UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE 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 (I.R.S. Employer
jurisdiction Identification No.)
of incorporation)
745 Atlantic Avenue
Boston, MA 02111
(Address of principal (Zip Code)
executive offices)
617-357-4455
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value ("Common Stock")
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 21, 1997, the aggregate market value of the Common Stock of the
registrant held by non-affiliates of the registrant was $132,852,724 based on
the closing price on the Nasdaq Stock Market's National Market (the "Nasdaq
National Market") on such date.
Number of shares of the registrant=s
Common Stock at March 21, 1997: 9,684,419
Number of shares of the registrant's
Non-Voting Common Stock
at March 21, 1997: 454,590
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders, which will be filed on or before April 30, 1997, are incorporated
by reference into Part III.
<PAGE>
IRON MOUNTAIN INCORPORATED
1996 FORM 10-K ANNUAL REPORT
Table of Contents
<TABLE>
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PART I
Page
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Item 1. Business.................................................................... 1
Item 2. Properties.................................................................. 19
Item 3. Legal Proceedings........................................................... 20
Item 4. Submission of Matters to a Vote of
Security Holders......................................................... 21
PART II
Item 5. Market for the Registrant's Common
Stock and Related Stockholder Matters.................................... 23
Item 6. Selected Consolidated Financial and Operating Information................... 24
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................................... 26
Item 8. Financial Statements and Supplementary Data................................. 37
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure..................................................... 61
PART III
Item 10. Directors and Executive Officers of the
Registrant............................................................... 62
Item 11. Executive Compensation...................................................... 62
Item 12. Security Ownership of Certain Beneficial
Owners and Management.................................................... 62
Item 13. Certain Relationships and Related
Transactions............................................................. 62
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K.................................................. 63
</TABLE>
<PAGE>
PART I
Item 1. Business
(a) Development of Business.
Iron Mountain Incorporated ("Iron Mountain" or the "Company," which
terms include its consolidated subsidiaries unless the context indicates
otherwise) is America's largest records management company, as measured by its
revenues in the United States. Iron Mountain is a full-service provider of
records management and related services, enabling customers to outsource data
and records management functions. As of December 31, 1996, Iron Mountain
managed approximately 30.6 million Cartons1 in 109 records centers in 33
markets nationwide. Iron Mountain has a diversified base of over 23,000
customer accounts, which includes more than half of the Fortune 500 and
numerous legal, banking, healthcare, accounting, insurance, entertainment and
government organizations. Iron Mountain provides storage and related services
for all major media, including paper (which is the dominant form of records
retention and which has accounted for approximately 85% of Iron Mountain's
revenues since 1992), computer disks and tapes, microfilm and microfiche,
master audio and video tapes, film and optical disks, X-rays and blueprints.
Iron Mountain's principal services include filing, retrieval and destruction
of records, courier pick-up and delivery, database management and customized
reporting. Iron Mountain also sells storage materials and provides consulting
and other records-related services.
Iron Mountain's operations date to 1951, when a corporate predecessor
commenced storage operations. The current Iron Mountain was incorporated in
Delaware in 1990.
As part of its growth strategy, since mid-1994, the Company has
acquired 27 records management businesses, 20 of which have been consummated
since January 1, 1996 (the "Recent Acquisitions"), and has entered into
definitive agreements to acquire two additional records management businesses
(the "Pending Acquisitions," and, together with the Recent Acquisitions, the
"Acquisitions"). See "Description of Business--Recent and Pending
Acquisitions" and "Growth Strategy."
On February 19, 1997, the Company entered into an Agreement and Plan of
Merger, as amended (the "Merger Agreement") with Safesite Records Management
Corporation ("Safesite") providing for the merger of a wholly owned subsidiary
of Iron Mountain with Safesite (the "Merger"). Safesite provides a full range
of records storage and management services and data protection services for
more than 7,000 customers in 14 markets, all of which are among the top 30
U.S. markets. Ten of these markets overlap with current Iron Mountain
operations, while four represent new markets.
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1 The term "Carton" is defined as a measurement of volume equal to a single
standard storage carton, approximately 1.2 cubic feet. The number of Cartons
stored does not include storage volumes in Iron Mountain's vital records and
data protection services.
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Under the Merger Agreement, Iron Mountain will acquire all of
Safesite's outstanding capital stock for approximately $62 million, which will
be paid in the form of Iron Mountain's Common Stock, par value $.01 per share
(the "Common Stock"), and immediately exercisable options to acquire shares of
Common Stock, to be valued at approximately $50 million, and approximately $12
million in cash. The number of shares of the Common Stock will be determined
based on the average market price for the 20 trading days ending three trading
days before the closing, subject to a floor of $26.00 and a ceiling of $31.00.
Accordingly, if such average price is less than $26.00 or greater than $31.00,
the number of shares of Common Stock and immediately exercisable options to
acquire Common Stock to be issued in the Merger will be based on a price of
$26.00 or $31.00, as the case may be, and Iron Mountain would issue 1,919,615
or 1,610,000, as the case may be, shares of Common Stock and shares underlying
immediately exercisable options to acquire Common Stock. The Merger has been
structured to be a tax-free reorganization.
Although the Company believes the consummation of the Merger is
probable, no assurances can be given that the Merger will occur or occur in
the foregoing manner. The Merger, which is expected to close in the second
quarter of 1997, is subject to various conditions to closing, including but
not limited to, regulatory approvals, third-party consents and a Safesite
stockholder vote. Certain major stockholders of Safesite have agreed to vote
in favor of the Merger and other related matters.
In March 1997, Iron Mountain experienced three fires that resulted in
extensive damage to two of its record management facilities in South
Brunswick, New Jersey. Approximately 1.0 million of the 1.2 million Cartons
stored at these facilities were destroyed. The fires are believed to be caused
by arson and are under investigation by local, state and federal authorities.
The affected facilities account for only two of Iron Mountain's 117 facilities
nationwide (as of March 21, 1997), and represented less than three percent of
revenues and less than two percent of earnings before interest, taxes,
depreciation, amortization and extraordinary charges ("EBITDA") for 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" for a more detailed description of such casualty and its
anticipated impact on Iron Mountain.
(b) Description of Business.
The Records Management Industry
Overview. Based on publicly available information, organizations in the
United States generate an estimated four trillion documents each year. Many of
these documents must be retained and available for reference for many years.
These records may be generally divided into two categories: active and
inactive. Active records relate to ongoing and recently completed activities
or contain information that is frequently referenced. Active records are
usually stored and managed on-site by the organization which originated them
to ensure ready availability.
Inactive records are the principal focus of the records management
industry. Inactive records consist of those records which are not needed for
immediate access but which must be retained for
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legal reasons or regulatory compliance or for occasional reference in support
of ongoing business operations. Based on industry studies, Iron Mountain
believes that inactive records make up approximately 80% of all records.
Growth of Market; Outsourcing. Iron Mountain believes that the volume
of inactive records is increasing for a number of reasons, including: (i) the
rapid growth of inexpensive document-producing technologies such as facsimile,
desktop printing and computer networking; (ii) increased regulatory
requirements; (iii) concerns over possible future litigation and the resulting
increases in volume and holding periods of documentation; (iv) the high cost
of reviewing records and deciding whether to retain or destroy them; and (v)
the failure of many entities to adopt or follow policies on records
destruction. Despite the growth of new "paperless" technologies, such as the
Internet and e-mail, management believes that stored information remains
predominantly paper-based and that such technologies have promoted the
creation of hard copies of such electronic information.
Iron Mountain believes that the records management industry will gain
a growing share of this increased volume as more large organizations make the
strategic decision to outsource their records management as part of a growing
trend to outsource a wide variety of functions that can be performed more
cost-effectively by third parties, though there can be no assurance in this
regard. Records management companies can offer occupancy and labor cost
reductions while at the same time providing greater levels of service than are
typically available in-house.
Highly Fragmented Industry. Most records management companies serve a
single local market, and are often either owner-operated or ancillary to
another business, such as a moving company. According to PRISM International,
a trade group with approximately 525 members (formerly known as the
Association of Commercial Records Centers), as of January 1994 (the latest
date for which such information is available), approximately 2,600 firms
offered records storage and management services in the United States. Iron
Mountain believes that there are only a few national providers in the industry
(including Iron Mountain and Safesite) and that the rest are regional or, in
most instances, single-city operators.
Increasing Industry Consolidation. Iron Mountain believes that there is
a trend towards consolidation in the records management industry and that it
will continue because of the industry's capital requirements for growth,
customer demands for more sophisticated technology solutions, a trend for
certain large customers to contract with one vendor in multiple cities and
opportunities to achieve economies of scale.
The records management business requires significant up-front capital
investment for real estate, racking systems and management information
technology. Economies of scale available in these areas can reward larger
initial capital investments by reducing per unit storage costs. However, such
economies of scale are only realized once a facility begins storage operations
and fills available capacity. Thus, larger companies with both access to
capital and the ability to quickly fill a new facility enjoy a competitive
cost advantage, thereby putting pressures on smaller competitors.
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Financial Characteristics of Iron Mountain's Business
Iron Mountain's records management business has the following financial
characteristics:
[bullet] Recurring Revenues. Iron Mountain derives a majority of its
revenues from fixed periodic (usually monthly) fees charged to
customers for storage of records. Storage revenues have grown
for 32 consecutive quarters and have represented approximately
60% of Iron Mountain's total revenues in each of the last five
years. Once a customer places a record in storage with Iron
Mountain and until that record is destroyed or permanently
removed (for which Iron Mountain typically receives a service
fee), Iron Mountain receives recurring payments of fixed
periodic fees without incurring additional labor or marketing
expenses or significant capital costs. The stable and growing
storage base also provides the foundation for increases in
revenues and EBITDA from service activities and sales of storage
materials.
[bullet] Historically Non-Cyclical Business. Iron Mountain has not
experienced a reduction of its business as a result of past
general economic downturns, although there can be no assurances
that this would be the case in the future. Management believes
that the outsourcing of records management may accelerate during
economic downturns as companies focus on reducing costs through
outsourcing non-core operating functions. In addition,
management believes that companies that have outsourced records
management are less likely during economic downturns to incur
the move-out costs and other expenses associated with switching
vendors or moving records management in-house.
[bullet] Inherent Growth from Existing Customers. Iron Mountain's
customers have on average generated additional Cartons at a
faster rate than stored Cartons have been destroyed or
permanently removed. From January 1, 1992 through December 31,
1996, net Cartons from existing customers grew at an average
annual rate of 6.5%. Iron Mountain believes the consistent
growth of its storage revenues is the result of a number of
additional factors, including: (i) the trend toward increased
records retention; (ii) customer satisfaction with Iron
Mountain's services; and (iii) the costs and inconvenience of
moving storage operations in-house or to another provider of
records management services.
[bullet] Diversified and Stable Customer Base. Iron Mountain has over
23,000 customer accounts in a variety of industries. Iron
Mountain currently provides services to more than half of the
Fortune 500 and numerous legal, banking, healthcare, accounting,
insurance, entertainment and government organizations. Only one
of Iron Mountain's customers accounted for more than 3% of
revenues in each of the years from 1993 through 1996. From
January 1, 1992 through December 31, 1996, average annual
permanent removals of Cartons represented only approximately 4%
of total Cartons stored.
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[bullet] Capital Expenditures Related Primarily to Growth. Iron
Mountain's business requires limited annual maintenance capital
expenditures. Maintenance capital expenditures were $1.2
million, $0.9 million and $1.1 million in 1994, 1995 and 1996,
respectively. From 1992 to 1996, over 90% of Iron Mountain's
aggregate capital expenditures were growth-related investments,
primarily in racking systems, new buildings and leasehold
improvements, equipment for new facilities, management
information systems and facilities restructuring. These
growth-related capital expenditures are primarily discretionary
and create additional capacity for increases in revenues and
EBITDA.
Recent and Pending Acquisitions
Since mid-1994, the Company has been pursuing a growth strategy, which
has resulted in the acquisition of 27 records management businesses during
such period. In addition to the Merger, the Company has one additional Pending
Acquisition.
The total purchase price of the Recent Acquisitions was approximately
$87.1 million (not including contingent payments of up to $4.8 million based
upon the achievement of certain revenue targets during 1997 and 1998), and the
total purchase price of the Pending Acquisitions is approximately $75.0
million. The Recent Acquisitions represent in the aggregate total annual
revenues of approximately $37.3 million, and the Pending Acquisitions
represent total annual revenues of approximately $24.1 million (calculated in
each case by reference to the revenues of each such acquired business during
the year ended December 31, 1996, which calculation includes an estimate of
total revenues for the portion of 1996, if any, during which any such acquired
business was included in the Company's results of operations).
Giving effect to the Recent Acquisitions consummated after January 1,
1997 and the Pending Acquisitions, as of December 31, 1996, the Company
operated 141 record centers in 40 markets nationwide, servicing over 30,000
customers.
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The following table presents certain information for each acquisition
completed since mid-1994.
<TABLE>
<CAPTION>
Principal
State(s) of Completion
Acquisitions Operation Date
- ------------ --------- ----
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1994 Acquisitions
Data protection service business of Media Management Group,
Inc............................................................ Connecticut June 1994
Data protection service business of Digital Equipment
Corporation.................................................... Massachusetts July 1994
Storage and Retrieval Concepts, Inc............................ Ohio October 1994
1995 Acquisitions
National Business Archives, Inc................................ Maryland March 1995
DataFile Services, Inc......................................... Texas October 1995
Brooks Records Center, Inc..................................... Delaware December 1995
Data Management Business Records Storage, Inc.................. Georgia December 1995
1996 Acquisitions
Nashville Vault Company, Ltd................................... Tennessee January 1996
Florida Data Bank, Inc......................................... Florida January 1996
DataVault Corporation.......................................... Massachusetts February 1996
Data Storage Systems, Inc...................................... California March 1996
Brambles CRC, Inc.............................................. Ohio and April 1996
Kentucky
Records management business of Output Technologies
Central Region, Inc........................................ Missouri May 1996
Records management business of The Fortress Corporation........ Massachusetts July 1996
and Florida
Data Archive Services, Inc. and Data Archive Services of
Miami, Inc..................................................... Florida August 1996
DKA Industries, Inc. (d/b/a/ Systems Record Storage)........... Florida August 1996
International Record Storage and Retrieval Service, Inc........ New Jersey September 1996
Security Archives Corporation.................................. California September 1996
Data Storage Company, Inc. (d/b/a DataSafe).................... Tennessee October 1996
Dial-A-File Storage, Inc....................................... Florida October 1996
Mohawk Business Record Storage, Inc............................ Minnesota November 1996
Magnetic Archives, Inc......................................... Colorado November 1996
Deliverex of Broward........................................... Florida November 1996
1997 Acquisitions
Security Archives II, Inc. and Security Archives of MSP, Inc... Minnesota February 1997
Records management business of Wellington Financial Services,
Inc. (d/b/a Michigan Data Storage, Michigan Safe Deposit
and The Depository)............................................ Michigan February 1997
Data Recovery Services, Inc.................................... Florida February 1997
CBD Security Archives, Inc..................................... Louisiana March 1997
and Texas
</TABLE>
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The closings of the Pending Acquisitions are subject to various
conditions and no assurance can be given that either Pending Acquisition will
be completed.
Growth Strategy
Iron Mountain's growth strategy is to expand aggressively in existing
and new markets through increased business from existing customers, additions
of new customers and acquisitions. Iron Mountain's goal is to be one of the
largest records management companies in each of its markets. In addition,
through its growth strategy, Iron Mountain seeks to attain increasing
economies of scale in order to provide high-quality service at competitive
prices.
The following table sets forth Iron Mountain's approximate growth in
Cartons stored by existing customers, new customers and as a result of
acquisitions for the three years ended December 31, 1994, 1995 and 1996.
Cartons Added to Storage (1)
(In millions)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1994 1995 1996
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<S> <C> <C> <C>
Cartons at Beginning of Period.................. 15.5 17.7 23.3
==== ==== ====
Additions from Existing Customers
Gross Cartons Added........................... 2.6 2.5 3.3
Cartons Deleted:
Destructions.............................. (0.9) (1.0) (1.1)
Permanent Removals........................ (0.6) (0.6) (0.9)
---- ---- ----
Net Carton Growth from Existing Customers....... 1.1 0.9 1.3
Additions from New Customers.................... 1.0 1.4 1.4
Additions from Acquisitions..................... 0.1 3.3 4.6
--- --- ---
Total Carton Additions.......................... 2.2 5.6 7.3
=== === ====
Percentage Increase............................. 14% 32% 31%
</TABLE>
(1) Excludes storage volumes attributable to the Company's vital records
services and data protection services.
Growth from Existing Customers. Existing Iron Mountain customers have
contributed to storage and services revenue growth because they have on
average generated additional Cartons at a faster rate than old Cartons are
destroyed or permanently removed. In order to maximize growth opportunities
from existing customers, Iron Mountain seeks to maintain high levels of
customer retention by providing premium customer service through its
decentralized customer support staff.
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The local customer support staff, working in conjunction with the
corporate staff, is also responsible for marketing additional services to
existing customers, including records tracking, indexing, customized
reporting, vital records management and records management consulting
services.
Additions of New Customers. Iron Mountain's direct sales force is
dedicated solely to establishing new account relationships and draws on Iron
Mountain's national marketing organization and senior management. New customer
sales efforts have resulted in the addition of more than 900 new customer
accounts in each of the years 1993 through 1995 and over 1,200 new customer
accounts in 1996.
Iron Mountain segments its market into large volume accounts (typically
over 10,000 Cartons) and standard accounts. As of December 31, 1996, large
volume accounts represented more than half of the total Cartons stored. The
two segments differ in complexity of service and technology needs, purchasing
behavior and purchasing leverage. Iron Mountain employs different database
marketing techniques, program design features and pricing structures to meet
the needs of each segment. In recent years Iron Mountain's large volume
account segment has grown rapidly, driven by strategic outsourcing initiatives
and Iron Mountain's marketing efforts. In 1994, 1995 and 1996, large volume
accounts represented 70%, 76% and 66% respectively, of the additions of
Cartons from new customers.
Growth through Acquisitions. Iron Mountain has had a successful record
of acquiring and integrating smaller records management companies. From 1990
through 1994, Iron Mountain completed five acquisitions. In order to
capitalize on industry consolidation, Iron Mountain in mid-1994 adopted a more
active acquisition strategy and implemented changes in its management, systems
and financial infrastructure, including the consummation of a public offering
of its Common Stock in January 1996 to execute such strategy. Since June 1994,
Iron Mountain has acquired 27 companies and has entered into definitive
agreements to acquire two more.
Iron Mountain currently operates in 36 markets nationwide and intends
to continue to make fold-in acquisitions in existing markets and to make
strategic acquisitions in new geographic markets, with an emphasis on the 50
largest markets in the United States. Iron Mountain's corporate development
staff is engaged in an ongoing review of acquisition candidates. Management
believes that Iron Mountain is well-positioned to participate in the further
consolidation of the records management industry.
Iron Mountain seeks to expand its national presence, size and customer
base through new-market acquisitions. Management believes that the high
start-up costs of commencing operations make acquisitions an attractive means
of entering new markets. Iron Mountain seeks to acquire records management
companies in markets where management believes there is the potential for
growth. Within such markets, Iron Mountain uses a variety of criteria to
evaluate acquisition candidates, including the capacity and condition of
existing storage facilities, past and current operating performance and
revenues and the experience and depth of existing management.
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Iron Mountain believes that it can use its expertise and central
administrative organization to leverage the acquisition candidate's local
market presence, promoting the development of underperforming facilities and
enhancing the value of the local assets. Iron Mountain believes that its
new-market acquisition strategy could have a number of benefits, including:
(i) continued growth in revenues and EBITDA and diversification across a
greater number of markets; (ii) introduction of Iron Mountain's efficient
storage, labor, transportation and other operating efficiencies into new
markets; (iii) the increased utilization of efficiencies available through
Iron Mountain's central administrative and management information functions;
(iv) increased market awareness of Iron Mountain's national scope and
presence; and (v) increased overall scale, which should broaden the range of
and facilitate Iron Mountain's capital-raising activities.
Iron Mountain also intends to continue to make fold-in acquisitions to
augment its operations in existing markets. Iron Mountain's goal in its
existing markets is to exploit economies of scale while maintaining high
quality service. Following a new-market acquisition, Iron Mountain seeks to
increase its business with the acquired customer base and to supplement that
growth with new customers and, potentially, with appropriate fold-in
acquisitions so that Iron Mountain may benefit from economies of scale.
Premium Service Strategy
Organizations selecting a provider of records management services
consider a number of factors in addition to price. Management believes that
Iron Mountain is a "premium" brand in the marketplace based upon its
reputation for reliability, customer-oriented organization, investment in
technology and national operating presence. Iron Mountain seeks to exploit its
strengths in each of these areas to maintain customer relationships and to
attract new customers.
Reputation for Reliability. Iron Mountain believes it has a reputation
for reliability based on its more than 45 years of operations, the continuity
and depth of its management, its successful historical growth, the quality and
diversity of its customer base which includes more than half the Fortune 500,
its technological capabilities and its size and financial resources.
Customer-Oriented Organization and Locally Responsive Management. Iron
Mountain has developed a decentralized, local management structure that brings
significant management experience and stability to local markets and allows
Iron Mountain to respond directly, effectively and flexibly to customers.
Broad operating authority is delegated to regional Vice Presidents and local
managers. In pursuing its acquisition strategy, Iron Mountain seeks to
capitalize upon the experience and strengths of existing management. In
addition, all full-time union and non-union employees participate in
incentive-based compensation programs that provide payments based on profits
or attainment of specified objectives for the unit in which they work. Iron
Mountain believes that the experience, stability and commitment of its
regional and local management is integral to its ability to provide superior
customer service and maximize growth potential.
Investment in Technology. Iron Mountain has invested $16.3 million in
technology since 1992 in order to provide faster and more flexible solutions
for its customers and to enhance the
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quality and lower the costs of its own operations. Iron Mountain believes that
its technological capabilities, especially its Safekeeper system, are a
significant tool in attracting new customers. Iron Mountain plans to continue
to invest in its proprietary technologies in the future. See "Technology and
Development; Information Systems."
