document is effective to create, in favor
of the Administrative Agent for the benefit of the Administrative Agent
and the Lenders, a
Opinion of Special New York Counsel to the
Administrative Agent
--------------------
<PAGE>
-3-
valid security interest under the UCC in all of the right, title and
interest of the Company and the Pledgors in, to and under the
Collateral as collateral security for the payment when due of the
Secured Obligations, except that (a) such security interest will
continue in Collateral after its sale, exchange or other disposition
and in any Proceeds thereof only to the extent provided in Section
9-306 of the UCC, (b) such security interest in any portion of the
Collateral in which an Obligor acquires rights after the commencement
of a case under the Bankruptcy Code in respect of such Obligor may be
limited by Section 552 of the Bankruptcy Code and (c) the creation of a
security interest in any portion of the Collateral constituting an
Investment Security requires the transfer thereof to the Administrative
Agent pursuant to Section 8-313(1) of the UCC.
The foregoing opinions are subject to the following comments
and qualifications:
(A) The enforceability of Sections 12.04 of the Credit
Agreement (and any similar provisions in any of the other Credit
Documents) may be limited by laws limiting the enforceability of
provisions exculpating or exempting a party, or requiring
indemnification of a party for, liability for its own action or
inaction, to the extent the action or inaction involves gross
negligence, recklessness, willful misconduct or unlawful conduct.
(B) Clause (iii) of the second sentence of Section 2.02 of the
Subsidiary Guaranty may not be enforceable to the extent that the
Guaranteed Obligations are materially modified.
(C) The enforceability of provisions in the Credit Documents
to the effect that terms may not be waived or modified except in
writing may be limited under certain circumstances.
(D) We express no opinion as to (i) the effect of the laws of
any jurisdiction in which any Lender is located (other than the State
of New York) that limit the interest, fees or other charges such Lender
may impose, (ii) the second sentence of Section 5.07(a) of the Credit
Agreement, (iii) Section 2.06 of the Subsidiary Guaranty and (iv) the
second sentence of Section 12.12 of the Credit Agreement, insofar as
such sentence relates to the subject matter jurisdiction of the United
States District Court for the Southern District of New York to
adjudicate any controversy related to any of the Credit Documents.
Opinion of Special New York Counsel to the
Administrative Agent
--------------------
<PAGE>
-4-
(E) We express no opinion as to the applicability to the
obligations of the Subsidiary Guarantors (or the enforceability of such
obligations) of Section 548 of the Bankruptcy Code, Article 10 of the
New York Debtor Creditor Law or any other provision of law relating to
fraudulent conveyances, transfers or obligations.
(F) We wish to point out that the obligations of the Obligors,
and the rights and remedies of the Administrative Agent and the
Lenders, under each Collateral Document may be subject to possible
limitations upon the exercise of remedial or procedural provisions
contained in such Collateral Document, provided that such limitations
do not, in our opinion (but subject to the other comments and
qualifications set forth in this opinion letter), make the remedies and
procedures that will be afforded to the Administrative Agent and the
Lenders inadequate for the practical realization of the substantive
benefits purported to be provided to the Administrative Agent and the
Lenders by such Collateral Document.
(G) We express no opinion as to the existence of, or the
right, title or interest of the Obligors in, to or under any of the
Collateral.
(H) Except as expressly provided in paragraph 2 above, we
express no opinion as to the creation, perfection or priority of any
security interest in, or other Lien on, the Collateral.
The foregoing opinions are limited to matters involving the
Federal laws of the United States and the law of the State of New York, and we
do not express any opinion as to the laws of any other jurisdiction.
At the request of our client, this opinion letter is, pursuant
to Section 7.01(d) of the Credit Agreement, provided to you by us in our
capacity as special New York counsel to the Administrative Agent and may not be
relied upon by any Person for any purpose other than in connection with the
transactions contemplated by the Credit Agreement without, in each instance, our
prior written consent.
Very truly yours,
WFC/WJM
Opinion of Special New York Counsel to the
Administrative Agent
--------------------
<PAGE>
Annex 1
DEFINED TERMS
"Collateral" means the "Collateral" under and as defined in
the Collateral Documents.
"Guaranteed Obligations" has the meaning assigned to such term
in the Subsidiary Guaranty.
"Investment Security" means a "security" as such term is
defined in Section 8-102(1)(c) of the UCC.
"Pledgors" has the meaning assigned to such term in the
Subsidiary Pledge Agreement.
"Proceeds" means "proceeds" within the meaning of Section
9-306(1) of the UCC.
"Secured Obligations" means the "Secured Obligations" under
and as defined in the Collateral Documents.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York.
Opinion of Special New York Counsel to the
Administrative Agent
--------------------
ASSET PURCHASE AND SALE AGREEMENT
between
IRON MOUNTAIN RECORDS MANAGEMENT, INC.
as Buyer
RECORDS RETENTION/FILESAFE
as Seller
AS OF AUGUST 20, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I...................................................................1
DEFINITIONS........................................................1
ARTICLE II..................................................................4
SALE AND PURCHASE OF SUBJECT ASSETS................................4
ARTICLE III.................................................................7
REPRESENTATIONS AND WARRANTIES OF SELLER...........................7
ARTICLE IV.................................................................15
REPRESENTATIONS AND WARRANTIES OF BUYER...........................15
ARTICLE V..................................................................16
PRE-CLOSING AGREEMENTS............................................16
ARTICLE VI.................................................................19
CONDITIONS PRECEDENT TO OBLIGATION OF BUYER TO CLOSE..............19
ARTICLE VII................................................................22
CONDITIONS PRECEDENT TO OBLIGATION OF SELLER......................22
ARTICLE VIII...............................................................23
THE CLOSING.......................................................23
ARTICLE IX.................................................................24
POST-CLOSING MATTERS..............................................24
ARTICLE X..................................................................25
TERMINATION.......................................................25
ARTICLE XI.................................................................26
INDEMNIFICATION...................................................26
ARTICLE XII................................................................31
MISCELLANEOUS PROVISIONS..........................................31
<PAGE>
TABLE OF CONTENTS
(cont'd.)
Schedule 1.7 Items of Excluded Personal Property
Schedule 1.8 General Ledger entries for Funded Indebtedness
Schedule 1.11 Owned Premises Legal Description
Schedule 1.12 Principal Items of Owned Tangible Assets and
Software Licenses
Schedule 2.3 Allocation of Purchase Price
Schedule 3.3 Compliance with Other Instruments
Schedule 3.4 Authorizations
Schedule 3.5 Encumbrances
Schedule 3.6 Contracts
Schedule 3.8 Litigation; Claims
Schedule 3.9 Permits, Licenses
Schedule 3.10 List of Environmental Reports
Schedule 3.11 Encumbrances on Leased Premises
Schedule 3.13 Financial Statement Exceptions
Schedule 3.14 Benefit Plans
Schedule 3.16 Customers/Seeking Bids
Schedule 3.18 Employee Information
Schedule 3.24 Transactions with Interested Persons
Schedule 3.25 Exceptions to locatable records
Schedule 3.26 Exceptions to prompt shelving/filing
Exhibit 2.2 Post-Closing Escrow Agreement
Exhibit 6.3(i)-(iv) Noncompetition and Confidentiality Agreement
Exhibit 6.11 Opinion of Seller's Counsel
Exhibit 7.4 Opinion of Buyer's General Counsel
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ASSET PURCHASE AND SALE AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 20th day of August, 1997
by and between Iron Mountain Records Management, Inc., a Delaware corporation
("Buyer"), and Records Retention/Filesafe, a California limited partnership
("Seller").
RECITALS
A. Seller is engaged in the business of providing records management
and storage services in the metropolitan San Francisco, Oakland, the "Silicon
Valley" area and metropolitan Los Angeles, California under the trade name
"Filesafe".
B. Buyer desires to purchase, and Seller desires to sell, substantially
all the assets of the Business (as hereinafter defined) on the terms and subject
to the conditions contained in this Agreement.
In consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer, intending to be
legally bound, agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, certain terms used in this Agreement and not
otherwise defined herein shall have the meanings designated below:
Section 1.1 Agreement means all or any part of this Agreement, including
schedules, exhibits, and appendices, as any of the foregoing may be amended,
modified or supplemented in writing from time to time.
Section 1.2 Business means the paper and magnetic media records management and
storage business and related paper shredding business conducted by Seller in
metropolitan San Francisco, Oakland, the "Silicon Valley" area and metropolitan
Los Angeles, California under the trade name "Filesafe".
Section 1.3 Closing means the occasion upon which the transactions contemplated
by this Agreement are carried out by the delivery of documents, payment of funds
and other actions contemplated herein, as described in Article VIII.
Section 1.4 Closing Date shall be October 1, 1997, or such other date as the
parties may agree.
Section 1.5 Effective Time means 12:01 a.m. in San Francisco, California on the
Closing Date.
Section 1.6 Encumbrances means any and all encumbrances, mortgages, deeds of
trust, security interests, liens, Taxes, claims, liabilities, options,
commitments, charges, restrictions or other obligations of whatsoever kind,
quantity or nature, whether accrued, absolute, contingent or otherwise, which
affect title to the Subject Assets.
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Section 1.7 Excluded Assets means (i) Seller's partnership, tax and financial
records not relevant to the operation of the Business or preparation of tax
returns related to the Business, (ii) Seller's interest in the Versatrac and
Source File businesses, including Source File's interest in the storage contract
between Seller and Source File dated May 9, 1997; (iii) the payments and
distributions that Seller is permitted to make pursuant to Section 2.2(a)(ii)
hereof; (iv) all claims, rights and causes of action whatsoever, whether under
insurance policies, claims for contribution or indemnification, whether as a
matter of tort, contract or otherwise, from other parties which relate to any of
the Excluded Assets or liabilities of Seller not expressly assumed by Buyer; and
(v) certain items of personal property and software licenses related to the
Versatrac and Source File businesses which are listed on Schedule 1.7.
Section 1.8 Funded Indebtedness means, with respect to Seller, liabilities in
respect of borrowed money, capitalized leases and other funded obligations with
respect to which Seller pays interest, but shall not include trade accounts
payable. Schedule 1.8 identifies items of Funded Indebtedness on Seller's
general ledger as of December 31, 1996.
Section 1.9 Knowledge or the phrases "to the knowledge of" or "to the best of
Seller's knowledge", when used in reference to Seller, means (except as
otherwise stated herein) matters actually known by Thomas R.
Morehouse, Leston Faulds or Richard Stehr after reasonable investigation.
Section 1.10 Leased Premises means the following premises occupied by Seller in
which the Business is operated:
(i) the building at 17118 South Main Street, Carson (Gardena),
California owned by Edward D. Webb, and leased to Records Retention/Filesafe or
nominee pursuant to a lease dated December 3, 1993, as amended by a Second
Addendum dated January 31, 1994 and an Amendment dated February 4, 1994;
(ii) Units E, F and G, constituting approximately 44,054 square
feet of space, of the building located at 111 Uranium Drive, Sunnyvale,
California, owned by The Realty Associates Fund III and leased pursuant to a
lease dated February 4, 1997 to Filesafe, Inc.; and
(iii) the building at 50 Crisp Street, San Francisco, California,
owned by Crisp Building, Inc. and leased to Filesafe, Inc. pursuant to a lease
dated October 16, 1985, which lease has been extended to expire on August 31,
2005.