National Operating Presence. Iron Mountain believes it is one of only a
few records management companies with a national operating presence (including
Safesite). Traditionally, the purchase decision for large multi-site customers
has been made at the local level. Recently, however, Iron Mountain has found
that certain large organizations have sought to obtain operating and economic
efficiencies by outsourcing a significant portion of their records management
functions with a single records management company. Iron Mountain seeks to use
its national operating presence to compete for such large multi-site customer
accounts.
Low-Cost Operating Strategy
Iron Mountain pursues a low-cost operating strategy based primarily on
achieving economies of scale in the areas of storage, labor and
transportation, general and administrative functions and management
information systems. Iron Mountain believes that it is one of the few records
management companies with the size and resources to realize significant
economies of scale in these areas.
Storage Costs. Because occupancy costs are a major component of Iron
Mountain's cost of sales, reducing per Carton storage costs is a primary
strategic goal of Iron Mountain and its real estate management staff. Iron
Mountain seeks to minimize per Carton storage costs by: (i) designing racking
systems and operating space to maximize facility storage efficiency; (ii)
negotiating favorable facility leases and having facilities built to its
custom specifications; and (iii) leasing larger facilities, which, when
filled, are less expensive per Carton to operate. Since 1991, Iron Mountain
has acquired or leased 11 custom-designed records management facilities. The
average Carton density (the ratio of standard Carton storage capacity to total
square feet of floor space) of these facilities is approximately twice that of
Iron Mountain's overall average Carton density.
Labor and Transportation Efficiency. Iron Mountain has made significant
investments in computer technologies for its service operations, resulting in
greater efficiencies. In addition, by increasing its operations and customer
base in a local market area, Iron Mountain seeks to maximize its courier
delivery fleet usage and to increase delivery and routing efficiencies.
Iron Mountain's incentive structure has also contributed to labor
efficiency. Each of Iron Mountain's full-time employees participates in
incentive compensation programs based upon achievement of specific operating
targets designed to integrate the objectives and performance of records
management facility employees and managers. For the year ended December 31,
1996, Iron Mountain's employees earned incentive compensation in an amount
equal to approximately 12.0% of the base wages paid by Iron Mountain.
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General & Administrative and Management Information Systems
Efficiencies. Iron Mountain's corporate staff provides support to local
management in the areas of acquisitions, marketing, facility acquisition and
leasing, racking system purchasing, finance and accounting and human resource
management. In addition, Iron Mountain's corporate staff is responsible for
the design and support of all records management technology. Iron Mountain
believes that central support in these areas provides local managers with
competitive advantages over smaller, local competitors and results in
significant economies of scale.
Technology and Development; Information Systems
Iron Mountain pioneered the application of advanced information
technology to the records management industry. Iron Mountain's proprietary
Safekeeper system provides advanced inventory control and information access,
enabling Iron Mountain to provide faster, higher quality and more flexible
solutions to its customers and to lower the costs of its operations. Iron
Mountain's Safekeeper system exploits bar-code technology to provide inventory
integrity and a comprehensive, standardized approach to tracking, accessing
and retrieving records. Safekeeper offers state-of-the-art records management
capabilities and ease of access to customers while featuring security
functions to protect customer information from unauthorized access. The system
coordinates inventory control, order entry, billing, material sales, service
activity, accounts receivable and management reporting, and features
system-driven quality assurance and error-prevention. Since 1992, Iron
Mountain has invested $16.3 million to develop and refine its management
information systems, including Safekeeper.
Safekeeper is built on an open systems architecture which is fully
portable and can be implemented in small processing environments with several
users and in large processing environments with hundreds of users. This allows
Iron Mountain a substantial measure of flexibility and vendor independence,
and reduces the risk of technological obsolescence.
Safekeeper has improved Iron Mountain's customer support and operating
efficiency in the following ways:
[bullet] Acquisition System Integration. Safekeeper has been designed to
easily and effectively integrate newly acquired records
management companies and offer improved levels of customer
service and records management capabilities to customers
acquired through acquisitions. The critical components of
integrating acquisition systems are the abilities to match the
acquired company's carton identifiers, location identifiers,
records descriptive data, and billing data. Safekeeper is
designed with flexible, comprehensive capabilities in each of
these areas. Consequently, an acquired company's inventory can
be converted to Safekeeper without having to relabel cartons or
reset and relabel inventory locations. The customers of the
acquired company retain their records data and receive similar
billing rate structures. In addition, acquisition customers
experience minimal disruption during integration and, after
conversion, gain access to advanced records management and
information access capabilities. Safekeeper utilizes a suite of
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conversion routines to automate the conversion process and
effectively translate customer and inventory information.
[bullet] Storage Efficiency. Safekeeper enables Iron Mountain to maximize
the efficient use of storage space at its facilities. When
cartons are added or returned to storage, Safekeeper identifies
available space and the location of the customer's other records
at the facility. Because there is a continual flow of cartons
into and out of Iron Mountain's facilities, Safekeeper also
permits facility operators to utilize space that becomes
available as soon as cartons are removed. Safekeeper can
pinpoint the location of any carton, enabling facility operators
to quickly determine the optimal location for new or returning
cartons.
[bullet] Inventory Integrity. Bar-coding and scanning are used to track a
carton or a record throughout its life cycle at Iron Mountain.
Safekeeper identifies inventory discrepancies during the order
processing cycle and forces their resolution before they affect
the customer. This forced discrepancy resolution means that
errors must be resolved before an order can be closed; until the
order is closed, billing cannot be processed. Management
believes that this system-driven quality assurance is a
significant advantage over the "best efforts" approach used by
most of its competitors.
[bullet] Customer Information Access. Customers can access their records
management data through a variety of formats, including direct
access via Safekeeper Online, access on their own PCs via
Safekeeper Desktop, integration of their internal system with
Safekeeper via automated file transfers and paper reports.
Safekeeper Online enables a customer to place orders directly
via online access, resulting in efficiencies for Iron Mountain
order processing. It features robust querying and searching
tools to enable customers to identify records with only partial
information. Safekeeper Desktop is a PC application, run from
customers' desktop or network PCs; it provides customers with an
entire set of records management data along with user-friendly
tools for querying, reporting, and editing. Safekeeper's suite
of file transfers enable customers to automatically transfer
records data and service requests from their internal system to
Safekeeper. The paper reports include inventory detail and
summary, service activity analysis, quality assurance, and
management review.
[bullet] Records Management Flexibility. Safekeeper offers full
life-cycle records management, from file creation to
destruction, enabling each customer to establish schedules for
records retention and destruction as dictated by the customer's
specific needs. Safekeeper can flexibly accommodate large or
small amounts of records management data in accordance with
customer requirements. A series of customer-specific features
and options allows Iron Mountain to tailor the records
management functionality and reporting to the customer's needs.
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<PAGE>
[bullet] Security. Safekeeper incorporates strict security protocols and
procedures for all customers to prevent unauthorized access to a
client's records information. Advanced security features that
can automatically restrict access by departmental identification
and/or type of service request are available to customers that
are internally set up to provide this information.
In addition to Safekeeper, Iron Mountain's data protection services
facilities utilize Iron Mountain's Media LinkJ software, a state-of-the-art
media management system which provides integrated bar-code tracking and
electronic data interface between customer and Iron Mountain facilities, as
well as audit trail and remote inventory query functionality. Iron Mountain
plans to continue to invest in its proprietary technologies in the future in
order to enhance its customer service as well as to increase its own operating
efficiency.
Description of Iron Mountain Records Management Services
Iron Mountain's records management services consist primarily of the
storage operations for the management of hard copy documents. These and
related services and products sold have, since 1992, accounted for
approximately 85% of Iron Mountain's revenues. The balance of Iron Mountain's
revenues come from the storage and service of vital records and data
protection, consulting and other services.
Storage Operations. Storage revenues accounted for approximately 60% of
revenues in each of Iron Mountain's last five fiscal years. Storage charges
are generally billed monthly on a per storage unit basis (usually either per
unit or per cubic foot of records) and include the provision of space,
racking, computerized inventory and activity tracking, physical security,
environmental and climate control and fire protection.
The storage of a carton begins by issuing Safekeeper bar-coded labels
to the customer. The customer packs records in cartons and affixes the
bar-coded label to each carton. Customer personnel and the Iron Mountain
driver conduct a physical count of the cartons and the driver signs for the
cartons, which are then transported to the records management facility. Upon
delivery to the facility, the cartons are subjected to a second physical
count. The cartons are delivered to available space identified by Safekeeper
and the bar-coded information is scanned into the computer together with a
bar-coded location identifier. At the same time, a computer operator enters
the customer's data describing the stored material into the computer and the
system confirms that the cartons sent match the data entered in the computer.
Under Iron Mountain's computer control system, the order can only be closed
out when all requisite steps and checks have been completed and counts and
locations have been reconciled.
Service and Courier Operations. Principal services include adding
cartons to storage, temporary removal of files or cartons from storage,
refiling of removed records, permanent withdrawals from storage and
destruction of records. Service charges are generally assessed for each
procedure on a per unit basis. The Safekeeper system controls the service
processes from order entry through transportation and invoicing.
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<PAGE>
Courier operations consist primarily of the pickup and delivery of
records upon customer request. Courier delivery schedules can be tailored to
fit customers' needs, but generally customer orders received by 4:00 p.m. on a
business day are delivered the following business day. Iron Mountain also
provides same-day and immediate delivery during business hours and emergency
delivery at night and on weekends and holidays. Charges for courier services
are based on urgency of delivery, volume and location and are billed monthly
as incurred. Iron Mountain currently utilizes a fleet of approximately 300
owned or leased delivery vehicles.
Vital Records Services. Vital records contain critical or irreplaceable
data such as master audio and video recordings, film, software source code and
other highly proprietary information. Vital records may require special
facilities or services, either because of the data they contain or the media
on which they are recorded. Iron Mountain's charges for providing enhanced
security and special climate-controlled environments for vital records are
higher than for typical storage functions. Iron Mountain provides the same
ancillary services for vital records as it provides for its other storage
operations.
Data Protection Services. Data protection services consist of the
storage, backup and archiving of computer media as part of corporate disaster
and business recovery plans. Computer tapes, cartridges and disk packs are
transported off-site by Iron Mountain's courier operations on a scheduled
basis to secure, climate-controlled facilities, where they are available to
customers 24 hours a day, 365 days a year, to facilitate data recovery in the
event of a disaster. This process is managed by Iron Mountain's Media Link
software, a state-of-the-art media management system which provides integrated
bar-code tracking, electronic data interface between the customer and Iron
Mountain's facilities as well as audit trail and remote inventory query
functionality. Iron Mountain also manages tape library relocation and supports
disaster recovery testing and execution.
Additional Services and Products. Iron Mountain offers a variety of
additional services, which customers may request or contract for on an
individual basis. These services include performing records inventories,
packing records into cartons or other containers, computerized indexing of
files and individual documents, developing schedules for the retention and
destruction of records and records management consulting services. Iron
Mountain also sells a full line of specially designed corrugated cardboard,
metal and plastic storage containers.
Iron Mountain provides professional consulting services to large
customers, enabling them to develop and implement comprehensive records
management programs. Iron Mountain's consulting business draws on Iron
Mountain's experience in records management to analyze the practices of such
companies and assist them in creating more effective programs of records
management. Iron Mountain's consultants work with such customers to develop
policies for document review, analysis and evaluation and for scheduling of
document retention and destruction.
In addition to its historical focus on the management of inactive
records, Iron Mountain has recently begun to provide services for the
management of active records. Iron Mountain can provide these services, which
generally include document and file processing and storage, both off-site at
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its own facilities and by supplying its own personnel to perform management
functions on-site at the customer's premises. Iron Mountain sees active
records management as a potential source of future revenue growth for Iron
Mountain, although there can be no assurance in this regard.
Potential International Investments
Iron Mountain may consider capitalizing upon its expertise in the
records management industry by making investments in records management
businesses outside the United States. From time to time, Iron Mountain has had
discussions concerning such investments. Such investments, if consummated,
would be subject to risks and uncertainties relating to the indigenous
political, social, regulatory, tax and economic structures of countries in
those areas, as well as fluctuations in currency valuation, exchange controls,
expropriation and governmental policies limiting returns to foreign investors.
At this time, there can be no assurance as to whether any such investment will
be made or, if made, will be successful in achieving its objectives.
Customers
Iron Mountain's customer base is diversified in terms of revenue and
industry concentration. Iron Mountain currently has over 23,000 customer
accounts. Iron Mountain considers each invoice it delivers to its customers a
separate customer account and, accordingly, an organization which receives
more than one invoice represents multiple customer accounts. The chart below
shows, as of June 1994, the relative amounts of revenue attributable to
certain business sectors.
[Graphic omitted: Graphic contains a pie chart showing the relative amounts of
revenue by percentage attributable to certain business sectors as of June
1994. Such percentages are as follows:
Other 19%
Legal Services 16%
Depository Institutions 14%
Health Care 10%
Other Financial Institutions 10%
Professional Services 7%
Government 6%
Insurance Companies 8%
Manufacturing 4%
Retail 4%
Entertainment 2% ]
Iron Mountain services accounts of all sizes, from small businesses and
professional groups to over half of the Fortune 500. Other than the Resolution
Trust Corporation (the "RTC") or its successor, the Federal Deposit Insurance
Corporation (the "FDIC"), which accounted for 6.3%, 4.8% and 3.5% of Iron
Mountain's revenues for the years ended December 31, 1994, 1995 and 1996,
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respectively, no account or related set of accounts generated more than 3% of
Iron Mountain's revenues during any such period.
Iron Mountain's contract with the FDIC, as successor under the contract
to the RTC, was renewed effective July 27, 1996 for a one-year term, with
three further annual renewal options at the election of the FDIC. Although the
substantial costs of removing its records from Iron Mountain's facilities may
act as a disincentive to the FDIC to select another vendor, there can be no
assurance that the contract will be further renewed or that the terms of such
renewal will be as favorable to Iron Mountain as the terms of the current
contract. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview."
Marketing and Sales
Iron Mountain uses database marketing and a dedicated sales force to
focus exclusively on new business development. A corporate marketing
organization provides sales support, training, marketing communications and
product management as support functions. The program has successfully produced
over 900 new customer accounts in each of the years 1993 through 1995, and
over 1,200 new customer accounts in 1996. The selling effort is bolstered by
regional and senior managers focused on key account selling.
Employees
A key feature of Iron Mountain's operating strategy is its
decentralized management structure and reliance on local management operating
in local business environments. Iron Mountain's current operations are divided
into four areas, each headed by a senior executive, comprising twelve local
management regions to maximize marketing and operating effectiveness and to
minimize supervisory costs. The management regions, each of which is managed
by a Vice President, are currently further divided into a total of 36 markets,
each managed by a General Manager. The Vice Presidents and General Managers
have broad operating authority. Iron Mountain's headquarters staff performs a
variety of central administrative and support functions in order to maximize
the time and resources that local personnel can devote to customer service and
client development.
Iron Mountain had approximately 1,456 full-time employees as of
December 31, 1996, of whom approximately 90% are employed at the district
level, 8% at the corporate level and the balance at the area and regional
levels.
Approximately 11% of Iron Mountain's employees are represented by
various Teamsters Union locals under four different agreements. Two of these
agreements, representing approximately 150 employees, have expired and are
currently under negotiation. Based on its prior experience with the six union
locals involved in these negotiations, Iron Mountain expects that it will
enter into new agreements on satisfactory terms. The remaining two contracts
expire in 1999. In addition, in two of Iron Mountain's facilities, an
election, subject to National Labor Relations Board regulations, was held on
June 20, 1996. A majority of the approximately 40 employees voted for
representation by a Teamsters Union local. Iron Mountain is currently in
negotiations with the union local.
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<PAGE>
All non-union employees are eligible to participate in Iron Mountain's
benefit programs, which include medical, dental, life, short and long-term
disability and accidental death and dismemberment plans. Unionized employees
receive these types of benefits through their unions. In addition to base
compensation and other usual benefits, all full-time union and non-union
employees participate in some form of incentive-based compensation program
that provides payments based on profits, collections, or attainment of
specified objectives for the unit in which they work. Management believes that
Iron Mountain has good relationships with its employees and unions.
Competition
Iron Mountain competes with a few other national companies, one of
which is Safesite, which will be acquired by Iron Mountain if the Merger is
consummated, as well as a large number of local and regional concerns. Iron
Mountain believes that competition for customers is based on price, reputation
for reliability, quality of service and scope and scale of technology, and
believes that it generally competes effectively based on these factors.
Management believes that, except for Pierce Leahy Corp., all of these
competitors have records management revenues significantly lower than those of
Iron Mountain. To accommodate growth, a records management vendor must invest
in incremental storage capacity, which requires added warehouses, racking
systems, and related equipment including computer systems capable of tracking
increasingly large inventories. The amount of such investment is significant
relative to the immediate return that can be realized, and the faster a vendor
grows, the more capital is required. As a result, the industry trend toward
consolidation will, in management's opinion, continue. In addition, Iron
Mountain faces competition from the internal document handling capability of
its current and potential customers. There can be no assurance that these
organizations will outsource more of their document management needs or that
they will not bring in-house some or all of the functions they currently
outsource. Iron Mountain also faces competition for acquisition candidates.
The substantial majority of Iron Mountain's revenues have been derived
from the storage of paper documents and from related services. Such storage
requires significant physical space. Alternative technologies for generating,
capturing, managing, transmitting and storing information have been developed,
many of which require significantly less space than paper. Such technologies
include computer media, microforms, audio/video tape, film, CD-ROM and optical
disk. None of these technologies has replaced paper as the principal means for
storing information. However, there can be no assurance that one or more
non-paper-based technologies (whether now existing or developed in the future)
may not in the future significantly reduce or supplant the use of paper as a
preferred medium, which could in turn adversely affect Iron Mountain's
business.
Insurance
Iron Mountain carries a comprehensive property insurance policy with
insurers that it believes to be reputable and in amounts that it believes to
be appropriate, covering replacement cost of real and personal property,
including improvements. Subject to sub-limits, the policy also covers
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<PAGE>
extraordinary expenses associated with business interruption and damage or
loss from fire, flood or earthquake, subject to certain deductibles. Separate
policies for California earthquake insurance carry other deductibles that may
be significant. Iron Mountain also maintains general liability and excess
liability insurance covering bodily injury, property damage and personal
injury. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview" for disclosure concerning recent fires at two
of Iron Mountain's facilities.
Iron Mountain's standard form of contract sets forth an agreed maximum
value (usually nominal) for each carton or other storage unit held by Iron
Mountain as a limitation on liability for loss or damage, as permitted under
the Uniform Commercial Code. Iron Mountain believes that in typical
circumstances its liability would be limited to the value set forth in such
contracts in the event of loss or damage relating to the value of information
stored on media held by Iron Mountain. However, certain of Iron Mountain's
agreements with certain large volume accounts contain no such limits or
contain higher limits or supplemental insurance arrangements.
Environmental Matters
Under various federal, state and local environmental laws, ordinances
and regulations ("environmental laws"), an owner of real estate or a lessee
conducting operations thereon may become liable for the costs of
investigation, removal or remediation of soil and groundwater contaminated by
certain hazardous substances or wastes or petroleum products. Certain such
laws impose cleanup responsibility and liability without regard to whether the
owner or operator of the real estate or operations thereon knew of or was
responsible for the contamination, and whether or not operations at the
property have been discontinued or title to the property has been transferred.
In addition, the presence of such substances, or the failure to properly
remediate such property may adversely affect the current property owner's or
operator's ability to sell or rent such property or to borrow using such
property as collateral. The owner or operator of contaminated real estate also
may be subject to common law claims by third parties based on damages and
costs resulting from off-site migration of the contamination.
Certain environmental laws govern the removal, encapsulation or
disturbance of asbestos-containing materials ("ACMs"). Such laws may impose
liability for the release of ACMs and may enable third parties to seek
recovery from owners or operators of real estate for personal injury
associated with exposure to such substances. Iron Mountain is aware of the
presence of ACMs at some of Iron Mountain's facilities, but believes that such
materials are in acceptable condition at this time. Iron Mountain believes
that future costs related to any remediation of ACMs at these facilities will
not be material, either on an annual basis or in the aggregate, although there
can be no assurance with respect thereto.
Certain of the properties formerly or currently owned or operated by
Iron Mountain were previously used for industrial or other purposes that
involved the manufacture, use or storage of hazardous substances or petroleum
products or the generation and disposal of hazardous wastes and, in some
instances, included the operation of underground storage tanks ("USTs"). In
addition, certain of such properties are adjacent to or near Superfund sites
or other contaminated properties.
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In connection with its former and current ownership or operation of certain
properties, Iron Mountain may be potentially liable for environmental costs
such as those discussed above, and as more specifically described below.
At Iron Mountain's Hollywood, California facilities, certain USTs and
contaminated soils have been removed. Some additional contamination of soils
and groundwater remains and may be migrating. In 1990 and 1991, Iron Mountain
filed certain reports documenting its efforts and site conditions with the
appropriate environmental agencies pursuant to various environmental laws.
Investigations conducted on behalf of Iron Mountain in connection with its
on-site remedial activities disclosed that regional groundwater contamination,
unrelated to Iron Mountain's property, exists. At this time, Iron Mountain has
not received any notice from any regulatory agency or third party seeking
further remediation of soil or groundwater by Iron Mountain; however, there
can be no assurance that such further action will not be sought in the future.
Iron Mountain has accrued estimated costs of $0.8 million that it believes it
may reasonably be expected to incur in connection with this site if such
additional remediation were to become necessary; however, there can be no
assurance as to the adequacy of such accrual. Iron Mountain believes the
ultimate outcome of the foregoing will not have a material adverse effect on
Iron Mountain's financial condition or results of operations. See Note 8 of
Notes to Iron Mountain's Consolidated Financial Statements.
Iron Mountain has also from time to time conducted certain
environmental investigations and remedial activities at certain of its other
former and current facilities, but an in-depth environmental review of the
properties has not been conducted by or on behalf of Iron Mountain. Iron
Mountain believes that it is in substantial compliance with all applicable
material environmental laws. Iron Mountain has not received any written notice
from any governmental authority or third party asserting, and is not otherwise
aware of, any material noncompliance, liability or claim relating to hazardous
substances or wastes, petroleum products or material environmental laws
applicable to its operations in connection with any of its present or former
properties other than as described above. However, no assurance can be given
that there are no environmental conditions for which Iron Mountain might be
liable in the future or that future regulatory action, as well as compliance
with future environmental laws, will not require Iron Mountain to incur costs
for or at its properties that could have a material adverse effect on Iron
Mountain's financial condition and results of operations.