The leases for the Leased Premises are referred to herein collectively
as the "Leases", and each individually as a "Lease".
Section 1.11 Owned Premises means the land, buildings and other
improvements at the following addresses:
(i) 1350 West Grand Avenue, Oakland, California; and
(ii) Madrone Way, Felton, California.
The legal description of each of the Owned Premises is set forth in Schedule
1.11.
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Section 1.12 Subject Assets means all of Seller's assets and properties of
whatever kind, character and description, and whether tangible, intangible,
real, personal or mixed, and wherever located, excluding the Excluded Assets.
The Subject Assets, which assets constitute all the assets, property and
equipment owned by Seller or any subsidiary of Seller and regularly used in the
Business, include the following Tangible Assets and Interests:
A. Tangible Assets means all personal tangible property used in the
Business, such as inventory; computers, computer peripherals and maintenance
manuals; word processors; typewriters and other business machines; automobiles,
trucks and other vehicles; warehouse equipment; lifts; pallet jacks; racking and
shelving; shredders; furniture, furnishings, and office equipment; and supplies.
Principal items of Tangible Assets, including vehicles, are listed on Schedule
1.12.
B. Interests means all intangible property used in the Business to the
extent assignable, including rights, privileges, benefits and interests under
all contracts and agreements, together with consents, licenses, files and
correspondence related thereto; licensee rights in computer software used or
useful in the Business, including the software licenses listed in Schedule 1.12;
governmental permits, including certificates of occupancy; agreements, leases
and arrangements with respect to intangible or tangible property or interests
therein; confidentiality and non-competition agreements with employees and third
parties, whether oral or written; consents; agreements with suppliers and
customers; deposits held by contract parties, including any lease deposits;
rights to refunds; prepaid expenses; accounts receivable; equity interests held
by Seller in any business entity in any form of records management business;
Seller's rights in and to the trade names "Filesafe" and "Records Retention";
all financial and operating records related to the Business, excluding Seller's
income tax records; and any sales agent or sales affiliate agreements used in
connection with the Business.
Buyer acknowledges that where an Interest is represented by a contract
right, Buyer's failure to assume such contract may mean that the Interest
associated therewith will not be available to Buyer.
Section 1.13 Taxes means any and all taxes, sums or amounts assessed or
assessable, levied and due by any federal, state or county or other local
governmental authority or agency, including without limitation, real and
personal property taxes, income taxes, whether measured by gross or net income
or profit, franchise, excise, sales and use taxes, employee withholding, social
security, unemployment taxes and any other taxes required to be paid by Seller,
including interest and penalties in respect thereof whether disputed or not, and
whether accrued, contingent, due, absolute, deferred, unknown or other, together
with any and all penalties, interests and additions to all such taxes, sums or
amounts.
(ARTICLE II COMMENCES ON THE NEXT PAGE)
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ARTICLE II
SALE AND PURCHASE OF SUBJECT ASSETS
Section 2.1 Sale and Transfer. Subject to the terms and conditions set forth in
this Agreement, Seller shall sell, convey, transfer, assign and deliver to
Buyer, and Buyer shall purchase and receive from Seller, at the Closing, all of
the Subject Assets.
Section 2.2 Purchase Price; Assumption of Certain Obligations.
(a) Purchase Price. The Purchase Price to be paid by Buyer for all the
Subject Assets shall be Forty-two Million Dollars ($42,000,000), plus assumption
of all Funded Indebtedness, trade accounts payable, deferred revenue and other
accrued expenses of Seller as of the Effective Time, provided that Buyer's
assumption of such obligations of Seller shall be limited as follows:
(i) Seller shall have incurred no Funded Indebtedness in addition
to that reflected on Seller's balance sheet as of December 31, 1996, and no
trade accounts payable (other than customary trade accounts payable incurred in
the ordinary course of business) since December 31, 1996, and Seller shall have
operated the Business in the ordinary course between December 31, 1996 and the
Effective Time;
(ii) Seller shall have not made any cash distributions to or
other payments to the General Partners or the limited partners of Seller
(including payments in the form of bonuses, loans or distributions of profit or
gain) between December 31, 1996 and the Effective Time other than distributions
which do not exceed Seller's net income for such period, determined on the basis
of generally accepted accounting principles ("GAAP"), applied in a manner
consistent with Seller's financial statements as of and for the period ended
December 31, 1996; and
(iii) the sum of Funded Indebtedness, less cash as of the
Effective Time shall not exceed the sum of Funded Indebtedness, less cash at
December 31, 1996.
If Seller's Funded Indebtedness less cash exceeds what it would
otherwise be if Seller had complied with the foregoing, Buyer shall not assume
or be liable for such excess, which shall be the sole responsibility of Seller.
Notwithstanding any other provision of this Section 2.2(a), Buyer shall
not assume or pay for, and there shall be excluded from liabilities assumed by
Buyer, (i) all attorneys' and accountants fees incurred by Seller in connection
with the transactions contemplated hereby, all brokers' or finders' fees
incurred by Seller in connection with this Agreement and similar transaction
expenses all of which shall be paid by Seller, (ii) any contingent liabilities
of Seller, and (iii) any liabilities of Seller which are, or would ordinarily
be, covered by policies of comprehensive general liability insurance or
automobile liability insurance including any deductibles or fronting
arrangements related to such insurance. If and to the extent Seller has paid, or
prior to the Closing shall pay, any attorneys', accountants', brokers' or
similar fees related to the transactions contemplated hereby, Buyer shall
receive a credit against the purchase price in the aggregate amount of such
payments except to the extent such payments are or will be made from cash
otherwise available for distribution to the partners of Seller pursuant to
Section 2.2(a)(ii) above.
(b) Payment of Purchase Price. The Purchase Price, less Five Million
Dollars ($5,000,000), shall be payable to Seller at the Closing by wire transfer
of immediately available
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funds to such account as Seller shall designate in writing not less than two
business days prior to the Closing Date. Five Million Dollars of the Purchase
Price shall be paid in escrow to Bank of the West or such other escrow agent as
may be acceptable to Buyer and Seller as escrow agent under a Post-Closing
Escrow Agreement in the form of Exhibit 2.2 hereto, to be held and disbursed as
provided therein. Pursuant to the Post-Closing Escrow Agreement, $5,000,000
shall be held in escrow until the date which is six months after the Closing
Date, when the amount held in escrow will be reduced to $2,500,000, provided
that the aggregate of claims made by or paid to Indemnified Buyer Parties (as
defined in Section 11.3 hereof) on such date shall be less than $2,500,000.
Buyer shall retire assumed Funded Indebtedness of Seller on the Closing
Date. Buyer shall pay assumed trade payables within the periods Seller
customarily paid trade accounts payable.
(c) Assumption of Certain Contracts and Other Obligations. In addition
to Funded Indebtedness and trade accounts payable, Buyer shall assume and
perform the following obligations of Seller:
(i) all obligations of Seller arising or accruing after the
Effective Time in respect of Seller's contracts, agreements and arrangements
with its customers providing for storage of business records at customary rates;
(ii) Seller's obligations under the vehicle and equipment leases
listed on Schedule 3.5;
(iii) miscellaneous contracts for goods and services to be
delivered or performed after the Effective Time, provided that any of such
contracts which require payment of more than $10,000 or cannot be cancelled on
sixty days' notice or less shall have been identified on a Schedule hereto;
(iv) Seller's obligations under the Leases;
(v) other executory agreements or arrangements relating to the
ongoing operations of the Business in the ordinary course, provided that any of
such agreements or arrangements which require payment of more than $10,000 or
cannot be cancelled on sixty days' notice or less shall have been identified on
a Schedule hereto or in the preliminary title reports for the Owned Premises
described in Section 3.11;
(vi) real and personal property taxes with respect to the Subject
Assets which are not delinquent; and
(vii) accrued salary, vacation, sick leave and other benefits for
Seller's employees of the Business, excluding severance benefits payable under
Seller's severance policy for senior management employees which are payable to
Thomas R. Morehouse, Richard Stehr, Leston Faulds and Terry McCord, which
excluded obligations shall remain the obligations of Seller. Notwithstanding the
foregoing, Buyer will be responsible for "normal" severance benefits payable to
Terry McCord.
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Notwithstanding any other provision to the contrary in this Agreement,
Buyer shall not be required by this Agreement to assume any contingent
obligations or claims against Seller related to the operation of the Business
prior to the Effective Time.
Section 2.3 Allocation. The Purchase Price shall be allocated among the Subject
Assets as set forth on Schedule 2.3, and the parties shall report the
transactions contemplated hereby in a manner consistent with such allocation for
tax purposes.
Section 2.4 Confirmation of Assumed Liabilities. Prior to the Closing Date Buyer
and Seller shall prepare an estimated statement of Funded Indebtedness and trade
accounts payable, deferred revenues and other accrued expenses of Seller to be
assumed by Buyer as of the Effective Time. During a period of 60 days after the
Closing Date Buyer shall have the right to review or audit Seller's operations
with respect to the period from January 1, 1997 through the Closing Date to
confirm that the amount of Funded Indebtedness, trade accounts payable, deferred
revenue and other accrued expenses of Seller assumed by Buyer as of the
Effective Time (the "Assumed Liabilities"); and the amount of cash distributions
made by Seller to its partners during such period, are consistent with the
limitations in respect of such assumed obligations and distributions set forth
in Section 2.2(a).
If Buyer tentatively determines that the Assumed Liabilities are inconsistent
with the limitations then set forth in Section 2.2(a), and if the aggregate of
such adjustments is greater than $25,000, Buyer shall so notify Seller in
writing ("Buyer's Section 2.4 Notice"). Such notice will state the amount of any
proposed adjustment deriving from such inconsistency (which adjustment shall
disregard the $25,000 threshold). If requested by Seller, Buyer will provide
information in reasonable detail describing the basis for Buyer's determination.
If Seller has any objections to Buyer's Section 2.4 Notice, Seller will deliver
a detailed statement of its objections to Buyer's Section 2.4 Notice within
thirty days after Buyer's receipt thereof. The parties will thereafter confer
and attempt to resolve any disagreement with respect to the Section 2.4 Notice.
If the parties are unable to reach agreement on any matters contained in the
Section 2.4 Notice within thirty days after receipt of Seller's objection, Buyer
and Seller shall select an accounting firm mutually acceptable to them to
resolve any unresolved issues. If Buyer and Seller are unable to agree on the
choice of an accounting firm, they will select a nationally recognized
accounting firm (other than Arthur Andersen LLP) by lot. Such accounting firm
shall make a final determination as to any matters raised by the Section 2.4
Notice then unresolved, and such determination, expressed in writing, shall be
final and binding on the parties.
Buyer and Seller shall be responsible for the fees of the accounting firm as
follows:
(a) if the accounting firm resolves all of the remaining
objections in favor of Buyer, Seller will be responsible for all of the fees and
expenses of the accounting firm;
(b) if the accounting firm resolves all of the remaining
objections in favor of Seller, Buyer will be responsible for all of the fees and
expenses of the accounting firm; and
(c) if the accounting firm resolves some of the remaining
objections in favor of Buyer and the rest of the remaining objections in favor
of Seller, Seller and Buyer shall share in such fees and expenses in proportion
to the dollar value of the issues decided in favor of each.
(ARTICLE III COMMENCES ON THE NEXT PAGE)
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows as of the date hereof:
Section 3.1 Organization and Good Standing. Seller is a limited partnership duly
organized and validly existing under the laws of the State of California, and
has all requisite power and authority to own, operate, sell and lease its
properties and to carry on its business as presently conducted. Seller has all
requisite power and authority to execute and deliver, and perform its
obligations under, this Agreement. Seller is not required by the nature or
location of the Subject Assets to be qualified to do business as a foreign
limited partnership in any jurisdiction where failure to so qualify would have a
material adverse impact on the Business.
Section 3.2 Authorization. The execution and delivery of this Agreement and
performance by Seller of its obligations hereunder, and all transactions
contemplated hereby, have been duly and validly authorized by all necessary
action on the part of Seller, the general partners of Seller and the limited
partners of Seller. This Agreement has been, and the other agreements and
documents required to be delivered by Seller, in accordance with the provisions
hereof (the "Seller's Documents") will be, duly executed and delivered on behalf
of Seller, by one or more of the general partners of Seller as duly authorized
general partners of Seller; and this Agreement constitutes, and the Seller's
Documents when executed and delivered will constitute, the valid and binding
obligations of Seller, enforceable in accordance with their respective terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws from time to time in effect affecting creditor's
rights generally and by legal and equitable limitations on the availability of
specific remedies (the "Enforceability Limits").
Section 3.3 Compliance With Other Instruments. Except as set forth on Schedule
3.3, neither the execution and delivery by Seller of this Agreement and the
Seller's Documents, nor the consummation by Seller of the transactions
contemplated hereby and thereby, will, with or without the giving of notice or
passage of time, or both, be contrary to or violate, breach, or constitute a
default under, or permit the termination or acceleration of maturity of, or
result in the imposition of any lien, claim or encumbrance upon any property or
asset of Seller pursuant to any provision of, any note, bond, indenture,
mortgage, deed of trust, evidence of indebtedness or lease agreement, other
agreement or instrument or any judgment, order, injunction or decree by which
Seller is bound, to which Seller is a party, or to which the assets of Seller is
subject except for (i) such of the foregoing which would not result in a
material adverse effect on the Business taken as a whole; and (ii) the consents
of any customers pursuant to their contracts; nor is the effectiveness or
enforceability of this Agreement or such other documents adversely affected by
any provision of the agreement of limited partnership or certificate of limited
partnership of Seller, as both are presently in effect.
Section 3.4 No Governmental or Other Authorization Required. No authorization or
approval of, or filing with, any governmental agency, authority or other body or
any other third persons will be required in connection with Seller's execution
and delivery of this Agreement or the consummation by either of the transactions
contemplated hereby and thereby other than (i) as required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) as set forth in Schedules 3.3 and 3.4, (iii) the consent of any
customers pursuant to their contracts, (iv) the consent of any suppliers of
goods or services to Seller whose contracts with Seller
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are assumed by Buyer, and (v) the consent of the general partners and limited
partners of Seller (which have previously been obtained).
Section 3.5 Title to Subject Assets; Sufficiency. Seller has, or at Closing will
have, good and marketable title to all the Tangible Assets and Interests,
excluding the Leased Premises, the Owned Premises and those Tangible Assets or
Interests leased or licensed by Seller as disclosed in one or more of the
schedules to this Agreement, free and clear of all Encumbrances except as set
forth on Schedule 3.5, which Schedule identifies leases for vehicles and
equipment as well as Encumbrances, except (i) liens securing Funded Indebtedness
reflected in Seller's December 31, 1996 balance sheet; (ii) liens for current
taxes not yet due and payable; and (iii) such imperfections of title or other
liens, if any, as are not, individually or in the aggregate, substantial in
character, amount or extent and do not materially detract from the value, or
materially interfere with the present use, of the property subject thereto or
affected thereby, or otherwise materially impair the operation of the Business.
Seller is not a party to, nor are the Subject Assets subject to, any judgment,
judicial order, writ, injunction or decree that materially adversely affects the
Subject Assets or the use thereof by Seller. The Subject Assets include all
assets regularly used by Seller in the operation of the Business.
Section 3.6 Contracts and Other Interests.
(a) Except as disclosed on Schedule 3.6, Part A, all material
contracts (including all customer contracts) are in full force and effect, valid
and enforceable in accordance with their respective terms against Seller and, to
Seller's knowledge, against the other parties thereto, and to Seller's knowledge
(after inquiry of those employees of Seller who because of their position or
responsibility are in a position to be aware of any such defaults), there are no
existing defaults of Seller or events of default that, with the giving of notice
or lapse of time, or both, would constitute defaults of Seller under any
material contracts, nor are material amendments pending with respect to any
material contracts.
(b) Except as set forth on Schedule 3.6, Part B, all of Seller's
customers have executed storage and service agreements with Seller pursuant to
which Seller's liability in the event of the loss or destruction of, or damage
to, stored material is limited to $2.00 per carton or other storage unit.
(c) Schedule 3.6, Part C lists Seller's twenty largest paper
customers and ten largest magnetic media customers (measured by storage revenue
during the six-month period ended June 30, 1997). Seller has delivered a copy of
its contract with each such customer to Buyer.
(d) Except as set forth in Schedule 3.6, Part D, Seller has no
contracts with customers under which Seller has agreed to perform move-in
services at no or reduced cost, or to pay permanent removal charges from such
customer's current storage facility, except any such contracts wherein Seller
has completed performance of such move-in services or payment.
(e) Seller has no oral agreements with customers which require
Seller to provide storage or services at no charge or at rates significantly
below the average rates for such services set forth in Seller's written customer
contracts, except for immaterial discounts and/or free services provided as
incentives to certain accounts.
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(f) Schedule 3.6, Part F, lists all of Seller's major customers
which have notified Seller either orally or in writing that such customers
intend to terminate their business relationship with Seller or to materially
reduce their volume of business with Seller since January 1, 1996. For purposes
of this Section 3.6(f), "major customers" shall mean customers to which Seller's
billings for the six months ended June 30, 1997 exceeded $50,000.
Section 3.7 Taxes. Seller has filed all federal, state and local income tax
returns, and Seller has filed all excise or franchise tax returns, real estate
and personal property tax returns, sales and use tax returns and other tax
returns (including returns in respect of withholding and unemployment tax),
required to be filed by it and has paid all taxes owing by it, including any
interest and penalties thereon, except taxes which have not yet accrued (or,
with respect to Owned Premises, taxes not delinquent) or otherwise become due
for which adequate provision has been made.
Section 3.8 Litigation; Claims; Defaults. Except as set forth in Schedule 3.8,
Seller has not been served with any currently effective summons or complaint and
there is no action or suit, equitable or legal, to which Seller is a party, nor
any administrative, arbitration or other proceeding pending or, to Seller's
knowledge, threatened against Seller in respect of the Subject Assets or the
Business. Except as set forth on Schedule 3.8, during the past six months Seller
has not received any material written assertions from customers of the Business
to the effect that their materials stored with Seller have been lost, damaged or
inappropriately destroyed or that such customers are being billed inaccurately
for storage of materials or records. Buyer shall not be deemed to have assumed
responsibility for any matter disclosed on Schedule 3.8 by reason of such
disclosure. Seller is not in default with respect to any currently effective
judgment, order, writ, injunction, decree, demand or assessment issued by any
court or of any federal, state, municipal or other governmental agency, board,
commission, bureau, instrumentality or department and applicable to Seller.
Seller is not charged or to Seller's knowledge (without investigation other than
inquiry of employees of Seller whose responsibilities place them in a position
to be aware of such matters) threatened with or under investigation with respect
to, any violation of any provision of any federal, state, municipal or other law
or administrative rule or regulation with respect to the Subject Assets or the
Business.
Section 3.9 Compliance with Laws. To Seller's knowledge (after inquiry by Thomas
R. Morehouse, Leston Faulds or Richard Stehr, of employees of Seller whose
position or responsibilities place them in a position to be aware of such
matters), Seller has complied, and through the Closing Seller will comply, in
all material respects with federal, state and local laws, rules and regulations
applicable to the Business and the Subject Assets, and Seller has received no
notice that it is not in such compliance with such laws, rules and regulations.
Seller possesses such certificates, authorities or permits issued by the
appropriate local, state or federal regulatory agencies or bodies as are
necessary to conduct the Business in all material respects, all of which are
listed on Schedule 3.9 and copies of which have been delivered to Buyer; and
Seller has not received any written notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit.
Section 3.10 Certain Environmental Matters. Except as disclosed in the surveys
and reports disclosed in Schedule 3.10, to Seller's knowledge, Seller is
operating and has operated the Business in the Leased Premises and the Owned
Premises in substantially full compliance with all applicable local, state and
federal environmental laws, regulations and ordinances, including, but not
limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. ss.ss.9601 et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, 42 U.S.C. ss.ss.6901 et seq., the Clean Water
Act, 33 U.S.C. ss.ss.1251 et seq., and the environmental laws and regulations of
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the State of California as such statute or regulation has been amended from time
to time ("Environmental Laws and Regulations"). Seller has not knowingly
accepted for storage, and to the best of its knowledge does not store, any
nitrate film or any hazardous substance or hazardous material in the Leased
Premises or the Owned Premises except for de minimis amounts used in the
ordinary course of business. Seller has never knowingly caused the release from
the Leased Premises or the Owned Premises of an amount of any hazardous
substance or hazardous material into the environment which release would
constitute a violation of any Environmental Laws and Regulations. For purposes
of this paragraph, "hazardous substance", "release" and "environment" shall have
the same meanings as that term is defined by Section 101 of CERCLA, 42 U.S.C.
ss.9601, and "hazardous material" shall have the same meaning as those terms are
defined by Environmental Laws and Regulations. Seller does not own, lease, rent
or otherwise utilize any underground storage tanks in connection with the
Business, and, to the best of Seller's knowledge, there are no waste tanks,
containers, cylinders, drums or cans buried, stored or deposited in or at the
Leased Premises or the Owned Premises. Except as disclosed in the surveys and
reports disclosed in Schedule 3.10, and except for the presence of asbestos in
the Leased Premises at 50 Crisp Street, San Francisco, to the best of Seller's
knowledge (without having conducted an investigation), the Leased Premises and
the Owned Premises do not contain (i) any asbestos, (ii) any polychlorinated
biphenyl (PCB) substances or (iii) any waste petroleum products, and Seller has
received no notices from any governmental agency to such effect. Seller has
delivered to Buyer copies of all environmental surveys in Seller's possession
related to the Leased Premises and the Owned Premises, all of which are
identified in Schedule 3.10.