Item 2. Properties.
As of December 31, 1996, Iron Mountain conducted operations through 94
leased and 15 owned facilities containing a total of approximately 7.3 million
square feet of space. The leased facilities typically have initial lease terms
of 10 years or longer with options to renew for an additional 10 years. The
weighted average remaining term of the leases on these facilities is
approximately 7.5 years. In addition, many of the leases contain either a
purchase option or a right of first refusal upon the sale of the property. The
leases include one property leased from affiliates of Iron Mountain. See Note
9 of Notes to Iron Mountain's Consolidated Financial Statements.
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As of December 31, 1996, Iron Mountain owned or leased (directly or
through its subsidiaries) the following records management facilities in the
geographic locations indicated below.
Records
Management
State Facilities
----- ----------
Arizona 2
California 25
Colorado 4
Connecticut 2
Delaware 1
Florida 13
Georgia 8
Illinois 3
Kansas 1
Kentucky 1
Maryland 3
Massachusetts 9
Minnesota 4
Missouri 2
New Hampshire 1
New Jersey 5
New York 5
Ohio 4
Pennsylvania 2
Rhode Island 1
Tennessee 2
Texas 8
Virginia 3
---
Total 109
===
Iron Mountain or its principal subsidiary is a guarantor of a
substantial portion of the leases to which other subsidiaries are party. See
Note 8 of Notes to Iron Mountain's Consolidated Financial Statements for
information regarding the minimum annual rental commitments of Iron Mountain.
Item 3. Legal Proceedings.
Iron Mountain is involved in litigation from time to time in the
ordinary course of business. In the opinion of management, no material legal
proceedings are pending to which Iron Mountain, or any of its properties, is
subject.
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Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders of the
Company during the fourth quarter of the fiscal year ended December 31, 1996.
EXECUTIVE OFFICERS OF IRON MOUNTAIN
Pursuant to General Instruction G(3), the following information is
included as an additional item in Part I:
<TABLE>
<CAPTION>
Names of Executive Officers Age Position
--------------------------- --- --------
<S> <C> <C>
C. Richard Reese 51 Chairman of the Board of Directors and Chief
Executive Officer
David S. Wendell 43 President and Chief Operating Officer,
Director
Eugene B. Doggett (1) 60 Executive Vice President and Chief Financial
Officer, Director
John F. Kenny, Jr. (1) 39 Vice President of Corporate Development
Robert G. Miller 40 Executive Vice President
Kenneth F. Radtke, Jr. 51 Executive Vice President
Robert P. Swift 55 Executive Vice President
-------------
</TABLE>
(1) Mr. Doggett has announced his intention to retire as Chief Financial
Officer effective as of May 29, 1997. Mr. Kenny will be Mr. Doggett's
successor in such capacity.
The executive officers and other officers were elected by the Iron
Mountain Board of Directors (the "Iron Mountain Board") on June 14, 1996, with
the exception of Mr. Radtke, who was elected in late June 1996, and Mr.
Miller, who was elected in December 1996. All executive officers and other
officers hold office at the discretion of the Iron Mountain Board until the
first meeting of the Iron Mountain Board following the next annual meeting of
stockholders and until their successors are chosen and qualified.
C. Richard Reese is the Chairman of the Iron Mountain Board , a
position he has held since November 1995, and the Chief Executive Officer, a
position he has held since December 1981. Prior to November 1995, Mr. Reese
was the President of Iron Mountain, a position he had held since 1981. Mr.
Reese is also a Director of Schooner Capital Corporation ("Schooner"), an
affiliate of Iron Mountain. Prior to joining Iron Mountain, he lectured at
Harvard Business School in "Entrepreneurship" and provided consulting services
to small and medium-sized emerging enterprises. Mr. Reese has also served as
president and a Director of PRISM International. He holds a Master of Business
Administration degree from Harvard Business School.
David S. Wendell is the President and Chief Operating Officer of Iron
Mountain, a position he has held since November 1995. After practicing law
with Brown & Wood, Mr. Wendell joined Iron Mountain in 1984, where he has
served in a variety of positions. Prior to November 1995, he
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was Executive Vice President, Atlantic Area and prior to 1991, he was Vice
President, New England Region. He holds a Master of Business Administration
degree from Harvard Business School and a Juris Doctor degree from the
University of Virginia.
Eugene B. Doggett is the Executive Vice President and Chief Financial
Officer of Iron Mountain, a position he has held since 1987. Mr. Doggett is
also a Director of Schooner. Prior to joining Iron Mountain, he had extensive
experience in commercial and investment banking, as well as financial and
general management experience at senior levels. He holds a Master of Business
Administration degree from Harvard Business School. Mr. Doggett has announced
his intention to retire as Chief Financial Officer effective as of May 29,
1997. Mr. Doggett will continue with Iron Mountain as an Executive Vice
President, focusing on strategic issues and special projects, and as a
Director. Mr. Kenny will succeed Mr. Doggett as Chief Financial Officer.
John F. Kenny, Jr. will become the Chief Financial Officer of Iron
Mountain upon the retirement of Mr. Doggett from such position on May 29,
1997. Mr. Kenny is currently Vice President of Corporate Development, with
primary responsibility for implementing Iron Mountain's acquisition strategy.
Mr. Kenny joined Iron Mountain in 1991. Prior to 1991, he was a Vice President
of CS First Boston Merchant Bank, New York, with responsibility for risk
capital investments. He holds a Master of Business Administration degree
from Harvard Business School.
Robert G. Miller is an Executive Vice President of Iron Mountain, a
position that he has held since December 1996. Mr. Miller joined Iron Mountain
in 1988 and held the positions of district manager from 1988 through 1991 and
regional vice president from 1991 through 1996. Prior to 1988, Mr. Miller was
employed as a district manager at Bell & Howell Records Management Company.
Kenneth F. Radtke, Jr. is an Executive Vice President of Iron Mountain,
a position that he has held since June 1996. Prior to June 1996, Mr. Radtke
was Northeast Regional Vice President and prior to 1995 he was Sales Manager,
New York Region. Mr. Radtke has worked in the records and information industry
since 1988 as President and Chief Executive Officer, Dataport Company, Inc.
and Senior Vice President, Arcus, Inc. He holds a graduate degree from the
University of Wisconsin, Graduate School of Banking.
Robert P. Swift is an Executive Vice President of Iron Mountain, a
position he has held since November 1995. Prior to November 1995, Mr. Swift
was the Executive Vice President, Western Area of Iron Mountain and prior to
1988, Mr. Swift was employed in various positions at Bell & Howell Records
Management Company.
All biographical information is given as of March 21, 1997.
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PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.
The Common Stock is traded on the Nasdaq National Market under the
symbol "IMTN." Iron Mountain first issued its Common Stock to the public in
February 1996. The following table sets forth the high and low sales prices on
the Nasdaq National Market.
High Low
---- ---
Sale Prices
-----------
1996
First Quarter (from February 1, 1996)................. $16.25 $13.75
Second Quarter........................................ 21.00 14.50
Third Quarter......................................... 30.50 20.50
Fourth Quarter........................................ 32.00 28.50
1997
First Quarter (through March 21, 1997)................ $31.00 $21.50
As of March 21, 1997 there were 66 holders of record of Common Stock
and 3 holders of record of Non-voting Common Stock. The Company believes
there are more than 1,750 beneficial owners of Common Stock.
Iron Mountain does not currently pay dividends on shares of Common Stock
or Non-voting Common Stock. The Iron Mountain Board currently intends to
retain future earnings, if any, for the development of Iron Mountain's
businesses and does not anticipate paying cash dividends on the Common Stock
in the foreseeable future. Future determinations by the Iron Mountain Board to
pay dividends on the Common Stock would be based primarily upon the financial
condition, results of operations and business requirements of Iron Mountain.
Dividends, if any, would be payable in the sole discretion of the Iron
Mountain Board out of the funds legally available therefor. Certain
agreements, pursuant to which the Company has borrowed funds, contain
provisions that limit the amount of dividends and stock repurchases that the
Company may make. See Note 3 to the Company's Consolidated Financial
Statements.
During the fourth quarter of the fiscal year ended December 31, 1996, the
Company issued the following shares of Common Stock pursuant to option
exercises by employees or former employees in reliance on Rule 701 promulgated
under the Securities Act of 1933, as amended:
Date of Sale Number of Shares Aggregate Price Paid
10/30/96 925 $ 5,998
11/20/96 4,698 $44,062
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Item 6. Selected Consolidated Financial and Operating Information.
The following tables present selected consolidated financial and
operating information relating to the financial condition and results of
operations of the Company over the past five years, and should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the Consolidated Financial Statements of
the Company for the year ended December 31, 1996 set forth in Part IV hereof.
Selected Consolidated Financial and Operating Information
(In thousands, except per share amounts and Carton data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Operations Data:
Revenues:
Storage $44,077 $48,892 $54,098 $64,165 $85,826
Service and Storage Material Sales 26,596 32,781 33,520 40,271 52,892
------- ------- ------- ------- -------
Total Revenues 70,673 81,673 87,618 104,436 138,718
Operating Expenses:
Cost of Sales (Excluding Depreciation) 35,169 43,054 45,880 52,277 70,747
Selling, General and Administrative 17,630 19,971 20,853 26,035 34,342
Depreciation and Amortization 5,780 6,789 8,690 12,341 16,936
------- ------- ------- ------- -------
Total Operating Expenses 58,579 69,814 75,423 90,653 122,025
------- ------- ------- ------- -------
Operating Income 12,094 11,859 12,195 13,783 16,693
Interest Expense 8,412 8,203 8,954 11,838 14,901
------- ------- ------- ------- -------
Income before Provision for Income Taxes 3,682 3,656 3,241 1,945 1,792
Provision for Income Taxes 2,095 2,088 1,957 1,697 1,435
------- ------- ------- ------- -------
Income Before Extraordinary Charge 1,587 1,568 1,284 248 357
Extraordinary Charge, Net of Tax Benefit -- -- -- -- 2,126
------- ------- ------- ------- -------
Net Income (Loss) 1,587 1,568 1,284 248 (1,769)
Accretion of Redeemable Put Warrant 626 940 1,412 2,107 280
------- ------- ------- ------- -------
Net Income (Loss) Applicable to
Common Stockholders $ 961 $ 628 $(128) $(1,859) $(2,049)
======= ======= ====== ======== ========
Income (Loss) Before Extraordinary Item per
Common and Common Equivalent Share $0.12 $0.08 $(0.02) $(0.24) $0.01
Net Income (Loss) per Common and
Common Equivalent Share $0.12 $0.08 $(0.02) $(0.24) $(0.20)
Weighted Average Common and Common
Equivalent Shares Outstanding 8,052 8,067 7,984 7,784 10,137
Other Data:
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<PAGE>
Year Ended December 31,
-----------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
EBITDA(1) $17,874 $18,648 $20,885 $26,124 $33,629
EBITDA as a Percentage of Total Revenues 25.3% 22.8% 23.8% 25.0% 24.2%
Capital Expenditures:
Growth (2)(3) $11,226 $13,605 $15,829 $14,395 $23,334
Maintenance 818 1,846 1,151 858 1,112
------- ------- ------- ------- -------
Total Capital Expenditures (3) $12,044 $15,451 $16,980 $15,253 $24,446
Additions to Customer Acquisition Costs $1,268 $922 $1,366 $1,379 $1,642
Approximate Cartons in Storage at end of
Period (in millions)(4) 12.6 15.5 17.7 23.3 30.6
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
-----------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and Cash Equivalents $ 498 $ 591 $ 1,303 $ 1,585 $ 3,453
Total Assets 115,429 125,288 136,859 186,881 281,799
Total Debt 73,304 78,460 86,258 121,874 184,733
Stockholders' Equity 23,419 24,047 22,869 21,011 52,384
-------------------
</TABLE>
(1) Earnings before interest, taxes, depreciation, amortization and
extraordinary charges ("EBITDA"). Based on its experience in the
records management industry, the Company believes that EBITDA is an
important tool for measuring the performance of records management
companies (including potential acquisition targets) in several areas,
such as liquidity, operating performance and leverage. In addition,
lenders use EBITDA as a criterion in evaluating records management
companies, and substantially all of the Company's financing agreements
contain covenants in which EBITDA is used as a measure of financial
performance. However, EBITDA should not be considered an alternative to
operating or net income (as determined in accordance with GAAP) as an
indicator of the Company's performance or to cash flow from operations
(as determined in accordance with GAAP) as a measure of liquidity. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview" and "--Liquidity and Capital
Resources" for discussions of other measures of performance determined
in accordance with GAAP and the Company's sources and applications of
cash flow.
(2) Growth capital expenditures include investments in racking systems, new
buildings and leasehold improvements, equipment for new facilities,
management information systems and facilities restructuring. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources--Capital
Investments."
(3) Includes $2,901 in 1994 related to the cost of constructing a records
management facility which was sold in a sale-leaseback transaction in
the fourth quarter of 1994.
(4) The term "Carton" is defined as a measurement of volume equal to a
single standard storage carton, approximately 1.2 cubic feet. The
number of Cartons stored does not include storage volumes in the
Company's vital records services and data protection services which are
described under "Business."
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read in conjunction with Iron
Mountain's Selected Consolidated Financial and Operating Information and Iron
Mountain's Consolidated Financial Statements and the Notes thereto and the
other financial and operating information included elsewhere in this filing.
Overview. The primary financial objective of Iron Mountain is to increase
its EBITDA, which is a source of funds to service indebtedness and for
investment in continued internal growth and growth through acquisitions. Iron
Mountain has benefited from growth in EBITDA, which has increased from $17.9
million in 1992 to $33.6 million in 1996 (a compound annual growth rate of
17.1%), but other measures of Iron Mountain's financial performance, such as
net income and net income applicable to common stockholders, have been
negatively affected by this objective. In 1994, 1995 and 1996, Iron Mountain
experienced net losses applicable to common stockholders. Such net losses are
attributable in part to significant increases in charges associated with Iron
Mountain's pursuit of its growth strategy, namely, (i) increases in
depreciation and amortization expenses associated with expansion of Iron
Mountain's storage capacity and (ii) increases in goodwill amortization
associated with acquisitions accounted for under the purchase method. In
addition, net income applicable to common stockholders has been negatively
affected by a charge for accretion of a redeemable put warrant and, in 1996,
by an extraordinary charge related to the early retirement of debt. The put
warrant was redeemed in February 1996, upon completion of Iron Mountain's
initial public offering (the "Initial Public Offering"). See Note 5 of Notes
to Iron Mountain's Consolidated Financial Statements.
Iron Mountain's revenues consist of storage revenues and service and
storage material sales revenues. Storage revenues are derived from charges for
storing records (either on a per unit or a per cubic foot of records basis),
and have accounted for approximately 60% of total revenues in each of the last
five years. Service and storage material sales revenues are derived primarily
from Iron Mountain's courier operations (consisting primarily of the pickup
and delivery of records upon customer request), additions of new Cartons,
temporary removal of records from storage, refiling of removed records,
destructions of records, permanent withdrawals from storage and sales of
specially designed storage containers and related supplies. Customers are
generally billed on a monthly basis on contractually agreed-upon terms.
While Iron Mountain's total revenues have increased from $70.7 million in
1992 to $104.4 million in 1995, average revenue on a per Carton basis declined
over such period. The year-over-year declines in average revenue per Carton
for 1993, 1994 and 1995 were approximately 8%, 7% and 2%, respectively. In
1996, total revenues increased to $138.7 million, and there was no decline in
average revenue per Carton. Such declines had been attributable to: (i)
increases in sales to large volume accounts, which typically generate lower
revenue per Carton (in particular the RTC account, which incorporated
substantial volume discounts, although such discounts were offset by revenues
from special service projects during 1994); (ii) a facilities management
arrangement with a large volume account under which, prior to July 1996, Iron
Mountain managed the customer's
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<PAGE>
records management facility and, therefore, the charges to the customer prior
to July 1996 did not include a rent component; and (iii) industry-wide pricing
pressures. Despite the decline, Iron Mountain has been able to maintain its
EBITDA margins through increased overall operating efficiencies and economies
of scale as well as specific efficiencies realized in the servicing of large
volume accounts. For 1993, 1994, 1995 and 1996, EBITDA margins were 22.8%,
23.8%, 25.0% and 24.2%, respectively.
Cost of sales (excluding depreciation) consists primarily of wages and
benefits, facility occupancy costs, vehicle and other equipment costs and
supplies. Of these, the most significant are wages and benefits and facility
occupancy costs. Over the past several years, Iron Mountain has been able to
reduce per Carton storage costs by: (i) designing racking systems and
operating space to maximize facility storage efficiency; (ii) negotiating
favorable facility leases and having facilities built to its custom
specifications; and (iii) leasing larger facilities, which, when filled, are
less expensive per Carton to operate.
Selling, general and administrative expenses consist primarily of
management, administrative, sales and marketing wages and benefits, as well as
travel, communications, professional fees, bad debts, training, office
equipment and supplies expenses.
Iron Mountain's depreciation and amortization charges result primarily
from the capital-intensive nature of the records management industry and the
acquisitions Iron Mountain has completed. The principal components of
depreciation relate to racking systems and related equipment, new buildings
and leasehold improvements, equipment for new facilities and computer system
software and hardware. Amortization primarily relates to goodwill and
noncompetition agreements arising from acquisitions and customer acquisition
costs. Iron Mountain has accounted for all of its acquisitions under the
purchase method. Since the purchase price for records management companies is
usually substantially in excess of the fair value of their net assets, these
purchases have given rise to significant goodwill and, accordingly,
significant levels of amortization. Although amortization is a non-cash
charge, it does decrease reported net income.
In February 1996, Iron Mountain received net proceeds of $33.3 million
from its Initial Public Offering. Iron Mountain used $6.6 million of such net
proceeds to repurchase a warrant to acquire 444,385 shares of Iron Mountain
Common Stock (the "Warrant"). For financial reporting purposes, Iron Mountain
recorded a charge (based on the estimated redemption value calculated using
the effective interest rate method), resulting in substantial charges to net
income applicable to common stockholders over the period the Warrant was
outstanding. See Note 5 of Notes to Iron Mountain's Consolidated Financial
Statements. The remaining net proceeds were used by Iron Mountain to fund
acquisitions, to repay indebtedness used to fund acquisitions and for working
capital.
On October 1, 1996, Iron Mountain completed the sale of $165.0 million of
10-1/8% Senior Subordinated Notes due 2006 (the "Senior Subordinated Notes").
The net proceeds to Iron Mountain were $160.1 million after underwriting
discounts and commissions. The net proceeds of the sale of the Senior
Subordinated Notes, after payment of related expenses, were used to repay
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<PAGE>
outstanding bank debt under the existing credit agreement, its 13.42% Senior
Subordinated Notes due December 14, 2000 (the "Chrysler Notes") and certain
other indebtedness, to fund the purchase price of an acquisition and for
general corporate purposes. In connection with the prepayment of such
indebtedness, Iron Mountain incurred an extraordinary charge of $3.5 million,
not including related tax benefit of $1.4 million, during the fourth quarter
of 1996. The charge consists of a prepayment penalty, the write-off of
deferred financing costs, an original issue discount and loss on termination
of interest rate protection agreements. This charge did not impact Iron
Mountain's EBITDA.
In December 1995, Iron Mountain decided to consolidate its corporate
accounting activities by transferring to Boston, Massachusetts those
accounting activities previously performed in Los Angeles, California. As a
result of such transfer, Iron Mountain recorded a charge of $0.5 million in
the fourth quarter of 1995 and a charge of $0.5 million for the year ended
December 31, 1996.
In March 1997, Iron Mountain experienced three fires that resulted in
extensive damage to two of its record management facilities in South
Brunswick, New Jersey. Approximately 1.0 million of the 1.2 million Cartons
stored at these facilities were destroyed. The fires are believed to be caused
by arson and are under investigation by local, state and federal authorities.
The affected facilities account for only two of Iron Mountain's 117 facilities
nationwide (as of March 21, 1997), and represented less than three percent of
revenues and less than two percent of EBITDA for 1996. Management believes
that insurance will cover substantially all of Iron Mountain's property and
business interruption losses relating to the fires. However, Iron Mountain
may incur costs as a result of the fires which will not be covered by
insurance. Management is unable to estimate at this time the magnitude of
such costs. 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.
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<PAGE>
Results of Operations. The following table sets forth, for the periods
indicated, information derived from Iron Mountain's consolidated statements of
operations, expressed as a percentage of revenues.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1994 1995 1996
---------------------------------
<S> <C> <C> <C>
Revenues:
Storage 61.7% 61.4% 61.9%
Service and Storage Material Sales 38.3 38.6 38.1
---- ---- ----
Total Revenues 100.0 100.0 100.0
Operating Expenses:
Cost of Sales (Excluding Depreciation) 52.4 50.1 51.0
Selling, General and Administrative 23.8 24.9 24.8
Depreciation and Amortization 9.9 11.8 12.2
--- ---- ----
Total Operating Expenses 86.1 86.8 88.0
---- ---- ----
Operating Income 13.9 13.2 12.0
Interest Expense 10.2 11.3 10.7
---- ---- ----
Income before Provision for Income Taxes 3.7 1.9 1.3
Provision for Income Taxes 2.2 1.7 1.0
--- --- ---
Income Before Extraordinary Charge 1.5 0.2 0.3
Extraordinary Charge, Net of Tax Benefit -- -- 1.6
--- --- ---
Net Income (Loss) 1.5 0.2 (1.3)
Accretion of Redeemable Put Warrant 1.6 2.0 0.2
--- --- ---
Net Loss Applicable to Common
Stockholders (0.1)% (1.8)% (1.5)%
==== ==== ====
EBITDA 23.8% 25.0% 24.2%
==== ==== ====
</TABLE>
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995.
Storage revenues increased from $64.2 million for the year ended December 31,
1995 to $85.8 million for the year ended December 31, 1996, an increase of
$21.6 million or 33.8%. Twenty acquisitions completed by Iron Mountain in 1995
and 1996 accounted for $15.0 million or 69.1% of such increase. The balance of
the storage revenues growth resulted primarily from net increases in Cartons
stored by existing customers and from sales to new customers.