Section 3.11 Real Property. The Leased Premises and the Owned Premises
constitute all of the real property that Seller owns or leases. With respect to
each of the Owned Premises, except as disclosed in Schedule 3.11:
(a) Seller has title to each parcel of real property constituting part
of the Owned Premises as described in the following preliminary title reports:
(i) with respect to 1350 West Grand Avenue, Oakland,
California, Seller's title is subject to the matters disclosed in that certain
Preliminary Title Report issued by Chicago Title Insurance Company dated as of
July 11, 1997; and
(ii) with respect to the Madrone Way, Felton, California
property, Seller's title is subject to the matters disclosed in that certain
Preliminary Title Report issued by First American Title Insurance Company dated
as of July 21, 1997;
(b) Seller has received no notices regarding pending condemnation
proceedings, lawsuits, or administrative actions relating to the Owned Premises
or other matters affecting materially and adversely the current use, occupancy
or value thereof nor, to the knowledge of Seller, are any such actions
threatened;
(c) to Seller's knowledge,, the buildings and improvements are located
within the boundary lines of the described parcels of land, are not in violation
of applicable setback requirements, zoning laws, and ordinances (and none of the
properties or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure" classifications),
and do not encroach on any easement which may burden the land, the land does not
serve any adjoining property for any purpose inconsistent with the use of the
land, and the property is not located within any flood plain or subject to any
similar
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type restriction for which any permits or licenses necessary to the use thereof
have not been obtained, and Seller has received no notice as to any such
matters;
(d) to Seller's knowledge, all facilities have received all approvals
of governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof, are in compliance with
applicable building, fire, electrical and similar codes and have been operated
and maintained in accordance with applicable laws, rules, and regulations, and
Seller has received no notice to the effect that Seller lacks any approvals or
that the facilities are not so in compliance;
(e) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any party or parties the right of use
or occupancy of any portion of the real property;
(f) there are no outstanding options or rights of first refusal to
purchase the real property, or any portion thereof or interest therein;
(g) there are no parties (other than Seller) in possession of either
parcel of real property; and
(h) all facilities located on the real property are supplied with
utilities and other services necessary for the operation of such facilities,
including gas, electricity, water, telephone, sanitary sewer, and storm sewer,
all of which services are adequate in accordance with all applicable laws,
ordinances, rules, and regulations and are provided via public roads or via
permanent, irrevocable, appurtenant easements benefiting the parcel of real
property.
With respect to each of the Leased Premises, except as disclosed in Schedule
3.11:
(a) Seller has delivered to Buyer a complete and correct copy of the
Lease related to such Leased Premises;
(b) the Lease is legal, valid, binding upon Seller (and to its
knowledge, the Lessor), enforceable (subject to the Enforceability Limits), and
in full force and effect;
(c) upon obtaining the consents described in Schedules 3.3 and 3.4, the
Lease (including any option to extend, expand or purchase, and any right of
first refusal or right of first offer) will continue to be legal, valid,
binding, enforceable, and in full force and effect to the extent represented in
the immediately preceding subparagraph (b) on identical terms following the
consummation of the transactions contemplated hereby (including the assignments
and assumptions referred to in Section 6.4);
(d) to Seller's knowledge, no party to the Lease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(e) no party to the Lease has repudiated any provision thereof;
(f) there are no disputes, oral agreements or forbearance programs in
effect as to the Lease;
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(g) Seller has not assigned, transferred, conveyed, mortgaged, deeded
in trust, or encumbered any interest in the leasehold;
(h) to the best of Seller's knowledge, all facilities leased thereunder
(including alterations constructed by Seller and shelving installed by Seller)
have received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules, and
regulations; and
(i) all facilities leased thereunder are supplied with utilities and
other services necessary for the operation of said facilities.
Section 3.12 No Inconsistent Agreements. Seller has not entered into any letter
of intent, preliminary agreement or other agreement, written or oral, with any
other party which would be inconsistent with the terms of this Agreement.
Section 3.13 Financial Statements. Seller has previously delivered to Buyer
Seller's (i) audited annual income and expense statement and balance sheet for
the year ended December 31, 1996, (ii) reviewed annual income and expense
statement and balance sheet for the year ended December 31, 1995 and (iii)
unaudited statements for the six months ended June 30, 1997 (the "Financial
Statements"). The Financial Statements are true, correct and complete in all
material respects for the periods covered and fairly present the results of
operation of the Business for the periods covered. Except as described in
Schedule 3.13, the Financial Statements for the years ended December 31, 1996
and 1995 were prepared pursuant to GAAP, consistently applied; the Financial
Statements for the six months ended June 30, 1997 were prepared on a basis
consistent with the Financial Statements for the year ended December 31, 1996,
except for accruals normally performed at year-end, such as bonuses and
profit-sharing, and other customary year-end adjustments and other adjustments
required by GAAP, none of which are material, either individually or in the
aggregate.
Section 3.14 ERISA Plans. Schedule 3.14 lists the Employee Pension Benefit Plans
or Employee Welfare Benefit Plans, as each term is defined in the Employee
Retirement Income Security Act of 1974, maintained by Seller for the employees
of the Business.
Section 3.15 Condition of Subject Assets. Except as disclosed in Schedule 3.8,
all the material Tangible Assets are at present, and will be as of the Closing
Date, in good operating condition, normal wear and tear excepted, and Seller has
not received written notice of any violation of the Occupational Safety and
Health Act with respect thereto, or rules and regulations issued thereunder, and
to the best of Seller's knowledge, Seller is not in violation of such Act, rules
or regulations.
Section 3.16 Customers Seeking Bids. Except as otherwise stated in Schedule
3.16, to Seller's knowledge (without investigation other than inquiry of
employees of Seller whose responsibilities place them in a position to be aware
of such matters), Seller has no customers to which billings for the six months
ended June 30, 1997 exceeded $50,000 whose storage business is or has within 90
days prior to the date of this Agreement been the subject of competitive bidding
procedures.
Section 3.17 No Material Undisclosed Liabilities. Except as described in this
Agreement or reflected in the Financial Statements, there is no liability or
obligation of Seller related to the
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operation of the Business, whether accrued, absolute or contingent, other than
liabilities and obligations that have been incurred in the ordinary course of
business consistent with past practice since December 31, 1996 and are not
material in the aggregate to the Business.
Section 3.18 Personnel Information. Schedule 3.18 lists the names of all full-
and part-time employees of Seller (or leased employees utilized by Seller) who
perform services for the Business and sets forth a brief job description or
title and compensation for each such person. Schedule 3.18 also sets forth a
list of all written and oral employment and noncompetition agreements with
Seller's employees employed in the Business, excluding Seller's employment
agreement with Thomas R. Morehouse.
Section 3.19 Patents, Trademarks, Etc. Except for the trade names "Filesafe" and
"Records Retention", which are unregistered trades name used by Seller, Seller
has no trademarks, service marks, trade names, copyrights, computer programs or
programs rights, patents, licenses or other similar intangible property rights
and interests which it uses in connection with the Business.
Section 3.20 Intellectual Property. Except for possible unauthorized copies of
generally available software which are being used by Seller's employees (none of
which Seller is aware), to Seller's knowledge, Seller owns or has the right to
use pursuant to license, sublicense or other agreement all computer programs,
software, customer information, technology and know-how necessary for the
operation of the Business as presently conducted. Each item of such intellectual
property owned or used by Seller prior to the closing will be available to Buyer
on the same terms.
Section 3.21 Labor Relations. During the past three years there has not been,
and there is not now, any strike, labor dispute, slow down, stoppage or other
material interference with or impairment by labor of the business of Seller
pending or, to the knowledge of Seller (without investigation), threatened or
contemplated against or directly affecting the Business. Seller's employees are
not represented by any labor or trade union, nor, to the knowledge of Seller,
has there been any attempt to organize Seller's employees during the three-year
period prior to the date hereof.
Section 3.22 Insurance. There is in force comprehensive general liability and
casualty insurance for the Subject Assets and the Business which, in the
reasonable opinion of Seller, is appropriate and adequate coverage for such
assets and operations.
Section 3.23 Trade Secrets and Customer Lists. Seller has received no written
claims challenging its right to use any trade secrets, customer lists,
intellectual property and operating methods required for or incident to the
operation of the Business. To the best of its knowledge (without investigation),
Seller is not using or in any way making use of any confidential information or
trade secrets of any third party, including without limitation, a former
employer of any present or past employee or Seller.
Section 3.24 Transactions with Interested Persons. Except as set forth on
Schedule 3.24, Seller is not an affiliate of any customer, competitor or
supplier of the Business, or any organization which has a material contract or
arrangement with the Business.
Section 3.25 Records Services and Storage. Except as described in Schedule 3.25,
substantially all items received and stored by Seller on behalf of customers
(singly or in the aggregate) are held in storage by Seller and are locatable and
accessible without extraordinary effort except for items
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withdrawn or destroyed at the respective customer's request. The stored items
for which customers are billed exist and, in all material respects, can be
accounted for.
Section 3.26 Filing; Destructions, Etc. Except as described in Schedule 3.26,
Seller has shelved or refiled substantially all records received for filing or
refiling more than two business days prior to the date hereof. Seller has
completed substantially all destructions and other inventory and special-service
projects for which Seller has invoiced, recorded as revenue and/or received
payment.
Section 3.27 Business in Ordinary Course. From December 31, 1996 until the date
hereof, except for the distribution of the Source File business, the Business
has been conducted in the ordinary course in accordance with past practice.
Without limiting the generality of the foregoing, Seller has not, since
December 31, 1996
(i) mortgaged or pledged any of its property or assets;
(ii) sold, assigned, transferred or waived rights with respect to
any material part of the Subject Assets (except in the ordinary course of
business);
(iii) entered into or adopted any employee benefit plan or any
employment or severance agreement, or increased in any manner the compensation
or fringe benefits of its personnel or employees (except in the ordinary course
of business and consistent with past practice or pursuant to pre-existing
agreements or as required by law);
(iv) changed its billing, accounts payable, collections or other
cash management practices;
(v) made any payments or distributions to its partners in excess
of net income or paid to its employees any bonuses or special cash payments in
excess of regular compensation; or
(vi) agreed to take any of the foregoing actions.
Section 3.28 No Material Adverse Change. There has been no material adverse
change in the Subject Assets (including, without limitation, loss of or damage
to a material amount or part of the Subject Assets) or the results of operation
(including operating cash flow), other than possible industry-wide changes, as
to which Seller makes no representation, between December 31, 1996 and the date
hereof.
Section 3.29 Funded Indebtedness. The terms of the Funded Indebtedness do not
require, or permit the holder thereof to require, a prepayment premium or
penalty upon payment in full of such indebtedness prior to its stated maturity.
(ARTICLE IV COMMENCES ON THE NEXT PAGE)
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
Section 4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer possesses all requisite corporate power and authority to own,
operate and lease its properties and carry on its business, and to execute and
deliver, and perform its obligations under, this Agreement. Buyer is duly
qualified to do business in the State of California
Section 4.2 Authorization. The execution and delivery of this Agreement and
performance by Buyer of its obligations hereunder, and all transactions
contemplated hereby, have been duly and validly authorized by all necessary
corporate action. This Agreement has been, and the other agreements and
documents required to be delivered by Buyer in accordance with the provisions
hereof (the "Buyer's Documents") will be, duly executed and delivered on behalf
of Buyer by duly authorized officers of Buyer; and this Agreement constitutes,
and Buyer's Documents when executed and delivered will constitute, the valid and
binding obligations of Buyer, enforceable in accordance with their respective
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws from time to time in effect affecting
creditor's rights generally and by legal and equitable limitations on the
availability of specific remedies.