Service and storage material sales revenues increased from $40.3 million
for the year ended December 31, 1995 to $52.9 million for the year ended
December 31, 1996, an increase of $12.6 million or 31.3%. Acquisitions
accounted for $9.2 million or 72.7% of the increase. The balance
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<PAGE>
of the increase resulted from increases in service and storage material sales
to existing customers and the addition of new customer accounts.
For the reasons discussed above, total revenues increased from $104.4
million for the year ended December 31, 1995 to $138.7 million for the year
ended December 31, 1996, an increase of $34.3 million or 32.8%. Of this
increase, $24.1 million, or 70.4%, was attributable to acquisitions completed
by Iron Mountain in 1995 and 1996. The monthly average Cartons stored
increased approximately 33% in 1996 as compared to 1995, from approximately
20.4 million Cartons to approximately 27.1 million Cartons.
Cost of sales (excluding depreciation) increased from $52.3 million for
the year ended December 31, 1995 to $70.7 million for the year ended December
31, 1996, an increase of $18.4 million or 35.3%, and increased as a percentage
of revenues from 50.1% for the year ended December 31, 1995 to 51.0% for the
year ended December 31, 1996. The $18.4 million increase was primarily
attributable to the increase in Cartons stored, increased expenses related to
the severe winter weather on the Atlantic coast during the first quarter of
1996 and expenses related to certain facility relocations. The increase as a
percentage of revenue was primarily attributable to recent acquisitions, which
initially have lower gross margins than Iron Mountain.
Selling, general and administrative expenses increased from $26.0 million
for the year ended December 31, 1995 to $34.3 million for the year ended
December 31, 1996, an increase of $8.3 million or 31.9%, and decreased as a
percentage of revenues from 24.9% for the year ended December 31, 1995 to
24.8% for the year ended December 31, 1996. The $8.3 million increase was
primarily attributable to the costs associated with accelerated acquisition
activity, including certain redundant transitional expenses as new
acquisitions were integrated into Iron Mountain, with the addition of
personnel needed to support Iron Mountain's growth and with becoming a public
company. A charge of $0.5 million related to moving the corporate accounting
function from Los Angeles to Boston was recorded in 1996. Additionally, the
selling, general and administrative expenses of acquired companies tend to be
higher than Iron Mountain's, and cost reductions and other possible synergies
are not realized immediately.
Depreciation and amortization expense increased from $12.3 million for
the year ended December 31, 1995 to $16.9 million for the year ended December
31, 1996, an increase of $4.6 million or 37.2%, and increased as a percentage
of revenues from 11.8% for the year ended December 31, 1995 to 12.2% for the
year ended December 31, 1996. The $4.6 million increase was primarily
attributable to the additional depreciation and amortization expense related
to the aforementioned acquisitions, capital expenditures, including racking
systems, information systems and improvements to existing facilities, and
additions to customer acquisition costs.
As a result of the foregoing factors, operating income increased from
$13.8 million for the year ended December 31, 1995 to $16.7 million for the
year ended December 31, 1996, an increase of $2.9 million or 21.1%. As a
percentage of revenues, operating income decreased from 13.2% for the year
ended December 31, 1995 to 12.0% for the year ended December 31, 1996.
-30-
<PAGE>
Interest expense increased from $11.8 million for the year ended December
31, 1995 to $14.9 million for the year ended December 31, 1996, an increase of
$3.1 million or 25.9%. The $3.1 million increase was primarily attributable to
increased indebtedness to finance acquisitions and capital expenditures. This
increase was partially offset by a decrease in Iron Mountain's effective
borrowing rates.
As a result of the foregoing factors, income before provision for income
taxes decreased from $1.9 million (1.9% of revenues) for the year ended
December 31, 1995 to $1.8 million (1.3% of revenues) for the year ended
December 31, 1996, a decrease of $0.1 million or 7.9%. Provision for income
taxes decreased from $1.7 million (1.7% of revenues) for the year ended
December 31, 1995 to $1.4 million (1.0% of revenues) for the year ended
December 31, 1996. Iron Mountain's effective tax rate is higher than statutory
rates primarily due to the amortization of the nondeductible portion of
goodwill associated with acquisitions made prior to the change in tax laws
which now generally permit deduction of such expenses for asset purchases.
Since Iron Mountain will acquire all of the outstanding capital stock of
Safesite in the Merger, goodwill associated with the Merger will be
nondeductible.
In October 1996, Iron Mountain recorded an extraordinary charge of $3.5
million, not including related tax benefit of $1.4 million, related to the
early retirement of certain indebtedness. The charge consists of a prepayment
penalty, the write-off of deferred financing costs, an original issue discount
and loss on termination of interest rate protection agreements.
Net income (loss) was income of $0.2 million (0.2% of revenues) for the
year ended December 31, 1995 compared to a loss of $1.8 million (1.3% of
revenues) for the year ended December 31, 1996. Net loss applicable to common
stockholders was $1.9 million (1.8% of revenues), after accretion of $2.1
million related to the Warrant, for the year ended December 31, 1995 compared
to $2.0 million (1.5% of revenues), after accretion of $0.3 million related to
the Warrant, for the year ended December 31, 1996. The Warrant was redeemed in
full in February 1996, with a portion of the proceeds from the Initial Public
Offering. As a result of such redemption, there will be no future charges for
such accretion.
As a result of the foregoing factors, EBITDA increased from $26.1 million
for the year ended December 31, 1995 to $33.6 million for the year ended
December 31, 1996, an increase of $7.5 million, or 28.7%. As a percentage of
revenues, EBITDA decreased from 25.0% for the year ended December 31, 1995 to
24.2% for the year ended December 31, 1996.
Iron Mountain acquired sixteen records management businesses in 1996
compared to four records management businesses in 1995. Primarily as a result
of Iron Mountain's acquisition activity, EBITDA margins were lower for the
year ended December 31, 1996 compared to the prior year. The decrease was
primarily attributable to the fact that the acquired businesses are initially
less operationally efficient than Iron Mountain and the anticipated margin
increases are generally not realized immediately.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994.
Storage revenues increased from $54.1 million for 1994 to $64.2 million for
1995, an increase of $10.1 million or
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<PAGE>
18.6%. Seven acquisitions completed between June 1994 and December 1995
accounted for $5.7 million or 56.7% of such increase. The balance of the
storage revenues growth resulted primarily from net increases in Cartons
stored by existing customers and from sales to new customers.
Service and storage material sales revenues increased from $33.5 million
for 1994 to $40.3 million for 1995, an increase of $6.8 million or 20.1%. This
increase was accomplished despite a decrease of approximately $0.8 million in
such revenues received from the RTC, which decrease was primarily due to a
reduction in revenues from special service projects. Acquisitions accounted
for $4.3 million or approximately 63.5% 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.
For the reasons discussed above, total revenues increased from $87.6
million for 1994 to $104.4 million for 1995, an increase of $16.8 million or
19.2%. Of such increase, $10.0 million or 59.4% was attributable to
acquisitions made by Iron Mountain between June 1994 and December 1995. The
monthly average Cartons stored increased approximately 22% in 1995 as compared
to 1994, from approximately 16.7 million Cartons to approximately 20.4 million
Cartons. The percentage increase was greater than that of total revenues
primarily for the reasons described in the third paragraph under "Overview"
above.
Cost of sales (excluding depreciation) increased from $45.9 million for
1994 to $52.3 million for 1995, an increase of $6.4 million or 13.9%, and
decreased as a percentage of revenues from 52.4% for 1994 to 50.1% for 1995.
The $6.4 million increase resulted primarily from an increase in Cartons
stored. The decrease as a percentage of revenues was due primarily to
increased storage efficiencies resulting from relocations to, or additions of,
newer, higher density facilities as well as increased utilization of storage
capacity.
Selling, general and administrative expenses increased from $20.9 million
for 1994 to $26.0 million for 1995, an increase of $5.1 million or 24.9%, and
increased as a percentage of revenues from 23.8% for 1994 to 24.9% for 1995.
The $5.1 million increase was due primarily to increases in field management
and administrative staffing, including increases due to acquisitions. Of the
1.1% increase as a percentage of revenues, $0.6 million (0.6% of revenues)
resulted from a provision for a judgment in a lawsuit relating to a 1992
incident and a $0.5 million (0.5% of revenues) charge for the relocation of
the corporate accounting function from Los Angeles to Boston.
Depreciation and amortization expenses increased from $8.7 million for
1994 to $12.3 million for 1995, an increase of $3.6 million or 42.0%, and
increased as a percentage of revenues from 9.9% for 1994 to 11.8% for 1995.
Depreciation and amortization expenses, both in absolute dollars and as a
percentage of revenues, continued to increase, primarily as a result of Iron
Mountain's acquisitions and growth-related capital investments for racking
systems, improvements to records management facilities, information systems
and customer acquisition costs. Amortization during 1995 included a one-time
charge of $0.9 million (0.9% of revenues) in connection with the write-down of
the goodwill of a subsidiary due to Iron Mountain's decision to sell such
subsidiary at an
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<PAGE>
estimated price which is $0.9 million less than such subsidiary's book value
and related goodwill. Iron Mountain subsequently decided not to sell such
subsidiary.
As a result of the foregoing factors, operating income increased from
$12.2 million for 1994 to $13.8 million for 1995, an increase of $1.6 million
or 13.0%, and decreased as a percentage of revenues from 13.9% to 13.2%.
Interest expense increased from $9.0 million for 1994 to $11.8 million for
1995. This increase was due primarily to increased levels of indebtedness
primarily to finance acquisitions, as well as higher interest rates and higher
deferred financing charges.
As a result of the foregoing factors, income before provision for income
taxes decreased from $3.2 million (3.7% of revenues) for 1994 to $1.9 million
(1.9% of revenues) for 1995, a decrease of $1.3 million or 40.0%. Provision
for income taxes decreased from $2.0 million (2.2% of revenues) to $1.7
million (1.7% of revenues). Iron Mountain's effective tax rates for 1994 and
1995 were higher than statutory rates primarily due to $1.5 million and $2.5
million, respectively, of amortization of nondeductible goodwill.
Net income decreased $1.1 million from $1.3 million (1.5% of revenues) for
1994 to $0.2 million (0.2% of revenues) for 1995 as a result of the factors
outlined above.
As a result of the foregoing factors, EBITDA increased from $20.9 million
for 1994 to $26.1 million for 1995, an increase of $5.2 million or 25.1%, and
increased as a percentage of revenues from 23.8% to 25.0%. These increases
reflect continuing economies of scale and increased operating efficiencies,
which were partially offset by the $0.6 million (0.6% of revenues) reserve
relating to the judgment in the lawsuit referred to above and by the $0.5
million (0.5% of revenues) charge for the relocation of the corporate
accounting function from Los Angeles to Boston.
Liquidity and Capital Resources. In February 1996, Iron Mountain raised
$33.3 million, net of underwriters' discounts and commissions and associated
costs, in the Initial Public Offering. The net proceeds from the Initial
Public Offering were used to retire the Warrant, to fund acquisitions, to
repay debt that had been incurred to make acquisitions and for working
capital.
On October 1, 1996, Iron Mountain completed the sale of $165.0 million of
the Senior Subordinated Notes. The net proceeds to Iron Mountain were $160.1
million after underwriting discounts and commissions. The net proceeds of the
sale of the Senior Subordinated Notes, after payment of related expenses, were
used to repay outstanding bank debt under the existing credit agreement, the
Chrysler Notes and certain other indebtedness, to fund the purchase price of
an acquisition and for general corporate purposes. In connection with the
prepayment of the outstanding bank debt, the Chrysler Notes and certain other
indebtedness, Iron Mountain incurred an extraordinary charge of $3.5 million,
not including related tax benefit of $1.4 million, during the fourth quarter
of 1996. The charge consists of a prepayment penalty, the write-off of
deferred financing costs an original issue discount and loss on termination of
interest rate protection agreements. This charge did not impact Iron
Mountain's EBITDA.
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<PAGE>
In connection with the sale of the Senior Subordinated Notes, Iron
Mountain entered into a Credit Agreement dated as of September 30, 1996 (the
"Credit Agreement"), which provided for $100 million of revolving credit
availability. On March 3, 1997 the Company entered into an Amendment and
Restatement of the Credit Agreement (the "Amendment"), which increased credit
availability under the facility to $150 million.
As Iron Mountain has sought to increase its EBITDA, it has made
significant capital investments, consisting primarily of acquisitions;
growth-related capital expenditures, including racking systems, information
systems and improvements to existing facilities; and customer acquisition
costs. These investments have been primarily funded through a portion of the
net proceeds of the Initial Public Offering and the sale of the Senior
Subordinated Notes, cash flows from operations and borrowings under Iron
Mountain's credit agreements.
Capital Investments. For 1994, 1995 and 1996, Iron Mountain's
growth-related capital expenditures were $15.8 million, $14.4 million and
$23.3 million, respectively. Included in capital expenditures for 1994 is $2.9
million for the construction of a records management facility which was sold
in a sale and leaseback transaction. Growth-related capital expenditures
consist primarily of investment in racking systems, new building and leasehold
improvements, equipment for new facilities, management information systems and
facilities restructuring. For 1994, 1995 and 1996, Iron Mountain's maintenance
capital expenditures were $1.2 million, $0.9 million and $1.1 million,
respectively.
In addition, Iron Mountain incurs costs (net of revenues received for the
initial transfer of records) related to the acquisition of large volume
accounts (typically over 10,000 Cartons). For 1994, 1995 and 1996, Iron
Mountain's additions to customer acquisition costs were $1.4 million, $1.4
million and $1.6 million, respectively.
Recent and Pending Acquisitions. Iron Mountain's liquidity and capital
resources have been significantly impacted by acquisitions and, given Iron
Mountain's acquisition strategy, may be significantly impacted for the
foreseeable future. In order to capitalize on industry consolidation, Iron
Mountain, in mid-1994, adopted a more active acquisition strategy. Since
mid-1994, Iron Mountain has acquired or entered into agreements to acquire 29
records management businesses, 27 of which have been completed and two of
which are pending, for a total purchase price of approximately $197.9 million
(not including contingent payments of up to $4.8 million based upon the
achievement of certain revenue targets during 1997 and 1998). Iron Mountain
has historically financed its acquisitions with borrowings under its credit
agreements in conjunction with cash flows provided by operations and, more
recently, from a portion of the proceeds of the Initial Public Offering and
the sale of the Senior Subordinated Notes. Under the terms of the Merger
Agreement, however, approximately $50 million of the $62 million purchase
price for Safesite will be in the form of shares of Common Stock or
immediately exercisable options to acquire shares of Common Stock. Iron
Mountain's future interest expense may increase significantly as a result of
the additional indebtedness Iron Mountain may incur to finance possible future
acquisitions. To the
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<PAGE>
extent that future acquisitions are financed by additional borrowings under
the Credit Agreement or other credit facilities, the resulting increase in
debt and interest expense could have a negative effect on such measures of
liquidity, debt to equity, EBITDA to debt and EBITDA to interest expense.
Sources of Funds. During 1996, Iron Mountain generated $15.9 million in
net cash from operations compared to $15.7 million for the same period in
1995. The slight increase in net cash provided by operations resulted from an
increase in EBITDA, which was partially offset by an increase in accounts
receivable related to increased revenues and decreases in accounts payable,
accrued expenses and other asset and liability accounts. During the year ended
December 31, 1994, Iron Mountain generated net cash from operations of $11.6
million.
At December 31, 1996, Iron Mountain had estimated net operating loss
carryforwards of approximately $11.5 million for federal income tax purposes.
As a result of such loss carryforwards, cash paid for income taxes has
historically been substantially lower than the provision for income taxes.
Net cash provided by financing activities was $6.7 million and $34.1
million for 1994 and 1995, respectively, substantially all of which was
provided under a then existing credit agreement, and $80.6 million for the
year ended December 31, 1996, consisting primarily of the net proceeds of
$160.1 million from the sale of the Senior Subordinated Notes and of $33.3
million from the Initial Public Offering, offset by $102.1 million of
increased indebtedness and by $6.6 million due to the retirement of the
Warrant.
Credit Arrangements of Iron Mountain. The Credit Agreement, as amended, is
a $150 million revolving credit facility. The Credit Agreement will terminate
on September 30, 2001, at which time all outstanding revolving credit loans
and other amounts payable thereunder will become due. Borrowings under the
Credit Agreement may be used to finance possible future acquisitions, as well
as for working capital and general corporate purposes. Iron Mountain's
obligations under the Credit Agreement are guaranteed by substantially all of
Iron Mountain's subsidiaries and are secured by the pledge of the stock of
such subsidiaries. Prepayments of outstanding borrowings under the Credit
Agreement are required in certain circumstances out of the proceeds of certain
insurance payments, condemnations, issuances of indebtedness and asset
dispositions.
The Credit Agreement permits Iron Mountain to elect interest rates from
time to time, as to all or a portion of the borrowings made thereunder, at
interest rates based upon the applicable reference rate and a margin or spread
over such reference rate (which spread varies based upon the ratio of Iron
Mountain's indebtedness to EBITDA). The reference rate, at Iron Mountain's
option, may be based upon (i) the agent's prime rate, (ii) a certificates of
deposit rate, (iii) an overnight federal funds rate or (iv) for periods of up
to 12 months, the interest rates prevailing on the date of determination in
the London interbank markets.
The Credit Agreement and the Indenture for the Senior Subordinated Notes
(the "Note Indenture") contain covenants restricting the ability of Iron
Mountain and its subsidiaries to, among
-35-
<PAGE>
other things: (i) declare dividends or redeem or repurchase capital stock;
(ii) make optional payments and modifications of subordinated and other debt
instruments; (iii) incur liens and engage in sale and leaseback transactions;
(iv) make loans and investments; (v) incur indebtedness and contingent
obligations; (vi) make capital expenditures; (vii) engage in mergers,
acquisitions and asset sales; (viii) enter into transactions with affiliates;
and (ix) make changes in their lines of business. Iron Mountain will also be
required to comply with financial covenants with respect to: (i) a maximum
leverage ratio; (ii) a minimum interest coverage ratio; and (iii) a minimum
fixed charge coverage ratio. Iron Mountain has also made certain customary
affirmative covenants. The Credit Agreement and the Note Indenture also
contain customary events of default.
The annual maturities of Iron Mountain's indebtedness for 1997, 1998,
1999, 2000 and 2001 are $0.4 million, $0.4 million, $0.4 million, $7.8 million
and $9.3 million respectively. Subsequent to December 31, 1996, Iron Mountain
borrowed $15.0 million under the Credit Agreement to finance acquisitions. As
of March 7, 1997, Iron Mountain had $199.6 million in total indebtedness and
$126.0 million available under the Credit Agreement.
Under the Credit Agreement, Iron Mountain is required to use interest rate
protection products to reduce its exposure to increases in interest rates. As
of December 31, 1996, Iron Mountain had $184.7 million of total debt, of which
$175.7 million had fixed interest rates and $9.0 million had variable interest
rates. Consistent with the Credit Agreement, the Company has in place interest
rate cap agreements covering a notional amount of $30.0 million. See Note 3 of
Notes to Iron Mountain's Consolidated Financial Statements.
Future Capital Needs. Iron Mountain's ability to generate cash adequate to
fund its needs depends generally on the results of its operations and the
availability of financing. Management believes that cash flow from operations
in conjunction with borrowings from existing and possible future credit
facilities will be sufficient for the foreseeable future to meet debt service
requirements and to make possible future acquisitions and capital
expenditures. However, there can be no assurance in this regard or that the
terms available for any future financing, if required, would be favorable to
Iron Mountain.
At the 1997 Annual Meeting of Stockholders, the stockholders of Iron
Mountain will be asked to approve an amendment to the Restated Certificate of
Incorporation of Iron Mountain to increase the number of shares of Common
Stock that Iron Mountain is authorized to issue from 13,000,000 to 20,000,000
shares. Such additional shares would provide Iron Mountain with additional
flexibility to issue shares in connection with business acquisitions or for
cash through sales of stock to public and private investors. There can be no
assurance that such approval will be received.
Seasonality. Historically, Iron Mountain's business has not been subject
to seasonality in any material respect.
Inflation. Certain of Iron Mountain's expenses, such as wages and
benefits, occupancy costs and equipment repair and replacement, are subject to
normal inflationary pressures. Although Iron Mountain to date has been able to
offset inflationary cost increases through increased operating
-36-
<PAGE>
efficiencies, there can be no assurance that Iron Mountain will be able to
offset any future inflationary cost increases through similar efficiencies or
increased storage or service charges.