Section 4.3 Compliance with Other Instruments. Neither the execution and
delivery by Buyer of this Agreement and the Buyer's Documents, nor the
consummation by Buyer of the transactions contemplated hereby and thereby, will,
with or without the giving of notice or passage of time, or both, be contrary to
or violate, breach, or constitute a default under, or permit the termination or
acceleration of maturity of, or result in the imposition of any lien, claim or
encumbrance on any property or asset of Buyer pursuant to any provision of, any
note, bond, indenture, mortgage, deed of trust, evidence of indebtedness or
lease agreement, other agreement or instrument or any judgment, order,
injunction or decree by which Buyer is bound, to which Buyer is a party, or to
which the assets of Buyer are subject; nor is the effectiveness or
enforceability of this Agreement or such other documents adversely affected by
any provision of the certificate of incorporation or by-laws of Buyer.
Section 4.4 Litigation. There is no action, suit or proceeding pending or, to
the knowledge of Buyer, threatened against Buyer which might interfere with its
ability to consummate the transactions contemplated hereunder.
Section 4.5 No Governmental or Other Authorization Required. Except as required
by the HSR Act, and as described in Schedules 3.3 and 3.4, no authorization or
approval of, or filing with, any governmental agency, authority or other body or
any other third persons will be required in connection with Buyer's execution
and delivery of this Agreement and Buyer's Documents or its consummation of the
transactions contemplated hereby and thereby.
(ARTICLE V COMMENCES ON THE NEXT PAGE)
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ARTICLE V
PRE-CLOSING AGREEMENTS
Section 5.1 Access to Information and Facilities. Seller shall afford Buyer and
its representatives full access during normal business hours to all facilities,
properties, books, accounts, records, contracts and documents of or relating to
the Business in Seller's possession or control, subject to reasonable
requirements that Buyer not interfere with the operations and activity of the
Business. Buyer shall conduct its examinations off Seller's premises unless
Seller agrees otherwise.
Section 5.2 Confidentiality.
(a) Seller and Buyer shall not use or disclose to others, or permit the
use or disclosure of, any and all non-public information furnished by each to
the other (including confidential information transmitted by each to its
representatives, accountants, counsel, advisors or bankers) in the course of
negotiations relating to this Agreement and the business and financial reviews
and investigations referred to in this Agreement, except to their respective
officers, directors, employees and representatives who need to know such
information in connection with this Agreement or except to the extent that any
such information may become generally available to the public other than through
the actions of the parties or any other person under a duty of confidentiality.
Such obligation of confidentiality extends to the additional financial
statements described in Section 5.3.
(b) Notwithstanding the foregoing, (i) Buyer's parent, Iron Mountain
Incorporated ("IMI"), shall have the right to include disclosure regarding the
transactions contemplated by this Agreement in any registration statement,
filing or other report which IMI, Buyer or any of their respective affiliates
files with the Securities and Exchange Commission or the National Association of
Securities Dealers, including in each case any financial and other information
concerning Seller and the transactions contemplated hereby required in
connection therewith, and Buyer or IMI may disclose the existence of this
Agreement in connection with the issuance of securities of either of them; (ii)
disclosure of such information may be made to the extent required by judicial or
regulatory process, and reviews by financial institutions which are lenders to
either party; and (iii) such information may be used to the extent necessary as
evidence in or in connection with any pending or threatened litigation relating
to this Agreement or any transaction contemplated hereby.
(c) In the event that the sale contemplated by this Agreement is not
consummated for any reason, each party agrees to return to the other party all
materials containing nonpublic information provided by the other immediately on
request. The confidentiality obligation set forth in this Section 5.2 shall
survive termination of this Agreement.
(d) Each party agrees that the confidential information of the other
party is unique and that its release or misuse in contravention of the terms of
this Agreement may not be compensable in monetary damages and that the
non-breaching party shall be entitled to seek appropriate injunctive relief
therefor. In connection therewith the parties waive the claim or defense that an
adequate remedy exists at law or that a bond is necessary.
Section 5.3 Additional Financial Statements. Buyer anticipates that IMI will be
required by statute or regulation to file or disclose financial information
related to the Business with the
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Securities and Exchange Commission which is in addition to information prepared
by Seller and previously delivered to Buyer. Seller shall make available to
Buyer any relevant financial information related to the Business or the Subject
Assets not previously delivered to Buyer and otherwise cooperate with Buyer, at
Buyer's expense, in preparing, or causing Seller's auditors to prepare, such
information. If requested by Buyer, Seller shall use commercially reasonable
efforts to obtain Seller's auditors' consent to Buyer's use of financial
statements which they have audited, or shall consent to Seller's auditors'
preparing required audits for Buyer (including audited financial statements of
Seller for the year ended December 31, 1995), and shall use its commercially
reasonable best efforts to cause Seller's auditors to prepare such required
audited financial statements. Such audited financial statements will be prepared
in accordance with Regulation S-X under the Securities Act of 1933, and will be
prepared no later than September 12, 1997. Buyer shall have the right to file
and disclose such information as required by any such law, statute or
regulation, including, without limitation, as contemplated by Section 5.2(b)
hereof.
Section 5.4 Communications to Seller's Employees. Buyer and Seller shall
mutually agree on the timing and content of a program of communications to
employees and customers of the Business in respect of the transactions
contemplated hereby; provided that Seller may elect to inform its employees of
the pending transaction if it determines such disclosure is necessary or
desirable.
Section 5.5 Continued Efforts. Seller shall use commercially reasonable efforts
to (a) cause to be fulfilled and satisfied all of the conditions to the Closing
which are the responsibility of Seller, and (b) cause to be performed all of the
matters required upon the Closing which are the responsibility of Seller.
Buyer shall use commercially reasonable efforts to (a) cause to be fulfilled and
satisfied all of the conditions to the Closing which are the responsibility of
Buyer, and (b) cause to be performed all of the matters required upon the
Closing which are the responsibility of Buyer.
Section 5.6 Operation of Business Prior to Closing. From the date hereof until
the Closing Date, Seller shall conduct the Business in the ordinary course
consistent with past practice, and shall use its commercially reasonable efforts
to maintain and service the Business, to keep available the services of present
employees and agents and to maintain existing business relationships. Without
limiting the generality of the foregoing, Seller shall not take any of the
actions described in clauses (i) through (vi) of Section 3.27.
Section 5.7 HSR Act Filing. Promptly after the execution of the Agreement, Buyer
and Seller shall each prepare and file a Notification and Report Form with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the HSR Act. Each shall file any related materials
that it may be required to file, shall use its commercially reasonable best
efforts to obtain an early termination of the applicable waiting period, and
shall make any further filings pursuant thereto that may be necessary, proper or
advisable in connection therewith. Buyer and Seller shall share equally the HSR
Act filing fees; provided that Buyer shall pay such filing fees and receive a
credit therefor against the purchase price at the Closing. If the Closing does
not occur, and this Agreement is terminated by either party, Seller shall have
no obligation to reimburse Buyer for one-half of the HSR Act filing fees.
Section 5.8 Seller's Employees. Buyer expects to offer employment to
substantially all of Seller's employees, subject to pre-closing review of
staffing levels and employee job performance;
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provided that Buyer shall not be obligated to offer employment to (i) Thomas R.
Morehouse and Sherry Ramm, or (ii) any other employee of Seller in connection
with the acquisition of the Subject Assets, and such acquisition shall not grant
any employee of Seller a right of continued employment with Buyer. Any of
Seller's employees offered employment by Buyer shall be employed on
substantially the same terms as their employment with Seller. As of the Closing,
Buyer shall provide coverage to those employees of Seller who accept offers of
employment with Buyer under Buyer's normal employee benefit plans, programs or
arrangements, including participation in Buyer's 401(k) profit sharing plan. For
purposes of determining eligibility and vesting, Buyer agrees that any such
transferred employee's service with Seller shall be credited under the terms of
any of Buyer's employee benefit plans, programs or arrangements, to the extent
established, continued or otherwise sponsored after the Closing. Buyer shall
also extend coverage to all such transferred employees under Buyer's health
benefits program without the imposition of any pre-existing condition exclusion.
Section 5.9 Termination of 401(k) Plan. Prior to the Closing Date Seller shall
take such actions as are necessary or appropriate to terminate the 401(k) profit
sharing plan maintained by Seller for its employees and distribute to such
employees their interests therein.
(ARTICLE VI COMMENCES ON THE NEXT PAGE)
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATION OF BUYER TO CLOSE
The obligation of Buyer to purchase the Subject Assets and carry out the other
transactions contemplated hereby are, unless waived in writing by Buyer, subject
to the satisfaction, on the Closing Date, of the following conditions:
Section 6.1 Accuracy of Representations and Performance of Seller. The
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date with the
same force and effect as though made on and as of such date; each and all of the
conditions and covenants to be performed or satisfied by Seller hereunder at or
prior to the Closing Date shall have been duly performed or satisfied in all
material respects; and Seller shall have furnished Buyer with a certificate to
that effect.
Section 6.2 Absence of Certain Litigation. On the Closing Date, no suit, action
or other proceeding, or injunction or final judgment relating thereto, shall be
threatened in writing or pending before any court or governmental or regulatory
official or agency, in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby (provided that any such suit, action or
other proceeding which would not have a material effect on the transactions
contemplated hereby shall not constitute a failure to satisfy this condition),
and no investigation that might result in any such suit, action or proceeding
shall be pending.
Section 6.3 Noncompetition and Nondisclosure Agreement. Seller, the general
partners of Seller and Thomas R. Morehouse shall have each executed and
delivered a Noncompetition and Confidentiality Agreement in the form of Exhibit
6.3(i) through (iv). The Noncompetition and Confidentiality Agreement to be
signed by Mr. Morehouse will specifically permit him to engage in the software
escrow business.
Section 6.4 Leases for Leased Premises. Seller shall have assigned to Buyer its
interest as tenant in each of the Leases for the Leased Premises, the landlord
under each of such Leases shall have consented thereto and shall have confirmed
that any option to extend the term, expand the premises or buy the leased real
estate, and any right of first refusal or right of first offer set forth in the
Lease shall be available to Buyer, and (if required under the terms of any
applicable deed of trust), the beneficiary of any deed of trust affecting the
Leased Premises shall have consented thereto and executed a subordination,
non-disturbance and attornment agreement.
Section 6.5 Third Party Consents. Seller shall have procured all of the third
party consents identified in Section 3.4.
Section 6.6 Title Matters.
(a) The applicable title insurance company shall be prepared to issue
the following title insurance policies upon delivery of deeds, discharges of
mortgages and other liens identified in the applicable Preliminary Title Report
and other customary closing documentation.