Item 8. Financial Statements and Supplementary Data.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Public Accountants .....................................................38
Consolidated Balance Sheets, December 31, 1995 and 1996.......................................39
Consolidated Statements of Operations, Years ended December 31, 1994, 1995 and 1996...........40
Consolidated Statements of Stockholders' Equity, Years ended December 31,
1994, 1995 and 1996.......................................................................41
Consolidated Statements of Cash Flows, Years ended December 31, 1994, 1995 and 1996...........44
Notes to Consolidated Financial Statements....................................................45
Financial Statement Schedule:
Report of Independent Public Accountants .................................................59
Schedule II - Valuation and Qualifying Accounts...........................................60
</TABLE>
37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Iron Mountain Incorporated:
We have audited the accompanying consolidated balance sheets of Iron
Mountain Incorporated (a Delaware corporation) and its subsidiaries, as of
December 31, 1995 and 1996 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Iron Mountain Incorporated
and its subsidiaries as of December 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 4, 1997 (except for
Note 11.a and e. for which
the date is March 19, 1997)
38
<PAGE>
IRON MOUNTAIN INCORPORATED
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1995 AND 1996
(Amounts in thousands)
ASSETS
<TABLE>
<CAPTION>
December 31,
---------------------------
1995 1996
------------ ------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents..................................................... $ 1,585 $ 3,453
Accounts Receivable (Less Allowances of $651 and $1,061
as of 1995 and 1996, Respectively)......................................... 16,936 24,136
Inventories................................................................... 682 767
Deferred Income Taxes......................................................... 1,943 3,378
Prepaid Expenses and Other.................................................... 1,862 3,054
------------ ------------
Total Current Assets.................................................. 23,008 34,788
Property, Plant and Equipment:
Property, Plant and Equipment................................................. 125,240 163,495
Less -- Accumulated Depreciation.............................................. (32,564) (45,146)
------------ ------------
Net Property, Plant and Equipment..................................... 92,676 118,349
Other Assets:
Goodwill, net................................................................. 59,253 109,363
Customer Acquisition Costs, net............................................... 5,210 6,334
Deferred Financing Costs, net................................................. 2,638 7,358
Other......................................................................... 4,096 5,607
------------ ------------
Total Other Assets.................................................... 71,197 128,662
------------ ------------
Total Assets.................................................................... $ 186,881 $ 281,799
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long-term Debt............................................. $ 2,578 $ 396
Accounts Payable.............................................................. 4,797 3,750
Accrued Expenses.............................................................. 10,917 17,275
Deferred Income............................................................... 3,108 4,995
Other Current Liabilities..................................................... 469 414
------------ ------------
Total Current Liabilities............................................. 21,869 26,830
Long-term Debt, Net of Current Portion.......................................... 119,296 184,337
Other Long-term Liabilities..................................................... 6,769 6,576
Deferred Rent................................................................... 7,983 7,651
Deferred Income Taxes........................................................... 3,621 4,021
Commitments and Contingencies (see Note 8)
Redeemable Put Warrant.......................................................... 6,332 --
Stockholders' Equity:
Preferred Stock............................................................... 5 --
Common Stock.................................................................. 0 101
Additional Paid-In Capital.................................................... 28,809 62,135
Accumulated Deficit........................................................... (7,803) (9,852)
------------ ------------
Total Stockholders' Equity............................................ 21,011 52,384
------------ ------------
Total Liabilities and Stockholders' Equity...................................... $ 186,881 $ 281,799
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
39
<PAGE>
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
Revenues:
Storage............................................................... $ 54,098 $ 64,165 $ 85,826
Service and Storage Material Sales.................................... 33,520 40,271 52,892
------------ ------------- -------------
Total Revenues................................................. 87,618 104,436 138,718
Operating Expenses:
Cost of Sales (Excluding Depreciation)................................ 45,880 52,277 70,747
Selling, General and Administrative................................... 20,853 26,035 34,342
Depreciation and Amortization......................................... 8,690 12,341 16,936
------------ ------------- -------------
Total Operating Expenses....................................... 75,423 90,653 122,025
------------ ------------- -------------
Operating Income........................................................ 12,195 13,783 16,693
Interest Expense........................................................ 8,954 11,838 14,901
------------ ------------- -------------
Income Before Provision for Income Taxes....................... 3,241 1,945 1,792
Provision for Income Taxes.............................................. 1,957 1,697 1,435
------------ ------------- -------------
Income Before Extraordinary Charge............................. 1,284 248 357
Extraordinary Charge from Early Retirement of
Debt (Net of Tax Benefit of $1,413)........................... -- -- 2,126
------------ ------------- -------------
Net Income (Loss) ............................................. 1,284 248 (1,769)
Accretion of Redeemable Put Warrant..................................... 1,412 2,107 280
------------ ------------- -------------
Net Loss Applicable to Common Stockholders..................... $ (128) $ (1,859) $ (2,049)
============ ============= =============
Net Income (Loss) per Common and Common Equivalent Share:
Income Before Extraordinary Charge and
Accretion of Put Warrant.................................. $ 0.16 $ 0.03 $ 0.04
Accretion of Put Warrant....................................... (0.18) (0.27) (0.03)
------------ ------------- -------------
Income (Loss) Before Extraordinary Charge ..................... (0.02) (0.24) 0.01
Extraordinary Charge (Net of Tax Benefit) ..................... -- -- (0.21)
------------ ------------- -------------
Net Loss Per Common and Common Equivalent Share......................... $ (0.02) $ (0.24) $ (0.20)
============ ============= =============
Weighted Average Common and Common
Equivalent Shares Outstanding.................................. 7,984 7,784 10,137
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
40
<PAGE>
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AS OF DECEMBER 31, 1994, 1995 AND 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
---------------------------------------------
1994 1995 1996
------------ ----------- ------------
<S> <C> <C> <C>
Series A1 Preferred Stock:
Balance, Beginning of Period........................................ $ 2 $ 1 $ 0
Conversion of 100,000 Shares of Series A1
Preferred Stock to Series A2 Preferred Stock..................... (1) -- --
Conversion of 43,500 Shares of Series A1
Preferred Stock to Series A3 Preferred Stock...................... -- (1) --
Conversion of 6,500 Shares of Series A1
Preferred Stock to Common Stock - Voting......................... -- -- (0)
------------ ----------- ------------
Balance, End of Period; (50,000, 6,500 and
0 Shares Outstanding as of December 31,
1994, 1995 and 1996, Respectively)............................... 1 0 --
------------ ----------- ------------
Series A2 Preferred Stock:
Balance, Beginning of Period........................................ -- 1 1
Conversion of 100,000 Shares of Series A1
Preferred Stock to Series A2 Preferred Stock..................... 1 -- --
Repurchase of 2,000 Shares of Series A2 Preferred Stock............. -- 0 --
Conversion of 25,321 Shares of Series A2
Preferred Stock to Common Stock - Non-Voting..................... -- -- (0)
Conversion of 72,679 Shares of Series A2
Preferred Stock to Common Stock - Voting......................... -- -- (1)
------------ ----------- ------------
Balance, End of Period; (100,000, 98,000 and
0 Shares Outstanding as of December 31,
1994, 1995 and 1996, Respectively)............................... 1 1 --
------------ ----------- ------------
Series A3 Preferred Stock:
Balance, Beginning of Period........................................ -- -- 1
Conversion of 43,500 Shares of Series A1
Preferred Stock to Series A3 Preferred Stock..................... -- 1 --
Conversion of 43,500 Shares of Series A3
Preferred Stock to Common Stock - Voting......................... -- -- (1)
------------ ----------- -----------
Balance, End of Period (None Outstanding as of December
31, 1994; 43,500 and 0 Shares Outstanding as of
December 31, 1995 and 1996, Respectively)......................... -- 1 --
------------ ----------- -----------
Series C Preferred Stock:
Balance, Beginning of Period........................................ 3 3 3
Conversion of 351,395 Shares of Series C
Preferred Stock to Common Stock - Voting......................... -- -- (3)
------------ ----------- -----------
Balance, End of Period; (351,395, 351,395 and
0 Shares Outstanding as of December 31, 1994,
1995 and 1996, Respectively)..................................... 3 3 --
------------ ----------- -----------
Total Preferred Stock............................................ 5 5 --
------------ ----------- -----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
41
<PAGE>
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
---------------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Class A Common Stock:
Balance, Beginning of Period........................................ 0 0 0
Exercise of 15,976 Stock Options in 1995............................ -- 0 --
Conversion of 44,888 Shares of Class A
Common Stock to Common Stock - Voting............................ -- -- (0)
------------ ------------ ------------
Balance, End of Period; (28,912, 44,888 and 0 Shares
Outstanding as of December 31, 1994, 1995 and
1996, Respectively).............................................. 0 0 --
------------ ------------ ------------
Class C Common Stock:
Balance, Beginning of Period........................................ 0 -- --
Repurchase of 17,289 Shares of Class C Common Stock................. (0) -- --
------------ ------------ ------------
Balance, End of Period; (None Outstanding as of
December 31, 1994, 1995 and 1996, Respectively).................. -- -- --
------------ ------------ ------------
Common Stock - Voting:
Balance, Beginning of Period........................................ -- -- --
Conversion of 474,074 Shares of Preferred Stock
and 44,888 Shares of Class A Common Stock to
Common Stock - Voting............................................ -- -- 73
Issuance of 2,350,000 Shares in Initial Public Offering ............ -- -- 23
Exercise of 6,896 Stock Options .................................... -- -- 0
Issuance of 915 Shares for Services ................................ -- -- 0
Conversion of 22,705 Shares of Common
Stock - Non-Voting to Common Stock - Voting...................... -- -- 0
------------ ------------ ------------
Balance, End of Period; (None Outstanding as of
December 31, 1994 and 1995; 9,657,657 Outstanding
as of December 31, 1996)......................................... -- -- 96
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
42
<PAGE>
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1994 1995 1996
----------- ---------- ---------
<S> <C> <C> <C>
Common Stock - Non-Voting:
Balance, Beginning of Period.......................................... -- -- --
Conversion of 25,321 Shares of Series A2 Preferred Stock
to 500,000 Shares of Common Stock - Non-Voting .................... -- -- 5
Conversion of 22,705 Shares of Common
Stock - Non-Voting to Common Stock - Voting........................ -- -- (0)
----------- ---------- ---------
Balance, End of Period; (None Outstanding as of
December 31, 1994 and 1995; 477,295 Outstanding
as of December 31, 1996)........................................... -- -- 5
----------- ---------- ---------
Total Common Stock................................................. -- -- 101
----------- ---------- ---------
Additional Paid in Capital:
Balance, Beginning of Period.......................................... $ 29,858 $ 28,808 $ 28,809
Repurchase of 17,289 Shares of Class C Common Stock................... (1,050) -- --
Repurchase of 2,000 Shares of Series A2 Preferred Stock............... -- (199) --
Issuance of 15,976 Shares of Class A Common
Stock Pursuant to Option Exercises ................................ -- 200 --
Conversion of Preferred Stock and Class A Common
Stock to Common Stock - Voting and Common
Stock - Non-Voting................................................ -- -- (73)
Issuance of 2,350,000 Shares of Common Stock - Voting
Pursuant to the Company's Initial Public Offering of
Common Stock....................................................... -- -- 33,262
Issuance of 6,896 Shares of Common
Stock - Voting Pursuant to Option Exercises ....................... -- -- 66
Issuance of 915 Shares of Common
Stock - Voting for Services ....................................... -- -- 19
Tax Benefit of Option Exercises....................................... -- -- 52
----------- ---------- ----------
Balance, End of Period................................................ 28,808 28,809 62,135
----------- ---------- ----------
Accumulated Deficit:
Balance, Beginning of Period.......................................... (5,816) (5,944) (7,803)
Net Income (Loss)..................................................... 1,284 248 (1,769)
Accretion of Redeemable Put Warrant................................... (1,412) (2,107) (280)
----------- ---------- ----------
Balance, End of Period................................................ (5,944) (7,803) (9,852)
----------- ---------- ----------
Total Stockholders' Equity.............................................. $ 22,869 $ 21,011 $ 52,384
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
43
<PAGE>
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
AS OF DECEMBER 31, 1994, 1995 AND 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss)................................................... $ 1,284 $ 248 $ (1,769)
Adjustments to Reconcile Net Income (Loss) to Cash
Flows Provided by Operations:
Depreciation and Amortization.................................... 8,690 12,341 16,936
Amortization of Financing Costs.................................. 1,046 1,135 857
Provision For Doubtful Accounts.................................. 356 630 639
Extraordinary Loss on Early Retirement of Debt................... -- -- 3,539
Loss on Sale of Fixed Assets..................................... 278 400 --
Other Long-term Liabilities...................................... (394) (527) (193)
Changes in Assets and Liabilities (Exclusive of
Acquisitions):
Accounts Receivable.............................................. (2,163) (3,171) (4,395)
Inventory, Prepaid Expenses and Other Assets..................... (556) (739) (878)
Deferred Income Taxes............................................ 1,714 1,179 (973)
Accounts Payable................................................. 83 265 (1,278)
Accrued Expenses................................................. 1,191 4,252 3,642
Deferred Rent.................................................... 441 (110) (332)
Deferred Income.................................................. (26) (301) 161
Other Liabilities................................................ (369) 125 (56)
--------- --------- ---------
Cash Flows Provided by Operations................................ 11,575 15,727 15,900
--------- --------- ---------
Cash Flows from Investing Activities:
Capital Expenditures................................................ (16,980) (15,253) (24,446)
Additions to Customer Acquisition Costs............................. (1,366) (1,379) (1,642)
Cash Paid for Acquisitions.......................................... (2,846) (33,048) (68,496)
Proceeds from Sale of Assets........................................ 2,973 73 --
Other, Net.......................................................... 705 71 (25)
--------- --------- ---------
Cash Flows Used in Investing Activities.......................... (17,514) (49,536) (94,609)
--------- --------- ---------
Cash Flows From Financing Activities:
Repayment of Debt................................................... (13,642) (812) (171,730)
Net Proceeds from Borrowings........................................ 21,350 36,350 69,570
Net Proceeds from Sale of Senior Subordinated Notes................. -- -- 160,050
Net Proceeds from Initial Public Offering........................... -- -- 33,285
Retirement of Redeemable Put Warrant................................ -- -- (6,612)
Prepayment Penalties on Early Retirement of Debt.................... -- -- (1,785)
Cash From Exercise of Stock Options................................. -- 200 66
Repurchase of Stock................................................. (1,050) (199) --
Financing Costs..................................................... (7) (1,448) (2,267)
--------- --------- ---------
Cash Flows Provided by Financing Activities...................... 6,651 34,091 80,577
--------- --------- ---------
Increase in Cash...................................................... 712 282 1,868
Cash and Cash Equivalents, Beginning of Year.......................... 591 1,303 1,585
--------- --------- ---------
Cash and Cash Equivalents, End of Year................................ $ 1,303 $ 1,585 $ 3,453
========= ========= =========
Supplemental Information:
Cash Paid for Interest................................................ $ 7,741 $ 9,111 $ 11,590
========= ========= =========
Cash Paid for Income Taxes............................................ $ 339 $ 1,177 $ 197
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
44
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Amounts in thousands except share data)
1. Nature of Business
The accompanying financial statements represent the consolidated accounts
of Iron Mountain Incorporated and its subsidiaries (collectively "Iron Mountain"
or the "Company"). Iron Mountain is a full service records management company
providing storage and related services for all media in various locations
throughout the United States to Fortune 500 Companies and numerous legal,
banking, health care, accounting, insurance, entertainment and government
organizations.
2. Summary of Significant Accounting Policies
a. Principles of Consolidation
The financial statements reflect the financial position and results of
operations of Iron Mountain on a consolidated basis. All significant
intercompany account balances have been eliminated.
b. Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated using the
straight-line method with the following useful lives:
<TABLE>
<S> <C>
Buildings........................................ 40 to 50 years
Leasehold improvements........................... 8 to 10 years or the life of the lease,
whichever is shorter
Racking.......................................... 10 to 20 years
Warehouse equipment/vehicles..................... 5 to 10 years
Office equipment................................. 3 to 5 years
Computer hardware and software................... 3 to 5 years
</TABLE>
Property, plant and equipment consist of the following:
December 31,
--------------------------
1995 1996
-------- --------
Real property............................. $ 34,162 $ 38,552
Leasehold improvements.................... 11,206 14,918
Racking................................... 53,348 72,854
Warehouse equipment/vehicles.............. 5,810 7,730
Furniture and fixtures.................... 2,754 3,839
Computer hardware and software............ 13,729 19,786
Construction in progress.................. 4,231 5,816
-------- --------
$125,240 $163,495
======== ========
The Company develops various software applications for internal use.
Payroll and related costs for employees who are directly associated with and who
devote time to the internal-use computer software project (to the extent of the
time spent directly on the project) are capitalized and amortized over the
useful life of the software. Capitalization begins when the design stage of the
application has been completed, it is probable that the project will be
completed and the application will be used to perform the function intended.
Amortization begins when the software is placed in service.
45
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Minor maintenance costs are expensed as incurred. Major improvements to the
leased buildings are capitalized as leasehold improvements and depreciated as
described above.
c. Revenue Recognition
Storage and service revenues are recognized in the month the respective
service is provided. Storage material sales are recognized when shipped to the
customer. Amounts related to future storage for customers where storage fees are
billed in advance are accounted for as deferred income and amortized over the
applicable period.
d. Goodwill
Goodwill reflects the cost in excess of fair value of the net assets of
companies acquired in purchase transactions. Goodwill is amortized using the
straight-line method from the date of acquisition over the expected period to be
benefited, currently estimated at 25 years. The Company assesses the
recoverability of goodwill, as well as other long lived assets based upon
expectations of future undiscounted cash flows in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long Lived Assets and for Long Lived Assets to be Disposed Of." Accumulated
amortization of goodwill was $15,074 and $18,858 as of December 31, 1995 and
1996, respectively. In 1995, the Company recorded a $900 impairment of goodwill
related to one of its subsidiaries.
e. Deferred Financing Costs
Deferred financing costs are amortized over the life of the related debt
using the effective interest rate method. If debt is retired early, unamortized
deferred financing costs are written off as an extraordinary charge in the
period the debt is retired. As of December 31, 1995 and 1996, deferred financing
costs were $4,688, and $7,998, respectively, and accumulated amortization of
those costs were $2,050, and $640, respectively.
f. Customer Acquisition Costs
Costs, net of revenues received for the initial transfer of the records,
related to the acquisition of large volume accounts (accounts consisting of
10,000 or more cartons) are capitalized and amortized for an appropriate period
not exceeding 12 years, unless the customer terminates its relationship with the
Company, at which time the unamortized cost is charged to expense. However, in
the event of such termination, the Company collects and records as income
permanent removal fees that generally equal or exceed the amount of unamortized
customer acquisition costs. As of December 31, 1995 and 1996 those costs were
$6,492 and $8,134, respectively, and accumulated amortization of those costs
were $1,282 and $1,800, respectively.
g. Deferred Rent
The Company has entered into various leases for buildings used in the
storage of records. Certain leases have fixed escalation clauses or other
features which require normalization of the rental expense over the life of the
lease resulting in deferred rent being reflected in the accompanying balance
sheets. In addition, the Company has assumed various unfavorable leases in
connection with certain of its acquisitions. The discounted present value of
these lease obligations in excess of market rate at the date of the acquisition
was recorded as a deferred rent liability and is being amortized over the
remaining lives of the respective leases.
46
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
h. Inventories
Inventories are carried at the lower of cost using the first-in, first-out
basis or market and are comprised primarily of cartons.
i. Accrued Expenses
Accrued expenses consist of the following:
December 31,
----------------------------------
1995 1996
----------------- ----------------
Incentive compensation........... $ 1,701 $ 2,287
Interest......................... 1,737 4,247
Workers' compensation............ 2,415 2,949
Payroll ......................... 920 1,448
Other............................ 4,144 6,344
------- -------
$10,917 $17,275
======= =======
j. Net Income (Loss) Per Common Share
Net income (loss) per common share is computed based on the weighted
average number of common and common stock equivalent shares outstanding during
each period. Common stock equivalents consist of preferred stock that is
convertible into common stock and employee options to purchase common stock.
Pursuant to certain SEC regulations, the calculation of weighted average shares
outstanding assumes the conversion of preferred stock for all periods presented.
The stock options have not been included in the calculation of common stock
equivalents for 1994 and 1995 because their dilutive effect was immaterial.
On March 3, 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share". The new standard must be applied beginning in 1998
and at that time will require restatement of previously reported earnings per
share. The new statement cannot be applied early. The Company believes that the
effect of applying the new standard will not be material.
k. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
l. Cash and Cash Equivalents
The Company defines cash and cash equivalents to include cash on hand and
cash invested in short-term securities which have original maturities of less
than 90 days. Cash and cash equivalents are carried at cost which approximates
fair market value.
m. Stock-Based Compensation
Effective January 1, 1996, the Company adopted the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation." The Company has elected to
continue to account for stock options at
47
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
intrinsic value with disclosure of the effects of fair value accounting on net
income and earnings per share on a pro forma basis.
n. Interest Rate Caps
Premiums paid for interest rate cap agreements are amortized to interest
expense over the terms of the cap. Unamortized premiums are included in other
assets in the Consolidated Balance Sheets. Amounts receivable, if any, under cap
agreements are accounted for as a reduction of interest expense.
3. Debt
Debt consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------
1995 1996
-------------- ---------------
<S> <C> <C>
10-1/8% Senior Subordinated Notes Due 2006 ........... $ -- $165,000
$100,000 New Credit Facility ......................... -- 9,000
Old Credit Agreement.................................. 95,725 --
Chrysler Notes........................................ 14,772 --
Real estate mortgages................................. 10,797 10,733
Other................................................. 580 --
-------- --------
Long-term debt.................................... 121,874 184,733
Less -- current portion........................... (2,578) (396)
-------- --------
Long-term debt, net of current portion............ $119,296 $184,337
======== ========
</TABLE>
At December 31, 1995, the Company had two term loans, an acquisition credit
facility and a working capital facility (collectively, the "Old Credit
Agreement") of $125,000. The outstanding indebtedness under the Old Credit
Agreement was paid in full on October 1, 1996 with a portion of the net proceeds
from the sale of $165,000 of 10-1/8% Senior Subordinated Notes due 2006 (the
"Notes"). Interest on the facility was based, at the Company's option, on a
choice of base rates plus a margin. The margin varied depending on the base rate
selected.
The Chrysler Notes were issued in 1990 with an original maturity date of
2000. A warrant was issued in connection with the Chrysler Notes to which
management assigned an initial value of $750 for financial reporting purposes
(see Note 5). The value of the warrant was being accounted for as an original
issue discount of the Chrysler Notes and was amortized as interest expense over
the life of the loan using the effective interest rate method. The Chrysler
Notes were paid in full with a portion of the net proceeds from the Notes.
On September 30, 1996, Iron Mountain entered into a new $100 million
revolving credit facility (the "New Credit Facility"). The New Credit Facility
is a five year revolving credit facility maturing on September 30, 2001. At
December 31, 1996, the weighted average interest rate on outstanding borrowings
under the New Credit Facility was 8.0%.
The New Credit Facility specifies certain minimum or maximum relationships
between operating cash flows (earnings before interest, taxes, depreciation,
amortization and extraordinary charges) and interest, total debt and fixed
charges. There are restrictions on dividends declared by the Company, sales or
pledging of assets, capital expenditures and changes in business and ownership;
cash dividends are effectively prohibited. As of December 31, 1996, the Company
was in compliance with all of its debt covenants. Loans under the New Credit
Facility are secured by the capital stock of all of the Company's subsidiaries.
48
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The interest rate on loans under the New Credit Facility varies, at the
Company's option, on a choice of base rates plus an applicable margin. The
applicable margin varies depending on the base rate selected and certain debt
ratios. The timing of interest payments also varies with the base rate selected.
Under the New Credit Facility, the Company is required to maintain an
interest rate protection program. Pursuant to this requirement, the Company has
only limited involvement with derivative financial instruments and does not use
them for trading purposes.