With respect to each of the Owned Premises, an ALTA Owner's Policy of
Title Insurance Form B-1987 issued by the applicable title insurance company, in
such amount as the Buyer reasonably may determine to be the fair market value of
such Owned Premises (including all
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improvements located thereon), insuring title to such real property to be in the
Buyer as of the Closing subject only to the title exceptions described in the
Preliminary Title Reports described in Section 3.11(a) (the "Permitted
Exceptions").
Each title insurance commitment and policy shall (A) insure title to
the real property and all recorded easements benefiting such real property, (B)
contain an "extended coverage endorsement" insuring over the general exceptions
contained customarily in such policies, (C) contain an ALTA Zoning Endorsement
3.1 (or equivalent), (D) contain an endorsement insuring that the real property
described in the title insurance policy is the same real estate as shown on the
Survey (as defined in Section 6.7) delivered with respect to such property, (E)
contain an endorsement insuring that each street adjacent to the real property
is a public street and that there is direct and unencumbered pedestrian and
vehicular access to such street from the real property or across insured
easement, and (F) if the real property consists of more than one record parcel,
contain a "contiguity" endorsement insuring that all of the record parcels are
contiguous to one another.
(b) Seller shall be prepared to deliver the following documents,
certificates and affidavits:
(i) certificate of non-foreign ownership
(ii) affidavit as to parties-in-possession and mechanics' liens;
(iii) documentation required by the applicable title insurance
company concerning partnership authorization for the conveyance; and
(iv) other certificates described in the Preliminary Title
Reports in order to issue the title insurance policies described in Section
6.6(a).
Section 6.7 Surveys. With respect to each parcel of the Owned Premises, Buyer
will procure in preparation for the Closing a current survey of the real
property certified to Buyer, prepared by a licensed surveyor and conforming to
current ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the
location of all improvements, easements, party walls, sidewalks, roadways,
utility lines, and other matters shown customarily on such surveys, and showing
access affirmatively to public streets and roads (the "Survey"). The Surveys
shall not disclose any survey defect or encroachment from or onto the real
property other than (i) those which have been cured or insured over prior to the
Closing or (ii) those which are not, individually or in the aggregate,
substantial in character, amount or extent and do not materially detract from
the value, or materially interfere with the present use, of the property subject
thereto or affected thereby, or otherwise materially impair the operation of the
Business.
Section 6.8 Environmental Analysis. No environmental analysis, survey, asbestos
assessment or other study undertaken by Buyer and related to the compliance of
the Owned Premises with Environmental Laws and Regulations shall have disclosed
any condition of the Owned Premises which requires remediation, removal of
material or other corrective action, or which imposes a risk of cost or
liability on the owner of such real property which could reasonably be expected
to cost more than $100,000, individually or in the aggregate.
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Section 6.9 Evidence of Approval. Seller shall deliver certified copies of
written records of actions taken by the General Partners and limited partners of
Seller pertaining to the authorization of this Agreement and the consummation of
the transactions contemplated hereby, together with a certificate executed by
the secretary or assistant secretary of the General Partners as to the due
election, qualification and incumbency and valid signature of the person or
persons authorized to sign this Agreement or any document, instrument or
certificate to be delivered hereunder on behalf of the General Partners.
Section 6.10 No Material Adverse Change. There shall have been no material
adverse change in the Subject Assets (including, without limitation, loss of or
damage to a material amount or part of the Subject Assets) or the results of
operations (including operating cash flow) between December 31, 1996 and the
Closing Date.
Section 6.11 Opinion of Seller's Counsel. Seller shall have delivered the
opinion of Seller's counsel, Steinhart & Falconer, LLP, substantially in the
form of Exhibit 6.11 hereto or as otherwise agreed by the parties.
Section 6.12 Shelving. Seller shall have completed installation of, and paid
for, sufficient shelving at the Sunnyvale facility to shelve all records
currently on the floor or on pallets, and shall have placed such records on such
shelving.
Section 6.13 HSR Act. All applicable waiting periods (and any extensions
thereof) under the HSR Act shall have expired or otherwise terminated.
Section 6.14 Post-Closing Escrow Agreement. The Post-Closing Escrow Agreement
shall have been executed by the parties thereto.
Section 6.15 Payment of Funded Indebtedness. Seller shall have provided to Buyer
payoff letters or similar documentation evidencing the amounts required to
retire in full all Funded Indebtedness as of the Closing Date, and committing to
provide discharges or terminations of all mortgages, deeds of trusts, and
security interests securing Funded Indebtedness.
Section 6.16 Amendment of Leases. The leases between Seller and each of Source
File, Inc. and Versa Trac, Inc. for space in the Oakland Owned Premises shall
have been amended to provide that the terms thereof will expire on December 31,
1997.
Section 6.17 Further Documents. Seller shall have executed and delivered to
Buyer such documents, instruments, agreements, and certificates as may
reasonably be needed to carry out the transactions contemplated by this
Agreement, including such documents, instruments and agreements as Buyer's
general counsel may reasonably request in connection therewith.
(ARTICLE VII COMMENCES ON THE NEXT PAGE)
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATION OF SELLER
The obligation of Seller to sell, assign, transfer and deliver the Subject
Assets to Buyer hereunder and to carry out the other transactions contemplated
hereby are, unless waived in writing by Seller, subject to the satisfaction at
or prior to the Closing Date of the following conditions:
Section 7.1 Accuracy of Representations and Performance of Conditions. The
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date with the
same force and effect as though made on and as of such Date; each and all of the
conditions and covenants to be performed or satisfied by Buyer hereunder at or
prior to the Closing Date shall have been duly performed or satisfied in all
material respects; and Buyer shall have furnished Seller with Buyer's
certificate to that effect.
Section 7.2 Approval. Buyer shall deliver certified copies of resolutions
adopted by Buyer's Board of Directors pertaining to the authorization of this
Agreement and the consummation of the transactions contemplated herein, and a
certificate executed by the secretary or assistant secretary of Buyer as to the
due election, qualification and incumbency and valid signatures of its officers
authorized to sign this Agreement or any document or certificates to be
delivered under it.
Section 7.3 Absence of Certain Litigation. On the Closing Date, no suit, action
or other proceeding, or injunction or final judgment relating thereto, shall be
threatened or pending before any court or governmental or regulatory official or
agency, in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby, and no investigation that might result in any
such suit, action or proceeding shall be pending.
Section 7.4 Opinion of Buyer's General Counsel. Buyer's General Counsel shall
have delivered his opinion in the form of Exhibit 7.4 hereto.
Section 7.5 HSR Act. All applicable waiting periods (and any extensions thereof)
under the HSR Act shall have expired or otherwise terminated.
Section 7.6 Post-Closing Escrow Agreement. The Post-Closing Escrow Agreement
shall have been executed by the parties thereto.
Section 7.7 Payment of Funded Indebtedness. Buyer shall be prepared to pay in
full the Funded Indebtedness outstanding as of the Closing Date subject to the
limit in Section 2.2(a).
Section 7.8 Further Documents. Buyer shall have executed and delivered to Seller
such documents, instruments, agreements, and certificates as may reasonably be
needed to carry out the transactions contemplated by this Agreement, including
such documents, instruments, agreements as Seller's counsel may reasonably
request in connection therewith.
(ARTICLE VIII COMMENCES ON THE NEXT PAGE)
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ARTICLE VIII
THE CLOSING
Section 8.1 Closing and Closing Provisions. The Closing shall be effected by
delivery of documents at the office of Steinhart & Falconer LLP, 333 Market
Street, San Francisco, California 94105, and payment of the Purchase Price as
provided herein or in such other manner and at such place as the parties may
agree.
Section 8.2 Deliveries by Seller and General Partners. At or prior to the
Closing, Seller and General Partners shall execute and deliver to Buyer all of
the matters, certificates and other documents designated as conditions precedent
and deliveries precedent to Buyer's obligation to close under this Agreement or
to carry out the transactions contemplated hereby.
Section 8.3 Deliveries by Buyer. At the Closing Buyer shall deliver to Seller
and the Escrow Agent the Purchase Price, subject to adjustments as permitted by
this Agreement, in the manner and form provided for in this Agreement, and all
the certificates and other documents designated as conditions precedent and
deliveries precedent to Seller's obligation to close under this Agreement.
(ARTICLE IX COMMENCES ON NEXT PAGE)
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ARTICLE IX
POST-CLOSING MATTERS
Section 9.1 Records of the Business. For a period of four years following the
Closing Date or for such longer period as the statute of limitations applicable
to claims for taxes relating to the Business for any period through the Closing
Date shall be extended (through voluntary extension or otherwise), Buyer shall
grant to Seller and its representatives, at Seller's request, access to and the
right to make copies of those records and documents which report the conduct of
the Business or the results thereof as may be necessary in connection with
Seller's affairs or the Business, at Buyer's customary fees therefor. If Seller
notifies Buyer that Seller requires retention of such records beyond four years,
Seller shall have the right to take such records or pay Buyer's customary
storage charges for such post-four-year period.
Seller shall, for at least two years after the Closing Date, retain copies of
all records of the Business retained by Seller, and shall grant access thereto
to Buyer upon reasonable request.
Section 9.2 Public Announcement. Except as provided in Section 5.2(b), no party
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the other
party; provided, however, that after the Closing the parties may (i) make
appropriate announcements to customers of the Business, and (ii) make a public
announcement to the effect that the transaction has occurred (without any
financial information), each after consultation with the other party; and
provided further that either party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities.
(ARTICLE X COMMENCES ON THE NEXT PAGE)
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ARTICLE X
TERMINATION
Section 10.1 Termination of Agreement. The parties may terminate this Agreement
as provided below:
(i) Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing (A) in the event Seller has breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, Buyer has notified Seller of the breach, and the breach
has continued without cure for a period of 20 days after the notice of breach or
(B) if the Closing shall not have occurred on or before November 1, 1997, by
reason of the failure of any condition precedent under Article VI hereof (unless
the failure results primarily from Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement); and
(iii) Seller may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing (A) in the event Buyer has breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, Seller has notified Buyer of the breach, and the breach
has continued without cure for a period of 20 days after the notice of breach or
(B) if the Closing shall not have occurred on or before November 1, 1997, by
reason of the failure of any condition precedent under Article VII hereof
(unless the failure results primarily from Seller itself breaching any
representation, warranty, or covenant contained in this Agreement).
Section 10.2 Effect of Termination. If either party terminates this Agreement
pursuant to Section 10.1, all rights and obligations of the parties hereunder,
other than the confidentiality obligation set forth in Section 5.2, shall
terminate without any liability of any party to any other party (except for any
liability of any party then in breach).
Section 10.3 Risk of Loss. Prior to Closing, the risk of loss, damage or
destruction with respect to the Subject Assets shall be borne solely by Seller.
(ARTICLE XI COMMENCES ON THE NEXT PAGE)
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ARTICLE XI
INDEMNIFICATION
Section 11.1 General Indemnification Obligation of Seller.