Interest rate cap agreements are used to reduce the potential impact of
increases in interest rates on floating rate long-term debt. At December 31,
1995 and 1996, the Company was a party to three interest rate cap agreements,
each covering a notional amount of $10,000. One agreement expires on August 12,
1997 and the other two agreements expire on March 24, 1998. The agreements
entitle the Company to receive from counterparties, on a quarterly basis,
certain payments, if the three month LIBOR rate exceeds 7.5%.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its interest rate cap agreements but has no off balance
sheet risk of accounting loss.
On October 1, 1996, the Company issued $165 million of 10-1/8% Senior
Subordinated Notes due 2006. Interest on the Notes is payable semi-annually on
April 1 and October 1 commencing on April 1, 1997. The net proceeds were $160.1
million after underwriting discounts and commissions. The proceeds were used to
repay outstanding bank debt under the Old Credit Agreement, the Chrysler Notes
and certain other indebtedness, to fund the purchase price of an acquisition and
for general corporate purposes. In connection with the prepayment of such
indebtedness, the Company incurred an extraordinary charge of $3,539 not
including related tax benefit of $1,413, during the fourth quarter of 1996. The
charge consists of a prepayment penalty, the write-off of deferred financing
costs, original issue discount and loss on termination of interest rate
protection agreements.
The Notes contain covenants and restrictions similar to, or less
restrictive than, the New Credit Facility. After September 30, 2001, and subject
to certain restrictions, the Company may, at its option, redeem any or all of
the Notes at face value, plus a premium ranging from approximately 2% to 9%
through September 30, 2004. Thereafter, the Notes may be redeemed at face value.
Additionally, under certain circumstances, including a change of control or
following certain asset sales, the holders of the Notes may require the Company
to repurchase the Notes.
The Notes are fully and unconditionally guaranteed, on a joint and several
basis, on a senior subordinated basis, by all of the Company's direct and
indirect subsidiaries (the "Subsidiary Guarantors"). The Company is a holding
company, substantially all of the assets of which are the stock of the
Subsidiary Guarantors, and substantially all of the operations of which are
conducted by the Subsidiary Guarantors. Accordingly, the aggregate assets,
liabilities, earnings and equity of the Subsidiary Guarantors are substantially
equivalent to the assets, liabilities, earnings and equity of the Company on a
consolidated basis. Management of the Company believes that separate financial
statements of, and other disclosures with respect to, the Subsidiary Guarantors
are not meaningful or material to investors.
The real estate mortgages consist of an $8,037, 10 year, 11% mortgage based
on 30 year amortization with a $7,495 balloon payment due October, 2000 and a
$3,000, 8% note that is payable in various installments commencing in 1997 and
maturing in November, 2006.
49
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Maturities of long-term debt are as follows:
Year Amount
----------------------------- ------------
1997......................... $ 396
1998......................... 379
1999......................... 389
2000......................... 7,794
2001......................... 9,300
Thereafter................... 166,475
---------
$184,733
=========
Based on the borrowing rates currently available to the Company for loans
with similar terms and average maturities, the Company has estimated the
following fair values for its long-term debt as of December 31, 1996:
Carrying Fair
Amount Value
--------- ---------
New Credit Facility..................... $ (9,000) $ (9,000)
Real estate mortgages................... (10,733) (10,137)
10-1/8% Senior Subordinated Notes ...... (165,000) (156,398)
4. Acquisitions
During 1994, the Company purchased substantially all of the assets, and
assumed certain liabilities, of three separate records management businesses.
During 1995, the Company purchased substantially all of the assets, and assumed
certain liabilities, of four additional records management businesses and during
1996, the Company purchased substantially all of the assets, and assumed certain
liabilities, of another sixteen records management businesses. Each of these
acquisitions was 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 excess of the purchase price over the underlying fair value of the
assets and liabilities of each acquisition has been assigned to goodwill
($2,484, $26,054 and $53,894 in 1994, 1995 and 1996, respectively) and is being
amortized over the estimated benefit period of 25 years. Funds used to make the
various acquisitions were provided through the Company's credit facilities and a
portion of the net proceeds from the Offering and the sale of the Notes. A
summary of the cash consideration (not including contingent payments of
approximately $4,000 based on the achievement of certain revenue targets in 1997
and 1998) and allocation of the purchase price as of the acquisition dates are
as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Fair value of assets acquired.............. $ 3,223 $ 41,286 $ 73,370
Liabilities assumed........................ (377) (8,238) (4,874)
-------- -------- ---------
Cash paid.................................. $ 2,846 $ 33,048 $ 68,496
======== ======== =========
</TABLE>
50
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The following unaudited pro forma combined information shows the results of
the Company's operations for the years ended December 31, 1995 and 1996 as
though each of the completed acquisitions had occurred as of the beginning of
the period reported:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Revenues ......................................................... $ 140,900 $ 154,076
Loss before extraordinary charge ................................. (1,989) (243)
Net loss applicable to common stockholders ....................... (4,096) (2,649)
Loss per common and common equivalent share before
extraordinary charge and accretion of put warrant ............ (0.26) (0.02)
Net loss per common and common equivalent share .................. (0.53) (0.27)
</TABLE>
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 the period reported 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 companies. Certain acquisitions
completed in the fourth quarter of 1996 are not included in the pro forma
results as their effect was immaterial.
In connection with the acquisitions completed in 1996, the Company has
undertaken certain restructurings of the acquired businesses. The restructuring
activities include certain reductions in staffing levels, elimination of
duplicate facilities and other costs associated with exiting certain activities
of the acquired businesses. In connection with these restructuring activities,
the Company established reserves of $1,883. These amounts were recorded as costs
of the acquisitions and were provided in accordance with Emerging Issues Task
Force Issue No. 95-3, "Recognition of Liabilities in Connection with a Purchase
Business Combination". During 1996, the Company expended $602 for restructuring
costs. These expenditures consisted primarily of severance costs, move costs and
costs relating to exited facilities. As of December 31, 1996, the Company had a
total of $1,340 accrued for restructuring costs on all of its acquisitions.
5. Capital Stock, Redeemable Put Warrant and Stock Options
a. Capital Stock
On February 6, 1996, the Company completed an initial public offering of
its Common Stock (the "Offering"). Pursuant to the Offering, the Company issued
2,350,000 shares of Common Stock - Voting.
In connection with the Offering, the Board of Directors approved, and the
shareholders ratified, a recapitalization and the designation of three new
classes of stock as follows:
Authorized
Class Shares
------------------------------------------------ --------------------
Preferred stock, $.01 par value................. 2,000,000
Common stock - voting, $.01 par value........... 13,000,000
Common stock - non-voting, $.01 par value....... 1,000,000
51
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Upon consummation of the Offering, all shares of capital stock were
automatically converted into shares of Common Stock - Voting and, in the case of
one stockholder, Common Stock - Non-Voting. The number of common shares received
upon conversation were as follows:
<TABLE>
<CAPTION>
Common
------------------------------------------------------
Preferred Voting Non-Voting
----------------- ------------------ -----------------
<S> <C> <C> <C>
Series A1 and Series A3................... 50,000 987,314 --
Series A2................................. 98,000 1,435,146 500,000
Series C.................................. 351,395 4,809,793 --
</TABLE>
The following table summarizes the number of shares authorized, issued and
outstanding for each issue of the Company's capital stock as of December 31:
<TABLE>
<CAPTION>
Number of Shares
----------------------------------------------------------------
Authorized Issued and Outstanding
-------------------------------- -------------------------------
Equity Type Par Value 1995 1996 1995 1996
- -------------------------------------- --------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Series A1 preferred stock ........... $.01 6,500 -- 6,500 --
Series A2 preferred stock ........... $.01 98,000 -- 98,000 --
Series A3 preferred stock ........... $.01 43,500 -- 43,500 --
Series B preferred stock ............ $.01 148,000 -- -- --
Series C preferred stock ............ $.01 351,395 -- 351,395 --
Preferred stock ..................... $.01 -- 2,000,000 -- --
Class A common stock ................ $.01 13,000,000 -- 44,888 --
Class B common stock ................ $.01 10,300,000 -- -- --
Class C common stock ................ $.01 1 -- -- --
Common stock-voting ................. $.01 -- 13,000,000 -- 9,657,657
Common stock-non-voting.............. $.01 -- 1,000,000 -- 477,295
</TABLE>
In 1995, the Company declared a 15.4215-for-1 stock split of the Class A
and Class B Common Stock in the form of a stock dividend. All weighted average
common share and stock related data in the consolidated financial statements
have been retroactively restated to reflect the stock split.
b. Redeemable Put Warrant
In connection with the issuance of the Chrysler Notes, the Company also
issued a put warrant, dated December 14, 1990 (the "Warrant"), exercisable for
444,385 shares of common stock for nominal consideration upon the occurrence of
certain specified events. On February 7, 1996, in connection with the Offering,
the Warrant was redeemed for $6,612. This Warrant has been accreted each year
using the effective interest rate method based on the Warrant's estimated
redemption value at its estimated redemption date of February 15, 1996 and is
reflected as a redeemable put warrant in the accompanying balance sheets.
c. Stock Options
In September, 1991 the Company created a non-qualified stock option plan
pursuant to which up to 444,385 shares of Class A common stock of the Company
could be issued at the discretion of the Stock Option Committee to key
employees, consultants and directors.
Effective November 30, 1995, the Board of Directors approved the adoption
of the 1995 Stock Incentive Plan (the "Stock Option Plan"), which replaced the
previous stock option plan. A total of
52
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
1,000,000 shares of Common Stock are available for grant as options and other
rights under the Stock Option Plan, including the options issued under the 1991
plan.
Effective December 21, 1995, the Board of Directors approved the 1995 Stock
Option Plan for Non-Employee Directors that permits non-employee Directors to
elect to receive all or a portion of their compensation in the form of Common
Stock. Directors electing to receive Common Stock will, as an incentive, receive
an amount of stock equivalent to 110% of the directors compensation otherwise
due to be paid in cash. During 1996, the Company issued 915 shares under the
plan. At December 31, 1996, there were 14,085 shares reserved for issuance under
the plan.
The following is a summary of stock option transactions during the
applicable periods:
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
----------------- ------------------------
<S> <C> <C>
Options outstanding, December 31, 1993..... 286,618 $ 6.85
Canceled................................. (25,134) 6.48
-------
Options outstanding, December 31, 1994..... 261,484 6.89
Granted.................................. 97,018 12.58
Exercised................................ (15,976) 12.58
Canceled................................. (8,219) 11.21
-------
Options outstanding, December 31, 1995..... 334,307 8.16
Granted.................................. 453,854 16.49
Exercised................................ (6,896) 9.58
Canceled................................. (18,404) 11.76
------
Options outstanding, December 31, 1996..... 762,861 13.02
=======
</TABLE>
The stock options were granted with exercise prices equal to or greater
than the fair market value at the date of grant. The majority of options become
exercisable ratably over a period of five years unless the holder terminates
employment. As of December 31, 1996, 220,129 of the options outstanding were
exercisable at a weighted average exercise price of $7.06 per share. The number
of options available for grant at December 31, 1996 was 185,355.
Effective January 1, 1996, the Company adopted the provisions of SFAS No.
123, "Accounting for Stock Based Compensation." The Company has elected to
continue to account for stock options at intrinsic value with disclosure of fair
value accounting on net income (loss) and earnings (loss) per share on a pro
forma basis. Had the Company elected to recognize compensation cost based on the
fair value of the options granted at grant date as prescribed by SFAS No. 123,
net income (loss) and earnings (loss) per common and common equivalent share
would have been reduced to the pro forma amounts indicated in the table below:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1995 1996
------------ ------------
<S> <C> <C>
Net loss applicable to common stockholders -- as reported ... $ (1,859) $ (2,049)
Net loss applicable to common stockholders -- pro forma ..... (2,058) (2,991)
Net loss per common and common equivalent
share -- as reported .................................... (0.24) (0.20)
Net loss per common and common equivalent
share -- pro forma ...................................... (0.26) (0.30)
</TABLE>
53
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Consistent with SFAS No. 123, pro forma net income (loss) and earnings
(loss) per share have not been calculated for options granted prior to January
1, 1995. Accordingly, pro forma compensation cost may not be representative of
that to be expected in future years.
The weighted average fair value of options granted in 1995 and 1996 was
$5.22 and $7.38 per share, respectively. The values were estimated on the date
of grant using the Black-Scholes option pricing model. The following table
summarizes the weighted average assumptions used for grants in the year ended
December 31:
Assumption 1995 1996
------------------------------------ --------------- --------------
Expected volatility ................ 24.2% 24.2%
Risk free interest rate ............ 7.51 6.34
Expected dividend yield ............ N/A N/A
Expected life of the option ....... 6.3 yrs 7.5 yrs
At December 31, 1996, the options outstanding were exercisable at prices
ranging from $6.48 to $30.38 per share and had a weighted average remaining
contractual life of 7.8 years.
6. Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109 which
requires the recognition of deferred tax assets and liabilities for the expected
tax consequences of temporary differences between the tax and financial
reporting bases of assets and liabilities.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1996
---------- -----------
<S> <C> <C>
Accrued liabilities........................................ $ 1,585 $ 1,757
Accrued rent............................................... 3,462 3,056
Net operating loss carryforwards........................... 2,522 4,751
AMT credit................................................. 628 587
Deferred income............................................ 360 --
Other...................................................... 1,150 1,719
---------- -----------
Gross deferred tax assets............................ 9,707 11,870
---------- -----------
Other assets principally due to differences in
amortization............................................ (2,051) (2,150)
Plant and equipment, principally due to
differences in depreciation............................. (7,201) (7,039)
Customer acquisition costs................................. (1,716) (2,337)
Other...................................................... (417) --
----------- -----------
Gross deferred tax liabilities....................... (11,385) (11,526)
---------- -----------
Net deferred tax asset (liability)........... $ (1,678) $ 344
========== ===========
</TABLE>
At December 31, 1996, a non-current deferred tax asset of $987 is included
in Other Assets in the accompanying Balance Sheets.
The Company and its subsidiaries file a consolidated Federal income tax
return. The provision for
54
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
income taxes consists of the following components:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Federal -- current.................. $ 68 $ 422 $ 958
Federal -- deferred................. 1,416 837 57
State -- current.................... 175 96 1,450
State -- deferred................... 298 342 (1,030)
--------- --------- ---------
$ 1,957 $ 1,697 $ 1,435
========= ========= =========
</TABLE>
A reconciliation of total income tax expense and the amount computed by
applying the US Federal income tax rate of 34% to income before income taxes is
as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Computed "expected" tax provision................... $ 1,102 $ 661 $ 609
Increase in income taxes resulting from:
State taxes (net of federal tax benefit).......... 312 289 278
Non-deductible goodwill
amortization................................... 521 843 602
Other............................................. 22 (96) (54)
-------- -------- --------
$ 1,957 $ 1,697 $ 1,435
======== ======== ========
</TABLE>
The Company has estimated Federal net operating loss carryforwards of
$11,510 at December 31, 1996 to reduce future Federal income taxes, if any,
which begin to expire in 2005. The Company also has estimated state net
operating loss carryforwards of approximately $3,610 to reduce future state
income taxes, if any. Additionally, the Company has alternative minimum tax
credit carryforwards of $587 which have no expiration date and are available to
reduce future income taxes, if any.
7. Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Mar. 31 June 30 Sept. 30 Dec. 31
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Revenues ....................................... $ 24,338 $ 25,886 $ 26,570 $ 27,642
Gross profit ................................... 12,114 12,998 13,682 13,365
Net loss applicable to common
stockholders - (1) ......................... (274) (259) (4) (822) (5) (504) (6)
Net loss per share applicable to
common stockholders ........................ (0.04) (0.03) (0.11) (0.06)
- -------------------------------------------------------------------------------------------------------------------------------
1996
Revenues........................................ $ 31,028 $ 32,922 $ 36,019 $ 38,749
Gross profit ................................... 15,360 16,207 17,311 19,093
Income (loss) before extraordinary
charge ..................................... 286 411 -- (340)
Net income (loss) applicable to
common stockholders ........................ 6 (2) 411 (7) -- (2,466) (3)
Income (loss) per share before
extraordinary charge applicable to
common stockholders ........................ 0.00 0.04 0.00 (0.03)
Net income (loss) per share applicable
to common stockholders ..................... 0.00 0.04 0.00 (0.23)
</TABLE>
55
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(1) Includes charges of $452, $501, $554 and $600 respectively, related to the
accretion of the put warrant.
(2) Includes a charge of $280, related to the accretion of the put warrant.
(3) Includes an extraordinary charge of $2,126, net of tax benefit, related to
the prepayment of certain indebtedness.
(4) Includes a $360 after tax charge for litigation.
(5) Includes a $900 write-down of the goodwill of a subsidiary.
(6) Includes a $300 after tax charge related to the relocation of the corporate
accounting function from Los Angeles to Boston.
(7) Includes a $193 after tax charge related to the relocation of the corporate
accounting function from Los Angeles to Boston.
8. Commitments and Contingencies
a. Leases
Iron Mountain leases most of its facilities under various operating leases.
A majority of these leases have renewal options of five to ten years and have
either fixed or Consumer Price Index escalation clauses. The Company also leases
equipment under operating leases, primarily computers which have an average
lease life of three years. Trucks and office equipment are also leased and have
remaining lease lives ranging from one to seven years. Rent expense was $13,555,
$15,661, and $21,114 for the years ended December 31, 1994, 1995 and 1996,
respectively.
Minimum future lease payments are as follows:
Year Operating
------------------------------------- ---------
1997................................. $ 20,210
1998................................. 17,397
1999................................. 17,106
2000................................. 16,896
2001................................. 16,242
Thereafter........................... 80,332
---------
Total minimum lease payments......... $ 168,183
=========
b. 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.
c. Other
The Company may be responsible for environmental clean-up costs at certain
of its facilities. Estimated costs of approximately $800 to perform the
necessary remediation work are included in other liabilities in the accompanying
balance sheets. Management believes the ultimate outcome of the above issue will
not have a material adverse effect on Iron Mountain's financial condition or
results of operations.
56
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
9. Related Party Transactions
Iron Mountain leases space to an affiliated company, Schooner Capital
Corporation (Schooner) for its corporate headquarters located in Boston,
Massachusetts. For the years ended December 31, 1994, 1995 and 1996, Schooner
paid Iron Mountain rent totaling $58, $49 and $68, respectively. Iron Mountain
leases one facility from a landlord which is a related party. Total rental
payments for the years ended December 31, 1994, 1995 and 1996 for this facility
totaled $88, $93 and $94, respectively. In the opinion of management, both of
these leases were entered into at market prices and terms.
10. Profit Sharing Retirement Plan
The Company has a defined contribution plan which covers all non-union
employees meeting certain service requirements. Eligible employees may elect to
defer from 1 to 15% of compensation per pay period up to the amount allowed by
the Internal Revenue Code. The Company makes matching contributions based on the
amount of the employee contribution and years of credited service, according to
a schedule as described in the Plan documents. The Company has expensed $168,
$276 and $419 for the years ended December 31, 1994, 1995 and 1996,
respectively.
11. Subsequent Events
a. Acquisitions
Subsequent to December 31, 1996, the Company agreed to acquire
substantially all of the assets and assume certain liabilities of five records
management businesses for approximately $31,600 (not including contingent
payments of up to approximately $800 based on the achievement of certain revenue
targets in 1997 and 1998), in transactions accounted for under the purchase
method. As of March 12, 1997, four of these transactions had been consummated.
The fifth acquisition is expected to close during the second quarter of 1997.
b. Agreement to Merge with Safesite Records Management Corporation
In addition to the acquisitions described above, in February 1997, the
Company announced that it had reached a definitive agreement to merge with
Safesite Records Management Corporation ("Safesite"), a privately held company
based in the Boston, Massachusetts area.
Safesite stockholders and holders of exercisable options will receive Iron
Mountain common stock valued at approximately $50 million, plus approximately
$12 million in cash. The number of shares of Iron Mountain common stock will be
determined based on its market price, using a "collar" with a floor of $26.00
and a ceiling of $31.00. The transaction is subject to regulatory approval and
the approval of Safesite's stockholders. The merger is expected to be completed
during the second quarter of 1997.
c. Amendment and Restatement of the New Credit Facility
On March 3, 1997, the Company amended the New Credit Facility, increasing
the facility from $100 million to $150 million. In addition, certain other terms
of the New Credit Facility, including interest rates, commitment fees and
financial covenants were amended and restated.
57
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
d. Actions of the Board of Directors
On March 3, 1997, the Board of Directors:
(1) Voted, subject to stockholder approval, to increase the number of
authorized shares of Common Stock-Voting from 13,000,000 shares to
20,000,000 shares.
(2) Increased, subject to stockholder approval, the number of shares
available for grant as options under the 1995 Stock Incentive Plan by
400,000.
(3) Amended the 1995 Stock Incentive Plan to, among other things,
incorporate the provisions of the 1995 Non-Employee Directors' Plan.
(4) Granted 22,900 options to various employees to purchase common stock at
fair market value at the date of grant.
(5) Voted to terminate the 1995 Non-Employee Directors' Plan as of June 30,
1997.
e. Facility Fire
In March 1997, Iron Mountain experienced three fires that resulted in
extensive damage to two of its record 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. Management believes that
insurance will cover substantially all of Iron Mountain's property and business
interruption losses relating to the fires. However, Iron Mountain may incur
costs as a result of the fires which will not be covered by insurance.
Management is unable to estimate at this time the magnitude of such costs. 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.
58
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Iron Mountain Incorporated:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Iron Mountain Incorporated for each of
the three years in the period ended December 31, 1996 and have issued our report
thereon dated March 4, 1997. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The supplemental schedule listed
in the accompanying index is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and regulations under the Securities Exchange Act of 1934 and
is not a required part of the basic financial statements. The supplemental
schedule has been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, is fairly stated, in all
material respects, in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 4, 1997
59
<PAGE>
<TABLE>
<CAPTION>
Schedule II
IRON MOUNTAIN INCORPORATED
Valuation and Qualifying Accounts
(Amounts in Thousands)
Balance at
Beginning of the Balance at End of
Year Ended December 31, Year Charged to Expense Deductions the Year
- -------------------------------------------- --------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
1994 .................................. $ 502 $ 356 $ (327) $ 531
1995 .................................. 531 630 (510) 651
1996 .................................. 651 639 (229) 1,061
</TABLE>
60
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
61
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this item with respect to executive officers
is set forth in Part I, page 21 under the caption "Executive Officers of Iron
Mountain."