(a) From and after the Closing, Seller shall reimburse, indemnify and
hold harmless Buyer and its successors and assigns (each an "Indemnified Buyer
Party") against and in respect of any and all damages (excluding consequential
damages, lost profits, lost business opportunities and incidental damages),
losses, deficiencies, liabilities, costs and expenses (including assessments,
legal fees, litigation costs, fines and judgments) incurred or suffered by any
Indemnified Buyer Party that result from, relate to or arise out of:
(i) any and all liabilities and obligations of Seller of any
nature whatsoever (including liabilities for Taxes) arising from or incurred in
the operation of the Business prior to the Closing Date, except for those
liabilities and obligations of Seller which Buyer specifically assumes pursuant
to this Agreement;
(ii) other than as described at (iii) below, any and all actions,
suits, claims or legal, administrative, arbitration, governmental or other
proceedings or investigations against any Indemnified Buyer Party to the extent
relating to Seller or the Business to the extent (and only to the extent) the
reason therefor or subject thereof arose or occurred prior to the Closing Date
or which result from or arise out of any action or inaction prior to the Closing
Date of Seller or any director, officer, employee, agent, representative or
subcontractor of Seller, except for those which Buyer specifically assumes
pursuant to this Agreement;
(iii) any cost, claim, expense or liability (including legal fees
and costs of litigation) which Buyer may incur or with which Buyer may be
threatened in writing by a customer in excess of $2.00 per carton, linear foot
of open-shelf files, disk pack or other storage unit in connection with lost,
damaged or destroyed records of customers with which Seller did not, as of the
Closing Date, have a contract which limited Seller's liability in the event of
loss, damage or destruction to such amount, , if such loss, damage or
destruction (i) occurred prior to the Closing Date, or (ii) is such that it
cannot be determined with reasonable certainty whether the date of the loss,
destruction or damage occurred prior to or after the Closing Date; provided that
with respect to any loss described in this clause (ii), Seller shall indemnify
Buyer for only 50% of the cost, claim, expense or liability related thereto; and
further provided that Seller acknowledges that the 6,500 cartons referred to in
Schedule 3.25 are cartons which, if lost, damaged or inadvertently destroyed,
suffered such event prior to the Closing Date occurred after the Closing Date;
and
(iv) any material misrepresentation, breach of warranty or
nonfulfillment of any agreement or covenant on the part of Seller under this
Agreement, or any material misrepresentation in or omission from any
certificate, schedule, statement, document or instrument furnished to Buyer at
the Closing pursuant hereto.
(b) Notwithstanding anything herein contained to the contrary, neither
Seller nor any of its partners shall have any obligations to Buyer under Section
11.1 with respect to any claim of which Buyer gives notice to Seller later than
December 15, 1998, and any such claims shall be expressly limited to the extent
provided in subparagraphs (c), (d) and (e) of this Section 11.1.
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(c) Notwithstanding any other provision herein contained, Seller shall
not have any indemnification obligation with respect to the first $150,000 of
total claims incurred under Section 11.1; provided, that if such threshold is
reached, Seller shall be liable for all costs, losses and expenses incurred by
Buyer without regard to the threshold.
(d) In case any event shall occur which would otherwise entitle either
party to assert a claim for indemnification hereunder, no loss shall be deemed
to have been sustained by such party to the extent of (i) any tax savings
realized by such party with respect thereto, or (ii) any after-tax proceeds
received by such party from any third party, including but not limited to any
insurance carrier.
(e) Seller and Buyer agree that the $5,000,000 in cash representing a
deferred portion of the purchase price as set forth in Section 2.2(b) above (the
"Indemnity Funds") will be held pursuant to the terms and conditions of the
Post-Closing Escrow Agreement and this Agreement. Notwithstanding any other
provision herein contained, neither Seller nor any of its partners shall have
any indemnification obligation for total claims incurred under Section 11.1 in
excess of the balance of the Indemnity Funds then held by the Escrow Agent under
the Post-Closing Escrow Agreement, and the exclusive recourse of Buyer for
claims incurred under Section 11.1 shall be the Indemnity Funds.
Section 11.2 General Indemnification Obligation of Buyer.
(a) From and after the Closing, Buyer will reimburse, indemnify and
hold harmless Seller and its successors or assigns (an "Indemnified Seller
Party") against and in respect of any and all damages (excluding consequential
damages, lost profits, lost business opportunities and incidental damages),
losses, deficiencies, liabilities, costs and expenses (including assessments,
legal fees, litigation costs, fines and judgments) incurred or suffered by any
Indemnified Seller Party that result from, relate to or arise out of:
(i) any and all liabilities and obligations of Seller which have
been specifically assumed by Buyer pursuant to this Agreement;
(ii) any and all liabilities and obligations arising from or
incurred in the operation of the Business after the Closing Date;
(iii) any and all actions, suits, claims or legal,
administrative, arbitration, governmental or other proceedings or investigations
against any Indemnified Seller Party to the extent relating to Buyer or the
Business to the extent (and only to the extent) the reason therefor or subject
thereof arose or occurred after the Closing Date or which result from or arise
out of any action or inaction after the Closing Date of Buyer or any director,
officer, employee, agent, representative or subcontractor of Buyer; and
(iv) any material misrepresentation, breach of warranty or
non-fulfillment of any agreement or covenant on the part of Buyer under this
Agreement, or any material misrepresentation in or omission from any
certificate, schedule, statement, document or instrument furnished to Seller
pursuant hereto or in connection with the negotiation, execution or performance
of this Agreement.
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(b) Notwithstanding anything herein contained to the contrary, Buyer
shall have no obligations to Seller under Section 11.2(a)(iv) with respect to
any claim of which Seller gives notice to Buyer later than December 15, 1998.
Such limitation shall not limit Buyer's obligations under Section 11.2(a)(i)
through (iii).
(c) In case any event shall occur which would otherwise entitle either
party to assert a claim for indemnification hereunder, no loss shall be deemed
to have been sustained by such party to the extent of (i) any tax savings
realized by such party with respect thereto, or (ii) any after-tax proceeds
received by such party from any third party, including but not limited to any
insurance carrier.
Section 11.3 Method of Asserting Claims, Etc. In the event that any claim or
demand for which Seller (the "Indemnifying Party") would be liable to an
Indemnified Buyer Party hereunder is asserted against or sought to be collected
from an Indemnified Buyer Party by a third party, the Indemnified Buyer Party
shall promptly (and in case of claims under Section 11.1(a)(iii), within thirty
days after Buyer has knowledge of such claim) notify Seller of such claim or
demand, specifying in reasonable detail the nature of such claim or demand, the
specific provisions of this agreement alleged to have been breached, and the
amount or the estimated amount thereof to the extent then feasible, which
estimate shall not be conclusive of the final amount of such claim and demand
(the "Claim Notice"). Indemnifying Party shall have thirty days from the
personal delivery or mailing of the Claim Notice (the "Notice Period") to notify
the Indemnified Buyer Party (A) whether or not it disputes its liability to the
Indemnified Buyer Party hereunder with respect to such claim or demand and (B)
notwithstanding any such dispute, whether or not it desires, at its sole cost
and expense, to defend the Indemnified Buyer Party against any such claim or
demand.
(a) If Indemnifying Party disputes its obligation to indemnify Buyer
with respect to such claim or demand or the amount thereof (whether or not
Indemnifying Party desires to defend the Indemnified Buyer Party against such
claim or demand as provided in paragraphs (b) and (c) below), such dispute shall
be resolved in accordance with Section 11.5 hereof. Pending the resolution of
any dispute by Indemnifying Party of its liability with respect to any claim or
demand, such claim or demand shall not be settled without the prior written
consent of both Buyer and Seller, which consent shall not be unreasonably
withheld or delayed.
(b) In the event that Indemnifying Party notifies the Indemnified Buyer
Party within the Notice Period that it desires to defend the Indemnified Buyer
Party against such claim or demand then, except as hereinafter provided,
Indemnifying Party shall have the right to defend the Indemnified Buyer Party,
at the Indemnifying Party's sole cost and expense, by appropriate proceedings,
which proceedings shall be promptly settled or prosecuted by it to a final
conclusion in such a manner as to avoid any risk of Indemnified Buyer Party
becoming subject to further liability in respect of such matter; provided,
however, Indemnifying Party shall not, without the prior written consent of the
Indemnified Buyer Party (which consent shall not be unreasonably withheld or
delayed), consent to the entry of any judgment against the Indemnified Buyer
Party or enter into any settlement or compromise which does not include, as an
unconditional term thereof, the giving by the claimant or plaintiff to the
Indemnified Buyer Party of a release, in form and substance satisfactory to the
Indemnified Buyer Party, as the case may be, from all liability in respect of
such claim or litigation. If any Indemnified Buyer Party desires to participate
in, but not control, any such defense or settlement, it may do so at its sole
cost and expense.
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(c) (i) If Indemnifying Party elects not to defend the Indemnified
Buyer Party against such claim or demand, whether by not giving the Indemnified
Buyer Party timely notice as provided above or otherwise, then the amount of any
such claim or demand as reduced to judgment or settlement, or if the same be
defended by Indemnifying Party or by the Indemnified Buyer Party (but none of
the Indemnified Buyer Party shall have any obligation to defend any such claim
or demand), then that portion thereof as to which such defense is unsuccessful,
in each case, shall be conclusively deemed to be a liability of Indemnifying
Party hereunder, unless Indemnifying Party shall have disputed its liability to
the Indemnified Buyer Party hereunder, as provided in (a) above, in which event
such dispute shall be resolved as provided in Section 11.5 hereof.
(ii) In the event an Indemnified Buyer Party should have a claim
against Indemnifying Party hereunder that does not involve a claim or demand
being asserted against or sought to be collected from it by a third party, the
Indemnified Buyer Party shall promptly send a Claim Notice with respect to such
claim to Indemnifying Party. If Indemnifying Party disputes its liability with
respect to such claim or demand, such dispute shall be resolved in accordance
with Section 11.5 hereof.
(d) All claims for indemnification by Indemnified Seller Party under
this Agreement shall be asserted and resolved under the procedures set forth
above substituting in the appropriate place "Indemnified Seller Party" for
"Indemnified Buyer Party", "Buyer" for "Indemnifying Party" and variations
thereof.
Section 11.4 Payment. Upon the determination of liability under Section 11.3 or
11.5 hereof, the appropriate party shall pay, or cause the Escrow Agent to pay,
to the other, as the case may be, within ten days after such determination, the
amount of any claim for indemnification made hereunder; provided that any
Indemnified Buyer Party's right to receive payment shall be limited to the
balance of the Indemnity Funds then held by the Escrow Agent pursuant to the
Post-Closing Escrow Agreement. Upon the payment in full of any claim, either by
setoff or otherwise, the entity making payment shall be subrogated to the rights
of the indemnified party against any person, firm or corporation with respect to
the subject matter of such claim.
Section 11.5 Arbitration.
(i) All disputes under this Article XI or otherwise arising under this
Agreement shall be settled by arbitration in San Francisco, California, before
three arbitrators pursuant to the rules of the American Arbitration Association.