The information required by this item with respect to Directors will be
included in Iron Mountain's definitive Proxy Statement and is incorporated
herein by reference.
Item 11. Executive Compensation.
The information required by this item will be included in Iron
Mountain's definitive Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
The information required by this item will be included in the Company's
definitive Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information required by this item will be included in the Company's
definitive Proxy Statement and is incorporated herein by reference.
62
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a)(1) and (2) Financial Statements and Financial Statement Schedule filed as
part of this report:
As listed in the Index to Financial Statements and Financial Statement
Schedule on page 37 hereof.
(a)(3) Exhibits filed as part of this report:
As listed in the Exhibit Index following the signature page hereof.
(b) Report on Form 8-K.
On November 8, 1996 the Company filed a current report on Form 8-K under
Item 2 pertaining to the consummation of the acquisition of Mohawk Business
Record Storage, Inc. No financial statements were filed as they were
previously reported in the Company's registration statement on Form S-1, as
amended (No. 333-10359).
63
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Iron Mountain Incorporated
By: /s/ C. Richard Reese
----------------------------------------
C. Richard Reese, Chairman of the Board
and Chief Executive Officer
Dated: March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ C. Richard Reese Chairman of the Board March 28, 1997
- --------------------------- and Chief Executive Officer
C. Richard Reese
/s/ David S. Wendell President, Chief Operating March 28, 1997
- --------------------------- Officer and Director
David S. Wendell
/s/ Eugene B. Doggett Executive Vice President, March 28, 1997
- --------------------------- Chief Financial Officer and
Eugene B. Doggett Director
/s/ Jean A. Bua Vice President and Corporate March 28, 1997
- ------------------------------- Controller (principal
Jean A. Bua accounting officer)
/s/ Constantin R. Boden Director March 28, 1997
- -------------------------
Constantin R. Boden
/s/ Arthur D. Little Director March 28, 1997
- ------------------------------
Arthur D. Little
/s/ Vincent J. Ryan Director March 28, 1997
- -----------------------------
Vincent J. Ryan
</TABLE>
64
<PAGE>
INDEX TO EXHIBITS
Exhibits indicated below are incorporated by reference to documents of
the Company on file with the Securities and Exchange Commission. Exhibit numbers
in parentheses refer to the Exhibit numbers in the applicable filing (which are
identified in the footnotes appearing at the end of this Index). All other
exhibits are filed herewith. Each exhibit marked by a pound sign (#) is a
management contract or compensatory plan.
<TABLE>
<CAPTION>
Exhibit No. Item Exhibit
----------- ---- -------
<S> <C> <C>
2 Agreement and Plan of Merger, dated as of Filed herewith as
February 19, 1997, by and among the Company, Exhibit 2
IM-1 Acquisition Corp. and Safesite Records
Management Corporation
3.1 Amended and Restated Certificate of (3.1)(1)
Incorporation of the Company, as amended
3.2 By-Laws of the Company, as amended (3.2)(3)
10.1 Credit Agreement, dated as of September 30, (10)(4)
1996, among the Company, the lenders party
thereto and The Chase Manhattan Bank, as
Administrative Agent
10.2A Amendment No. 1 to the Credit Agreement, dated Filed herewith as
January 15, 1997, among the Company, the Exhibit 10.2A
lenders party thereto and The Chase Manhattan
Bank, as Administrative Agent
10.2B Amendment and Restatement to the Credit Filed herewith as
Agreement, dated as of March 3, 1997, among the Exhibit 10.2B
Company, the lenders party thereto and The
Chase Manhattan Bank, as Administrative Agent
10.3 Indenture for 10-1/8% Senior Subordinated Notes Filed herewith as
due 2006 by and among the Company, certain of Exhibit 10.3
its subsidiaries and First National Association,
as trustee, dated October 1, 1996
10.4 Iron Mountain Incorporated 1995 Stock Incentive (10.6)(1)
Plan #
10.5 Form of Iron Mountain Incorporated 1995 Stock (10.7)(1)
Option Plan for Non-Employee Directors #
<PAGE>
-2-
Exhibit No. Page No.
----------- --------
10.6 Asset Purchase Agreement, dated July 19, 1995, (10.11)(1)
among IMRM, DataFile Services, Inc. and Cynthia
and Lee Macklin
10.7 Asset Purchase and Sale Agreement, dated as of (10.12)(1)
October 5, 1995, among IMRM, Brooks Records
Center, Inc. and Forty Acres, Ltd.
10.8 Asset Purchase and Sale Agreement, dated as of (10.13)(1)
November 1, 1995, among IMRM, Nashville Vault
Company, Ltd. and USA Vault Corporation
10.9 Asset Purchase and Sale Agreement, dated (10.14)(1)
November 14, 1995, among IMRM, Data Vault
Corporation and Ralph Stoddard III
10.10 Merger Agreement, dated as of November 17, (10.15)(1)
1995, among IMRM, Temp DSSI, Inc. and Data
Storage Systems, Inc.
10.11 Asset Purchase and Sale Agreement, dated (10.16)(1)
November 17, 1995, among IMRM, Florida Data
Bank, Inc., Carl J. Strang III, Carl J. Strang
II and 6/10 Corporation
10.12 Asset Purchase and Sale Agreement, dated (10.17)(1)
November 22, 1995 among IMRM, Data Management
Business Records Storage, Inc. and Outdoor
West, Inc.
10.13 Record Center Storage Services Agreement (10.18)(1)
between IMRM and Resolution Trust Corporation,
dated July 31, 1992, as renewed by letter
agreement effective July 26, 1996 between the
Company and the Federal Deposit Insurance
Corporation
10.14 Lease between IMRM and IM Houston (CR) Limited (10.19)(1)
Partnership, dated January 1, 1991
10.15 Asset Purchase and Sale Agreement, dated July (10.20)(2)
11, 1996, among IMRM, The Fortress Corporation
and certain subsidiaries
<PAGE>
-3-
Exhibit No. Page No.
----------- --------
10.16 Stock Purchase and Sale Agreement, dated as of (10.21)(2)
August 9, 1996, among IMRM and the shareholders
of Data Archive Services of Miami, Inc. and
Data Archives Services, Inc.
10.17 Asset Purchase and Sale Agreement, dated August (10.22)(2)
13, 1996, among IMRM, International Record
Storage and Retrieval Service, Inc. and
Laurance Winnerman, Sanford Winnerman and Penny
Novak
10.18 Asset Purchase Agreement, dated as of September (10.23)(2)
6, 1996, among IMRM, Mohawk Business Record
Storage, Inc., Michael M. Rabin, Richard K.
Rabin, Herman Ladin and Sidney Ladin
10.19 Registration Rights Agreement between the (4.1)(1)
Company and certain Stockholders, dated as of
December 14, 1990
10.20 Stockholders' Agreement, dated as of Filed herewith as
February 19, 1997 by and among the Company and Exhibit 10.20
certain stockholders of Safesite Records
Management Corporation
11 Statement regarding computation of per share Filed herewith as
earnings Exhibit 11
12 Schedule of computation of ratio of earnings to Filed herewith as
fixed charges Exhibit 12
21 Subsidiaries of the Company Filed herewith as
Exhibit 21
27 Financial Data Schedule Filed herewith as
Exhibit 27
</TABLE>
- ----------------
(1) Filed as an Exhibit to Iron Mountain's Registration Statement No.
33-99950 filed with the Securities and Exchange Commission on December
1, 1995.
(2) Filed as an Exhibit to Iron Mountain's Registration Statement No.
333-10359 filed with the Securities and Exchange Commission on August
16, 1996.
(3) Filed as an Exhibit to Iron Mountain's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed with the Securities and Exchange
Commission, File No. 0-27584.
(4) Filed as an Exhibit to Iron Mountain's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, filed with the Securities and
Exchange Commission, File No. 0-27584.
Exhibit 2
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
By and Among
IRON MOUNTAIN INCORPORATED,
IM-1 ACQUISITION CORP.
and
SAFESITE RECORDS MANAGEMENT CORPORATION
dated as of
February 19, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1.
THE MERGER............................................................2
Section 1.1. The Merger............................................2
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..................................3
Section 1.6. Certificate of Incorporation..........................3
Section 1.7. Bylaws................................................3
Section 1.8. Directors and Officers................................3
Section 1.9. Alternative Transaction...............................3
ARTICLE 2.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES....................3
Section 2.1. Conversion of Securities..............................3
Section 2.2. Exchange of Certificates; Exchange Agent and
Exchange Procedures...................................4
Section 2.3. Stock Transfer Books..................................6
Section 2.4. Option Securities.....................................6
Section 2.5. Dissenting Shares.....................................7
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................8
Section 3.1. Organization and Business; Power and
Authority; Effect of Transaction......................8
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 Governmental Authorizations
and Applicable Law...................................12
Section 3.8. Intangible Assets....................................12
Section 3.9. Related Transactions.................................13
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
<PAGE>
ii
Section 3.19. Broker or Finder....................................20
Section 3.20. Environmental Matters...............................20
Section 3.21. Operational Matters.................................22
Section 3.22. Materiality.........................................22
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
AND ACQUIROR MERGER SUBSIDIARY.......................................22
Section 4.1. Organization and Qualification; Power and
Authority; Effect of Transaction....................22
Section 4.2. Capitalization of Acquiror and Acquiror
Merger Subsidiary...................................23
Section 4.3. SEC Filings; Financial Statements...................24
Section 4.4. Registration Statement..............................24
Section 4.5. Brokers.............................................25
ARTICLE 5.
ADDITIONAL COVENANTS.................................................25
Section 5.1. Access to Information; Confidentiality...............25
Section 5.2. Agreement to Cooperate...............................26
Section 5.3. Affiliate Agreements; Registration
Rights Agreement.....................................27
Section 5.4. No Solicitation......................................28
Section 5.5. Directors' and Officers' Indemnification
and Insurance........................................29
Section 5.6. Notification of Certain Matters......................29
Section 5.7. Public Announcements.................................29
Section 5.8. Obligations of Acquiror..............................29
Section 5.9. Employee Benefits; Severance Policy..................29
Section 5.10. Certain Actions Concerning Business Combinations.....30
Section 5.11. Conversion of Option Securities......................30
Section 5.12. Tax Treatment........................................30
Section 5.13. Preparation of the Registration Statement............30
ARTICLE 6.
CLOSING CONDITIONS...................................................32
Section 6.1. Conditions to Obligations of Each Party
to Effect the Merger................................32
Section 6.2. Conditions to Obligations of Acquiror
and Acquiror Merger Subsidiary. ....................33
Section 6.3. Conditions to Obligations of the Company............34
ARTICLE 7.
TERMINATION, AMENDMENT AND WAIVER....................................35
Section 7.1. Termination..........................................35
<PAGE>
iii
Section 7.2. Effect of Termination................................36
Section 7.3. Amendment............................................36
Section 7.4. Waiver...............................................36
Section 7.5. Fees, Expenses and Other Payments....................37
Section 7.6. Effect of Investigation..............................37
ARTICLE 8.
INDEMNIFICATION .....................................................38
Section 8.1. Survival.............................................38
Section 8.2. Escrow; Indemnification..............................38
Section 8.3. Limitation of Liability; Disposition
of Escrow Indemnity .................................39
Section 8.4. Notice of Claims.....................................39
Section 8.5. Defense of Third Party Claims........................40
Section 8.6. Balance Sheet Adjustment.............................40
Section 8.7. Exclusive Remedy.....................................40
ARTICLE 9.
GENERAL PROVISIONS ...................................................40
Section 9.1. Notices..............................................40
Section 9.2. Headings.............................................41
Section 9.3. Severability.........................................41
Section 9.4. Entire Agreement.....................................42
Section 9.5. Assignment...........................................42
Section 9.6. Parties in Interest..................................42
Section 9.7. Governing Law........................................42
Section 9.8. Enforcement of the Agreement.........................42
Section 9.9. Counterparts.........................................43
Section 9.10. Mutual Drafting......................................43
Section 9.11. Continuation of Covenants............................43
ARTICLE 10.
DEFINITIONS.........................................................43
EXHIBITS
5.3 Form of Affiliate Agreement
6.2(c) Form of Opinion of Woods, Oviatt, Gilman, Sturman & Clarke LLP
6.3(a) Form of Opinion of Sullivan & Worcester LLP
8.3 Form of Escrow Agreement
SCHEDULES
Disclosure Schedule
Acquiror Disclosure Schedule
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 19, 1997, among
Iron Mountain Incorporated, a Delaware corporation ("Acquiror"), IM-1
Acquisition Corp., a Delaware corporation and a wholly owned Subsidiary of
Acquiror ("Acquiror Merger Subsidiary"), and Safesite Records Management
Corporation, a Delaware corporation (the "Company").
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
Section 10 below or in another Section of this Agreement and, in such case,
Article 10 includes a reference to such Section), 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 Acquiror Merger Subsidiary will merge with and into the Company (the
"Merger") and the stockholders of the Company (the "Stockholders") will convert
their holdings into a combination of cash and shares of the Voting Common Stock,
par value $.01 per share, of Acquiror ("Acquiror Stock");
WHEREAS, 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 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 and has recommended approval and adoption of this
Agreement, the Merger and the Transactions by the Stockholders; and
WHEREAS, the Board of Directors of Acquiror has unanimously approved
and adopted this Agreement, the Merger and the Transactions, and Acquiror has
approved and adopted this Agreement, the Merger and the Transactions as the sole
stockholder of Acquiror Merger Subsidiary;
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:
<PAGE>
2
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, Acquiror Merger Subsidiary shall be merged with and into the Company. As a
result of the Merger, the separate existence of Acquiror Merger Subsidiary shall
cease and the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
Section 1.2. Action by Stockholders.
(a) The Company, 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 for the purpose of adopting and approving this Agreement, the
Merger and the Transactions (the "Special Meeting"); include in any proxy
statement related to the Special Meeting 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 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 Acquiror, as sole stockholder of
Acquiror Merger Subsidiary, has approved and adopted this Agreement, the Merger
and the Transactions. Acquiror shall take all additional actions as sole
stockholder of Acquiror Merger Subsidiary necessary to adopt and approve and
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 10:00 A.M., local time, on the fifth 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),
at the offices of Sullivan & Worcester LLP, One Post Office Square, Boston,
Massachusetts, 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").
<PAGE>
3
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, and the Merger shall otherwise have
the effects, all as provided under the DGCL.
Section 1.6. Certificate of Incorporation. From and after the
Effective Time, the Certificate of Incorporation of Acquiror Merger Subsidiary
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, and the name of the Surviving Corporation shall be such name as
Acquiror may elect.
Section 1.7. Bylaws. From and after the Effective Time, the bylaws of
Acquiror Merger Subsidiary as in effect immediately prior to the Effective Time
shall be the bylaws 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 Merger Subsidiary at the Effective Time shall be the directors of
the Surviving Corporation and the officers of Acquiror Merger Subsidiary at the
Effective Time shall be the officers of the Surviving Corporation.
Section 1.9. Alternative Transaction. Acquiror shall have the right,
by giving written notice thereof to the Company, to restructure the Merger such
that the Company merges with and into Acquiror Merger Subsidiary (such merger
being referred to as the "Alternative Transaction"). In the event that the
Merger is structured as the Alternative Transaction, the separate corporate
existence of the Company shall cease upon consummation of the Alternative
Transaction and each reference in this Agreement to the Surviving Corporation
and to the Merger shall be deemed to refer to Acquiror Merger Subsidiary, as in
existence following the Alternative Transaction, and the merger of the Company
with and into Acquiror Merger Subsidiary, respectively.
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:
(a) Each share of Common Stock, par value $.01 per share, of the
Company (the "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(b) and any Dissenting Shares), shall be converted into the right
to receive, subject to the indemnification provisions of Article 8 hereof, (i)
that number equal to the Stock Conversion Number of fully paid and nonassessable
shares of Acquiror Stock (the "Stock Merger Consideration") and (ii) cash in an
amount equal to
<PAGE>
4
the Cash Conversion Number (the "Cash Merger Consideration", and together with
the Stock Merger Consideration, the "Merger Consideration"). At the Effective
Time, all shares of Company Stock (the "Shares") shall no longer be outstanding
and shall automatically be cancelled and retired and shall cease to exist, and
certificates previously evidencing any such Shares (each, a "Certificate") shall
thereafter represent the right to receive, upon the surrender of such
Certificate in accordance with the provisions of Section 2.2, but subject to the
indemnification provisions of Article 8 hereof, the Stock Merger Consideration
and Cash Merger Consideration multiplied by the number of Shares represented by
such Certificate, and a holder of more than one 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 Certificates (the
"Exchange Merger Consideration"). The holders of such Certificates previously
evidencing such Shares outstanding immediately prior to the Effective Time shall
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 prior to
the termination of the Escrow Indemnity Period shall be adjusted to give full
effect to the indemnification provisions in Article 8 hereof.
(b) Each Share held in the treasury of the Company and each Share
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.
(c) Each share of common stock of Acquiror Merger Subsidiary
outstanding immediately prior to the Effective Time shall be converted into and
become one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and shall constitute
the only outstanding shares of capital stock of the Surviving Corporation.
(d) In lieu of issuing fractional shares, Acquiror shall convert a
holder's right to receive shares of Acquiror Stock pursuant to Section 2.1(a)
into a right to receive the highest whole number of shares of Acquiror Stock
constituting the non-cash portion of the Exchange Merger Consideration plus cash
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
Merger 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 portion of the Exchange Merger Consideration. For purposes of
carrying out the intent of this Section 2.1(d), Acquiror may aggregate
Certificates so that fractional shares of Acquiror Stock due in exchange for
multiple Certificates may be combined to yield a number of whole shares thereof
plus a single fraction.
Section 2.2. Exchange of Certificates; Exchange Agent and Exchange
Procedures.
(a) As soon as reasonably practicable after the Effective Time,
Acquiror shall deposit or cause to be deposited with a bank or trust company
designated by Acquiror (the "Exchange Agent"), for the benefit of the holders of
Shares (other than Dissenting Shares), for exchange in accordance with this
Article, through the Exchange Agent, (i) cash (by wire transfer of federal funds
pursuant to instructions reasonably satisfactory to the Exchange Agent) in an
amount equal
<PAGE>
5
to the Cash Merger Consideration multiplied by the number of all Shares issued
and outstanding immediately prior to the Effective Time (other than Shares to be
cancelled pursuant to Section 2.1(b) and any Dissenting Shares) (said number of
Shares less said Shares to be cancelled and less said Dissenting Shares
hereafter to be referred to as the "Net Shares"), less the amount of cash
constituting the Escrow Indemnity Funds, and (ii) the Stock Merger Consideration
multiplied by the Net Shares, plus cash in an amount sufficient to make payment
for fractional shares, in exchange for all of the outstanding Shares
(collectively, the "Exchange Fund"). Subject to Article 8 hereof, the Exchange
Agent shall, pursuant to irrevocable instructions from Acquiror, deliver the
Exchange Merger Consideration to be issued pursuant to Section 2.1(a) out of the
Exchange Fund to holders of Shares upon transmittal of Certificates for exchange
as provided therein and in Section 2.2(b). The Exchange Fund shall not be used
for any other purpose. Any interest, dividends or other income earned by the
Exchange Fund shall be for the account of Acquiror.
(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 and the Exchange
Agent, and otherwise by mail to the most recent address of such holder as shown
on the Company's books and records) to such holder of a Certificate or
Certificates which immediately prior to the Effective Time evidenced outstanding
Shares (other than Shares to be cancelled pursuant to Section 2.1(b) and any
Dissenting Shares), a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the 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 the Certificates
in exchange for the Exchange Merger Consideration. Upon surrender of a
Certificate 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
Exchange Merger Consideration which such holder has the right to receive,
subject to Article 8 hereof, pursuant to Sections 2.1(a) and 2.1(d) hereof, and
the Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Shares which is not registered in the transfer records
of the Company, the Exchange Merger Consideration may be issued and paid in
accordance with this Article to a transferee if the Certificate evidencing such
Shares 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 Exchange Merger
Consideration will be delivered by the Exchange Agent promptly following
surrender of a Certificate and the related Transmittal Documents, and cash
payments for fractional shares and the cash portion of the Exchange Merger
Consideration may be made by check (or, pursuant to instructions reasonably
satisfactory to the Exchange Agent, by wire transfer). No interest will be
payable on the Exchange Merger Consideration regardless of any delay in making
payments. Until surrendered as contemplated by this Section, each Certificate
shall be deemed at any time after the Effective Time to evidence only the right
to receive, upon such surrender, the Exchange Merger Consideration, without
interest.
(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
<PAGE>
6
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 Exchange Merger Consideration deliverable in
respect thereof as determined in accordance with Sections 2.1(a) and 2.1(d).
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 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 to which
they are entitled pursuant to this Article.
(e) 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 Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) Each of Acquiror, the Surviving Corporation 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 such amounts as
Acquiror, the Surviving Corporation 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, the Surviving Corporation 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 in respect of which such
deduction and withholding was made by Acquiror, the Surviving Corporation 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 thereafter on the records 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 Merger Consideration.