Arbitration may be commenced at any time by any party hereto giving written
notice to each other party to a dispute that such dispute has been referred to
arbitration under this Section 11.5. The arbitrators shall be selected by the
joint agreement of Seller and Buyer, but if they do not so agree within 20 days
after the date of the notice referred to above, the selection shall be made
pursuant to the rules from the panels of arbitrators maintained by such
Association. Any award rendered by the arbitrators shall be conclusive and
binding upon the parties hereto and not subject to appeal, and judgment on the
arbitration award may be entered in any court having jurisdiction over the
subject matter of the controversy; provided, however, that any such award shall
be accompanied by a written opinion of the arbitrators giving the reasons for
the award. This provision for arbitration shall be specifically enforceable by
the parties and the decision of the arbitrators in accordance herewith shall be
final and binding and there shall be no right of appeal therefrom. For purposes
of this Section 11.5, in any arbitration hereunder in which any claim or the
amount thereof stated in the Buyer's notice of claim is at issue, Buyer shall be
deemed to be the non-prevailing party if the arbitrators award Buyer less than
the
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sum of one-half (1/2) of the disputed amount; otherwise, Seller shall be
deemed to be the non-prevailing party. The non-prevailing party to an
arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative costs of the arbitration, and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by the other party to
the arbitration.
(ii) To the extent that arbitration may not be legally permitted by
applicable law or statute, and the parties to any dispute hereunder do not at
the time of such dispute mutually agree to submit such dispute to arbitration,
any party may commence a civil action in a court of appropriate jurisdiction to
solve disputes hereunder. Nothing contained in this Section 11.5 shall prevent
the parties from settling any dispute by mutual agreement at any time.
Section 11.6 Compliance with Bulk Sales Law. Buyer and Seller hereby waive
compliance by Seller with the bulk sales law and any other similar laws in any
applicable jurisdiction in respect of the transactions contemplated by this
Agreement.
Section 11.7 Other Rights and Remedies. The indemnification rights of the
parties under this Article XI and the parties' rights and obligations set forth
in Section 2.4, are such parties' sole rights and remedies under this Agreement
and with respect to disputes arising herefrom, and are in lieu of, and not in
addition to, rights and remedies a party may otherwise have at law or in equity.
(ARTICLE XII COMMENCES ON THE NEXT PAGE)
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ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 Commissions. Each party represents and warrants that it has dealt
with no broker or finder in connection with this Agreement (except that Seller
has engaged the services of TM Capital Corp., for whose fees Seller shall be
solely responsible) and, insofar as it knows, no broker or other person is
entitled to any commission or finder's fee in connection with the consummation
of the transactions contemplated by this Agreement.
Section 12.2 Expenses. Except as otherwise provided herein, each of the parties
shall pay all costs and expenses incurred or to be incurred by it in the
negotiation and preparation of this Agreement and in closing and carrying out
the transactions contemplated by this Agreement. Buyer shall be responsible for
the cost of the Preliminary Title Reports, premiums for title insurance policies
and the Surveys.
Section 12.3 Headings; Schedules. The subject headings of the sections and
subsections of this Agreement are included only for purposes of convenience, and
shall not affect the construction or interpretation of any of its provisions.
Any disclosure made by Seller in a Schedule hereto shall be deemed a disclosure
on all Schedules hereto.
Section 12.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Signatures on this
Agreement delivered by fax or telecopier shall be considered original signatures
for purposes of effectiveness of this Agreement.
Section 12.5 Rights of Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action against any party to this Agreement.
Section 12.6 Assignment. Except as provided in the following paragraph, the
rights and obligations of the parties to this Agreement or any interest in this
Agreement shall not be assigned, transferred, hypothecated, pledged or otherwise
disposed of without the prior written consent of the nonassigning party which
consent may be withheld in such party's sole discretion.
Buyer shall have the right to assign to a wholly-owned subsidiary of Buyer its
rights and obligations under this Agreement; provided that such assignment shall
not release Buyer from its obligations hereunder, and Buyer shall remain fully
liable for all of Buyer's obligations hereunder, including without limitation
the payment of the entire Purchase Price (including contingent elements
thereof).
Section 12.7 Survival of Representations and Warranties. All representations,
warranties, covenants and agreements shall survive the Closing until the end of
the twelfth month after the Closing Date, except for ongoing agreements to
indemnify the other party for post-Closing actions.
Section 12.8 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if delivered by telecopier (with notice of
receipt), or if served personally on the party to whom notice
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is to be given; or if delivered by overnight private carrier, on the date of
delivery; or on the third day after mailing if mailed to the party to whom
notice is to be given by first class mail, certified, postage prepaid, and
properly addressed as following:
To Seller:
Records Retention/Filesafe L. P.
1350 West Grand Avenue
Oakland, California 94607
Attention: Thomas R. Morehouse
Telecopier: (510) 645-4322
With a copy (which shall not constitute notice but which is nonetheless required
for notice) to:
Steinhart & Falconer LLP
333 Market Street
San Francisco, California 94105
Attention: George H. Gnoss, Jr.
Telecopier: (415) 442-0856
To Buyer:
Iron Mountain Records Management, Inc.
745 Atlantic Avenue, 10th Floor
Boston, Massachusetts 02111-2735
Attention: John F. Kenny, Jr.
Telecopier: (617) 350-7881
With a copy (which shall not constitute notice but which is nonetheless required
for notice) to:
Garry B. Watzke, Esq.
745 Atlantic Avenue, 10th Floor
Boston, Massachusetts 02111-2735
Telecopier: (617) 350-7881
Any party may change its address for purposes of this paragraph by giving the
other parties written notice of the new address in the manner set for above. If
Seller notifies Buyer after the Closing that Seller has been dissolved, Seller
may direct Buyer to send notices to a designated representative of the General
Partners.
Section 12.9 Applicable Law and Remedies. The terms, conditions and other
provisions of this Agreement and any documents or instruments delivered in
connection with it shall be governed and construed according to the internal
laws of the State of California (other than the choice of law rules thereof)
except as to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters, the jurisdiction under which such entity derives its powers shall
govern. All remedies at law, in equity, by statute or otherwise shall be
cumulative and may be enforced concurrently or from time to time and, subject to
the express terms of this Agreement, the election of any remedy or remedies
shall not constitute a waiver of the right to pursue any other available
remedies. The parties agree that all disputes arising under this Agreement shall
be settled through arbitration procedures as described in Section 11.5.
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Section 12.10 Additional Instruments and Assistance. Each party hereto shall
from time to time execute and deliver such further instruments, provide
additional information and render such further assistance as the other party or
its counsel may reasonably request in order to complete and perfect the
transactions contemplated herein.
Section 12.11 Severability. If any provision of this Agreement is held or deemed
to be invalid or unenforceable to any extent when applied to any person or
circumstance, such invalidity or unenforceability shall not affect the remaining
provisions of this Agreement; the remaining provisions hereof and the
enforcement of such provision with respect to other persons or circumstances, or
to another extent, shall not be affected thereby and each provision hereof shall
be enforced to the fullest extent allowed by law. Moreover, the invalid or
inoperative provision shall be reformed and construed so that it shall be valid
and enforceable to the maximum extent permitted.
Section 12.12 Pronouns and Terms. In this Agreement, the singular shall include
the plural, the plural the singular, and the use of any gender shall include all
genders.
Section 12.13 Taxes. Any California sales taxes imposed on the transaction shall
be paid one-half by Seller and one-half by Buyer. With respect to Owned Property
located in Oakland, California, Seller shall pay real property transfer taxes
payable to the County of Alameda and Seller and Buyer shall each pay one-half of
the real property transfer taxes payable to the City of Oakland. With respect to
the Owned Property located in Felton, California, Seller shall pay all real
property transfer taxes. Recording, escrow, deed preparation and similar fees
shall be paid by the parties in accordance with the custom of the respective
counties in which the Owned Interests are owned.
Seller's federal tax identification number is 94-3060079.
Buyer's federal tax identification number is 04-3038590.
Section 12.14 Disclosure. No representation or warranty made by either party in
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statement of facts contained within
it not materially misleading.
Section 12.15 Entire Agreement, Amendments and Waivers. This Agreement, together
with all Exhibits and Schedules hereto, constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties (including the letter of intent dated
July 3, 1997), and there are no representations, warranties or other agreements
among the parties in connection with the subject matter hereof except as set
forth specifically herein or contemplated hereby. No supplement, modification or
waiver of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
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IN WITNESS WHEREOF, the parties to this Agreement have duly executed it
on the date first above written.
Records Retention/Filesafe Iron Mountain Records Management, Inc.
By Records Retention, Inc.,
a general partner
By /s/ Charles W. King, Jr. By /s/ John F. Kenny, Jr.
---------------------------- ------------------------------
Charles W. King, Jr. John F. Kenny, Jr.
President Executive Vice President and
Chief Financial Officer
By Filesafe, Inc., a general partner
By /s/ Thomas R. Morehouse
--------------------------------
Thomas R. Morehouse
President
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SCHEDULE 2.3
ALLOCATION OF PURCHASE PRICE
----------------------------
Asset Category
- --------------
<TABLE>
<S> <C> <C>
Accounts Receivable Actual amount as of the closing date.
Equipment $1,000,000
Oakland land and building ) Fair market values determined by an appraisal
Felton land and building ) obtained by Buyer.
Covenants not to compete,
customer lists and goodwill Remainder of Purchase Price
TOTAL $42,000,000 plus the amount of assumed liabilities
and Funded Indebtedness
</TABLE>
EXHIBIT 11
IRON MOUNTAIN INCORPORATED
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Amounts in Thousands except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) applicable to common
stockholders $ -- $ (325) $ 417 $(1,810)
======== ======== ======== ========
Weighted Average Shares:
Common Stock - Voting 9,627 11,594 8,538 10,446
Common Stock - Nonvoting 500 454 443 460
Class A Common Stock -- -- 5 --
Series A1 Preferred Stock -- -- 15 --
Series A2 Preferred Stock -- -- 219 --
Series A3 Preferred Stock -- -- 97 --
Series C Preferred Stock -- -- 544 --
-------- -------- -------- --------
Weighted average shares outstanding 10,127 12,048 9,861 10,906
Dilutive effect of stock options considered
common stock equivalents computed under the
treasury stock method using the average price 378 -- 240 --
-------- -------- -------- --------
Weighted average common and common equivalent
shares outstanding 10,505 12,048 10,101 10,906
======== ======== ======== ========
Net income (loss) per common and common
equivalent share $ 0.00 $ (0.03) $ 0.04 $ (0.17)
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1997 AND THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001004317
<NAME> IRON MOUNTAIN INCORPORATED
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 2,242
<SECURITIES> 0
<RECEIVABLES> 36,704
<ALLOWANCES> (1,332)
<INVENTORY> 989
<CURRENT-ASSETS> 50,836
<PP&E> 207,617
<DEPRECIATION> (56,996)
<TOTAL-ASSETS> 451,099
<CURRENT-LIABILITIES> 44,175
<BONDS> 274,368
0
0
<COMMON> 122
<OTHER-SE> 113,823
<TOTAL-LIABILITY-AND-EQUITY> 451,099
<SALES> 143,394
<TOTAL-REVENUES> 143,394
<CGS> 73,742
<TOTAL-COSTS> 127,919
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,631
<INCOME-PRETAX> (2,156)
<INCOME-TAX> (346)
<INCOME-CONTINUING> (1,810)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,810)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