Section 2.4. Option Securities. As soon as reasonably practicable
after the Effective Time, each holder of an Option Security shall receive (i)
subject to clause (ii) below, in respect of any such Option Security or portion
thereof which is exercisable at the Effective Time (including those which will
become exercisable by virtue of the consummation of the Merger) (1) a
non-qualified option to acquire shares of Acquiror Stock under Acquiror's 1995
Stock Incentive Plan, which option for Acquiror Stock shall (A) have an exercise
price per share determined by dividing the exercise price per share of the
applicable Option Security by the Stock Conversion Number and (B) entitle the
holder to purchase that number of shares equal to the product of (x) the number
of shares subject to such Option Security which as of the Effective Time is
exercisable
<PAGE>
7
and (y) the Stock Conversion Number, and (2) cash in the amount of the product
of (x) the number of shares subject to such Option Security which as of the
Effective Time is exercisable and (y) the Cash Conversion Number, and (ii) in
respect of any such Option Security or portion thereof which is not exercisable
at the Effective Time and in respect of those Option Securities to acquire
17,500 shares of Company Stock recently granted to the five individuals
identified in Section 3.13(b) of the Disclosure Schedule, a non-qualified option
to acquire shares of Acquiror Stock under Acquiror's 1995 Stock Incentive Plan
at an exercise price and in an amount affording the holder equivalent value for
the Option Security being exchanged, which option for Acquiror Stock shall (1)
have an exercise price per share determined by dividing (x) the exercise price
per share of the applicable Option Security by (y) the quotient of the Share
Price divided by the Determination Price, and (2) entitle the holder to purchase
that number of shares as equals product of (x) the number of shares subject to
such Option Security which as of the Effective Time is not exercisable and (y)
the quotient of the Share Price divided by the Determination Price. In addition,
each option to acquire Acquiror Stock issued in accordance with this Section 2.4
shall be exercisable (subject to the terms of such Option Security and
Acquiror's 1995 Stock Incentive Plan) on the date the applicable Option Security
would have been exercisable and otherwise be subject to the terms and conditions
of the Acquiror 1995 Stock Incentive Plan. Notwithstanding the foregoing, in
lieu of issuing cash in respect of exercisable Option Securities, Acquiror
reserves the right, in its sole discretion, subject to notification to the
Company not less than ten (10) days prior to the Closing Date, to exchange each
vested and exercisable Option Security solely for an option to acquire Acquiror
Stock, the terms and conditions (including, without limitation, the amount and
exercise price per share) of which will be determined in accordance with clause
(ii) above.
Section 2.5. Dissenting Shares.
(a) Notwithstanding any other provision of this Agreement to the
contrary, Shares that are outstanding immediately prior to the Effective Time
and which 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 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 Exchange Merger
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, withdrawals of such demands, and any other instruments
served pursuant to the DGCL and received by the Company and 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, make
<PAGE>
8
any payment with respect to any demands for appraisal, or offer to settle, or
settle, any such demands.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and for Section 3.16
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 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
Company's knowledge, except as set forth in Section 3.1(a)(ii) to 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) is, to the Company's knowledge, 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 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). 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,
<PAGE>
9
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 Organic 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 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 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 except pursuant
to the HSR Act.
(d) The Company does not have any Subsidiaries.
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"). 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, are
true, correct and complete, 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,
subject to normal year-end audit adjustments which adjustments, in the
aggregate, shall not be material, 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.
<PAGE>
10
(b) To the Company's knowledge, 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, to the
Company's knowledge, 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, except as set forth in Section 3.2(c)
of the Disclosure Schedule.
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. To the Company's knowledge, there is
no Event known to the Company which 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 any real property. To the Company's
knowledge, the Company has good leasehold title with respect to all real
property it leases. The Company has 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 (excluding leased real
estate) held by the Company for use in its business if not so reflected, or
purported to have been acquired by the Company since such date, except inventory
sold or depleted, or property, plant
<PAGE>
11
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 Company, 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 Company
Disclosure Schedule), and (v) such imperfections of title, easements,
encumbrances and mortgages 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 business operations. Each Lease or other occupancy or other agreement
under which the Company holds real or personal property has been duly
authorized, executed and delivered by the Company and, to the Company's
knowledge, by each of the other parties thereto; each such Lease is a legal,
valid and binding obligation of the Company and, to the Company's knowledge, of
each other party thereto, enforceable in accordance with its terms (subject to
the Enforceability Exceptions). To the Company's knowledge, the Company 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, to the Company's knowledge, contains any provision
which would impair the Company's ability to use such property as it is currently
used by the Company, except as described in Section 3.5(a) of the Disclosure
Schedule. To the Company's knowledge, (i) all of such Leases are valid and
subsisting and in full force and effect and (ii) except as set forth in Section
3.5(a) of the Disclosure Schedule, neither the Company nor 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 leased by the Company.
(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, except as in the aggregate would not result in an Adverse
Effect on the Company, all applicable title covenants, conditions, restrictions
and reservations and all Environmental Laws and all applicable zoning, wetlands,
land use and other Applicable Laws.
Section 3.6. Compliance with Private Authorizations. Section 3.6 of
the Disclosure Schedule sets forth, to the Company's knowledge, 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, except as set forth in Section 3.6 of the Disclosure Schedule. To the
Company's knowledge, the Company has obtained all Private Authorizations which
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
which, if not obtained and maintained, could, singly or in the aggregate,
Adversely Affect the Company. To the Company's knowledge, except as set forth in
Section 3.6 of the Disclosure Schedule, (i) the Company is not in breach or
violation of, or is in default in the performance, observance or fulfillment of,
any Private Authorization, and (ii) 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 or Private Authorization, except for such defaults,
<PAGE>
12
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 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 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) to the Company's knowledge, each Governmental
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, except as set forth in Section 3.7(a)(ii)
of the Disclosure Schedule.
(b) To the Company's knowledge, the Company 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 Company or which, if not obtained and
maintained, could singly or in the aggregate, have any Adverse Effect on the
Company. No material Governmental Authorization is the subject of any pending
or, to the Company's knowledge, threatened attack, revocation or termination. To
the Company's knowledge, (i) the Company is not in material breach or violation
of, or in default in the performance, observance or fulfillment of, any
Governmental Authorization or any Applicable Law, and (ii) 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, to the Company's knowledge,
will not have in the aggregate any Adverse Effect on the Company.
(c) The matters, if any, referred to in Sections 3.7(a) or 3.7(b) of
the Disclosure Schedule, if adversely determined against the Company, will not
Adversely Affect the Company, except to the extent set forth in the Disclosure
Schedule, 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
<PAGE>
13
have been duly registered in the offices as indicated therein. To the Company's
knowledge, 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. To the Company's knowledge,
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. Except as set forth in Section 3.8 of
the Disclosure Schedule, the Company possesses all proprietary rights in and to
the principal software used in operating and conducting its business and 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 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 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 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.
(b) To the Company's knowledge, 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 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 the Company have been prepared in
accordance with all Applicable Laws and generally accepted principles applicable
to taxation consistently applied. All Taxes which 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
<PAGE>
14
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 which 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 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. 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) The Company 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,
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.
(d) 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) 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(d) of the
Disclosure Schedule, and the Company has not been notified regarding any pending
examination, except as shown in Section 3.11(d) of the Disclosure Schedule.
(e) The Company is not a party to any tax sharing agreement or
arrangement.
(f) The Company is not, and within five years of 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:
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15
(i) to the Company's knowledge, 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) to the Company's knowledge, 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, 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 are 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;
(v) to the Company's knowledge, there have been no acts or
omissions by the Company 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 Company may be liable;
(vi) there are no Claims (other than routine claims for
benefits) pending or, to the Company's 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 sheet
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) to the Company's knowledge, 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 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
<PAGE>
16
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 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 differ 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.
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
<PAGE>
17
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.
(b) As of the date hereof, except as set forth in Section 3.13(b) of
the Disclosure Schedule,: (i) Option Securities to acquire 424,750 Shares are
outstanding under the Company's 1990 Long-Term Incentive Plan (the "Company
Option Plan"), including in such number Option Securities which are currently
exercisable to acquire 216,950 shares of Company Stock; (ii) Option Securities
to acquire 45,000 Shares are outstanding under the Company's 1990 Nonstatutory
Stock Option Plan for Non-Employee Directors (the "Directors Plan" and, together
with the Company Option Plan, the "Option Plans"), including in such number
Option Securities which are currently exercisable to acquire 45,000 shares of
Company Stock; and (iii) 514,599 Shares are reserved for future issuance
pursuant to Option Securities which may be granted under the Option Plans. In
accordance with the vesting schedules and acceleration provisions contained in
the Option Plans and the related option agreements and assuming all option
agreements remain outstanding, as of June 1, 1997, Option Securities would be
exercisable to acquire 385,450 Shares. The Option Plans constitute the only
plans or arrangements pursuant to which Option Securities are currently
outstanding. Other than as set forth in Section 3.13(b) of the Disclosure
Schedule, 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. The
Company has duly complied in all material respects with all of the terms and
conditions of each Option Plan and no amendment, modification or other revision
to either Option Plan or any related option 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 subject to issuance
under an Option Security will, upon issuance on the terms and conditions
specified in such Option Security, will be validly issued, fully paid and
nonassessable.
(c) All of the outstanding capital stock of the Company is owned by
the Stockholders as set forth in Section 3.13(c) of the Disclosure Schedule 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, and are
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, to the Company's
knowledge, 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 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) 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.
<PAGE>
18
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,
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 will accrue or receive or is entitled to accrue or receive
additional benefits, service or accelerated rights to payments of benefits under
any Employment Arrangement, 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 direct result of this
Agreement, the Merger or the Transactions.
Section 3.15. Material Agreements. To the Company's knowledge, 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 made available to or
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). To the Company's knowledge, (i) all of the
Material Agreements are valid, binding and legally enforceable obligations of
the Company and of each other party thereto (subject to the Enforceability
Exceptions), and (ii) the Company is validly and lawfully operating its business
and owning its property under each of the Material Agreements. To the Company's
knowledge, 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 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 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;
<PAGE>
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;
(xi) has not entered into, amended or terminated and will
not enter into, amend or terminate any Lease, Governmental
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;
<PAGE>
20
(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 Organic Documents;
(xiv) 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 except as set forth in Section 3.13(b) of the
Disclosure Schedule) or any Option Securities or Convertible
Securities and has not entered, and will not enter into any agreement
to do the same; and
(xv) 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,
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. To the Company's knowledge, it is
not a party to or subject to, nor is any of its 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 Company's ability to conduct its
business as it is currently being conducted or which could, to the Company's
knowledge, 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. Except as set forth in Section 3.19
of the Disclosure Schedule, 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 Company or any Principal Stockholder.
Section 3.20. Environmental Matters.
(a) Except as set forth in Section 3.20(a) of the Disclosure
Schedule:
<PAGE>
21
(i) to the Company's knowledge, it is, and at all times
since its organization has been, in compliance in all material
respects with all Environmental Laws and has not been notified that
it is potentially liable, has not received any request for
information or other correspondence concerning any site or facility,
and, to the knowledge of the Company, is not 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) the Company has not entered into or received any
consent decree, compliance order, or administrative order relating to
Environmental Law;
(iii) the Company is not a party in interest or in default
under any judgment, order, writ, injunction or decree of any final
order relating to Environmental Law;
(iv) to the Company's knowledge, (1) it has obtained all
material Governmental Authorizations and Private Authorizations
(including without limitation all Environmental Permits) and made all
Governmental Filings which are required to be filed by the Company
for the ownership of its property, facilities and assets and the
operation of its businesses under all Environmental Laws, (2) it is,
and at all times since its organization has been, in material
compliance with the terms and conditions of all such required
Governmental and Private Authorizations, and (3) it is not the
subject of or threatened with any Legal Action involving a demand for
damages or other potential liability with respect to violations or
breaches of any Environmental Requirement; and
(v) has not assumed or agreed to any obligation under any
of its leases of real property to clean up any Hazardous Materials
which exists on such property other than as a result of the Company's
operating and occupying such property.
(b) Except as set forth in Section 3.20(b) of the Disclosure
Schedule:
(i) the Company has not disposed, released, buried or
placed Hazardous Materials on, and, to the Company's knowledge, no
other disposal, release, burial or placement of Hazardous Materials
has occurred on, any property or facility leased, operated or
occupied by the Company during the period that such facilities and
properties were leased, operated or occupied by it or, to the
knowledge of the Company, at any other time;
(ii) to the knowledge of the Company, there has been no
disposal, release, burial or placement of Hazardous Materials on any
property which could reasonably be expected to result or has resulted
in contamination of or beneath any properties or facilities leased,
operated or occupied by the Company; and
(iii) no notice has been received by the Company and to the
Company's knowledge no Lien has arisen on its properties or
facilities under Environmental Law.
<PAGE>
22
(c) The Company has not installed, used or otherwise operated any
above-ground or underground fuel storage tanks on property leased, operated or
occupied by it and, to the Company's knowledge, no above-ground or underground
fuel storage tanks exist on property 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 Company as to environmental matters at any property leased,
operated or occupied by the Company.
Section 3.21. Operational Matters. With respect to the Company:
(a) customers are invoiced for special projects, such as purges,
special destructions, de-boxing and re-filing programs, only with respect to
completed work;
(b) substantially all of its customers is party to a customer
contract which limits the Company'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; and
(c) the monthly information set forth in Section 3.21 of the
Disclosure Schedule has been prepared consistent with past practice and is true
and correct in all material respects.
Section 3.22. 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 the
Company.
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.
<PAGE>
23
(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
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 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. 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 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. Capitalization of Acquiror and Acquiror Merger
Subsidiary.
(a) The authorized and outstanding capital stock of each of Acquiror
and Acquiror Merger Subsidiary is as set forth in Section 4.2 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. Between the date hereof and the
Closing, except as contemplated by this Agreement, Acquiror Merger Subsidiary
will not issue or sell or purchase or agree to issue or sell or purchase any
capital stock or any Option Security or Convertible Security. 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 non-assessable
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. When issued to the
Stockholders in connection with the
<PAGE>
24
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.
(b) Acquiror's 1995 Stock Incentive Plan was duly approved by
Acquiror's stockholders and directors and a sufficient number of shares is
reserved under Acquiror's 1995 Stock Incentive Plan to satisfy Acquiror's
obligations under Section 2.4 hereof.
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 Special Financial Report on Form 10-K for the fiscal year
ended December 31, 1995, (ii) its Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, (iii) its
proxy statement relating to its 1996 meeting of stockholders, and (iv) all other
forms, reports and registration statements filed by it with the SEC since
January 30, 1996 (the forms, reports and other documents referred to in clauses
(i), (ii), (iii) and (iv) above being referred to herein collectively as the
"Acquiror SEC Reports"). The Acquiror SEC Reports and any forms, reports and
other documents filed by the 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 applied on a consistent basis throughout the periods covered thereby,
except as otherwise noted therein, are true, correct and complete, 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 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 September 30, 1996), there has been no Adverse Change
in Acquiror. To Acquiror's knowledge, 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 executed pursuant hereto or thereto, except for changes in
general economic conditions or the industry in general.
Section 4.4. Registration Statement. As of the Closing Date, the
Registration Statement (if any) and any amendments thereto will comply in all
material respects with the provisions of the
<PAGE>
25
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
issue date thereof 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 4.3(a) and this Section 4.4 shall not apply to statements or omissions
in the Registration Statement or the Prospectus based on information relating to
the Company or any of the furnished to Acquiror by the Company or any of the
Stockholders. Neither the Acquiror Disclosure Schedule, this Agreement nor any
Collateral Document, data, information or statement 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,
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 herein or therein or
necessary in order to make the statements contained herein or therein not
misleading and all such Collateral Documents, data, information or statements
are and will be true, accurate and complete.
Section 4.5. 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 (other than William
Blair & Company, whose fees and expenses will be paid by Acquiror).
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 provi ded 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 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 of operations. The Company and Acquiror acknowledge that
they have heretofore executed a confidentiality agreement, dated December 27,
1996 (the "Confidentiality Agreement"), which separately and as incorporated
herein shall remain in full force and effect after and
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26
notwithstanding the execution and delivery of this Agreement, and that
information obtained from the Company by Acquiror or its Representatives or by
the Company or its Representatives from Acquiror, 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 the Confidentiality
Agreement, Acquiror and the Company may disclose such information as may be
necessary in connection with seeking allGovernmental 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 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(d); (ii) to
obtain all necessary or appropriate waivers, consents and approvals, (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. 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. Each agrees that, to the extent
required by Applicable Law to consummate the Merger, it will file with the
Antitrust Division of the Department of Justice and the Federal Trade Commission
a Notification and Report Form in a manner so as to constitute substantial
compliance with the notification requirements of HSR. Each covenants and agrees
to use its best efforts to achieve the prompt termination or expiration of any
waiting period or any extension thereof under the HSR Act. 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
<PAGE>
27
Subsidiaries (including, without limitation, the Surviving Corporation after
consummation of the Merger).
(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 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 in favor of
Fleet Bank of Massachusetts, N.A., but only to the extent that Acquiror elects
to repay or prepay the Indebtedness corresponding to such Liens from its own
funds.
(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 Company shall cause its independent accountants to cooperate
with Acquiror and shall prepare audited financial statements for the Company for
inclusion in the Registration Statement. Without limiting the generality of the
foregoing, the Company agrees that it will (i) consent to the use of such
audited financial statements in any registration statement or other document
filed by Acquiror (or any of its Subsidiaries) under the Securities Act or the
Exchange Act, and (ii) execute and deliver, and cause its officers to execute
and deliver, such "representation" letters as are customarily delivered in
connection with audits and as Acquiror's independent accountants may reasonably
request under the circumstances.
(g) Without intending to limit the generality of the covenants set
forth in Section 3.17, 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. Affiliate Agreements; Registration Rights Agreement.
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28
(a) Prior to the Closing Date, the Company shall deliver to Acquiror
a letter identifying all Persons who are, at the time this Agreement is
submitted to the Stockholders, "affiliates" of the Company for purposes of Rule
145 under the Securities Act. Each of Acquiror and the Company shall use its
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.
(b) Acquiror agrees that it will enter into a registration rights
agreement (the "Registration Rights Agreement") with the Principal Stockholders
and such other stockholders of Acquiror as Acquiror deems necessary or
appropriate, with respect to shares of Acquiror Stock to be issued to the
Principal Stockholders pursuant to Section 2.1(a) hereof (and any shares of such
other stockholders), for the benefit of the Principal Stockholders reasonably
satisfactory in form and substance to Acquiror and the Principal Stockholders,
which Registration Rights Agreement shall include, without limitation, the
following terms: (i) the Principal Stockholders shall have demand registration
rights upon the written request of the Principal Stockholders, or upon the
written request by either of them, requesting the registration of shares of
Acquiror Stock having a market price of an aggregate of at least $10,000,000 on
no more than two occasions (subject to customary proration or "cut-back"
provisions); (ii) the Principal Stockholders shall have an unlimited number of
piggyback registration rights in conjunction with public offerings of Acquiror
Stock (other than any such offerings in connection with acquisitions and subject
to customary proration or "cut-back" provisions); (iii) Acquiror and the
Principal Stockholders shall indemnify each other in the event of any losses
resulting from any misrepresentations, acts or omissions of the other party in
connection with any such registration or any document related thereto; (iv)
Acquiror shall have the right, in its discretion, subject to the consent of the
Principal Stockholders, which consent shall not be unreasonably withheld, to
choose the underwriter(s) in any underwritten public offering of Acquiror Stock;
(v) each Principal Stockholder will agree to customary lock-up provisions in
connection with any registration; and (vi) the Principal Stockholders shall be
solely responsible for all of their own expenses (including, without limitation,
underwriting discounts and selling commissions and the fees of their counsel)
and all registration filing fees of Acquiror in connection with any registration
and, with respect to demand registration only, shall reimburse Acquiror for all
reasonable out-of-pocket expenses incurred in satisfying any such demand
registration, including, without limitation, fees and expenses of complying with
securities and blue sky laws, printing expenses, fees and expenses of Acquiror's
counsel and accountants.
Section 5.4. No Solicitation. The Company shall not, nor shall it
permit any of the Company's 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 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 nothing contained in this Section shall
prohibit the Company or its Board of Directors from making any disclosure to
Stockholders that, in the reasonable
<PAGE>
29
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 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 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 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 as to settlements only, 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 Organic Documents (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 the Person to whom expenses
are advanced of an undertaking to repay such advances to the extent required
under the DGCL. Acquiror hereby guarantees the performance by the Surviving
Corporation of all of its obligations in this Section 5.5 and the payment of all
sums which would be due hereunder from the Surviving Corporation.
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 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 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, 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
<PAGE>
30
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.
Section 5.9. Employee Benefits; Severance Policy. Provided that it
complies in all material respects with Applicable Law, the Surviving Corporation
may, in its sole discretion, substitute employee compensation, benefit and
severance programs for those of the Company as are comparable with the programs
provided from time to time to Acquiror's employees and the employees of
Acquiror's Subsidiaries.
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 options to acquire Acquiror Stock, and
cash, in the case of vested and exercisable Option Securities, upon such
exchange, in accordance with Section 2.4 hereof, and (b) to obtain any consent
or waiver from the holder of an Option Security which may be 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,
(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 (including, if applicable, the Alternative Transaction) 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(j) and 6.3(d).
Without limiting the foregoing, Acquiror covenants that 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.
Section 5.13. Preparation of the Registration Statement.
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31
(a) Promptly following the date of this Agreement, Acquiror shall
prepare and file with the SEC the Registration Statement. Each of the Company
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. The Company shall use its reasonable best efforts to cause
the Prospectus to be mailed to the Stockholders 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 Company shall furnish all information concerning the
Company and the holders of the Company Stock as may be requested in connection
with any such action.
(b) The Company 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 Company promptly of the
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 Company 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 Company
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 Company or Acquiror or any of its Subsidiaries, as the
case may be, or with respect to other information supplied by the Company 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 Company 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 Company, 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 the Company
or any Stockholder 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
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32
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 Stockholders in connection with the
Special Meeting will, at the date it is first mailed to the Stockholders or at
the time of the Special Meeting, 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
Company with respect to statements made or incorporated by reference in the
Registration Statement other than with respect to information which is supplied
by the Company or any Stockholder specifically for inclusion or incorporation by
reference in the Registration Statement.
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 Organic
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 which 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;
(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 would not,
in the reasonable judgment of Acquiror, assuming consummation of the Merger,
have an Adverse Effect on the Company;
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33
(d) The filing and waiting period requirements under the HSR Act
relating to the consummation of the Merger shall have been complied with; and
(e) Acquiror or its nominee and the owner of each Property shall have
entered into and closed a purchase and sale agreement for each such Property for
the price of $2,200,000 for the Property located at 5 Fortune Drive, Billerica,
Massachusetts, $2,400,000 for the Property located at 96 High Street, N.
Billerica, Massachusetts, and $2,700,000 for the Property located at 520 Metro
Park West, Rochester, New York; provided, however, that it shall not be a
condition to the Company's obligation to effect the Merger if the reason for
Acquiror's or such nominee's failure to acquire a Property is due to the
inability of the owner of such Property to convey to Acquiror or such nominee
good and marketable title to the Property free and clear of all Liens other than
Permitted Liens.
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;
(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 or any
Stockholders 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 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) The Company 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 Woods, Oviatt, Gilman, Sturman
& Clarke, LLP, counsel for the Company, in the form attached hereto as Exhibit
6.2(c);
(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 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
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34
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 Affiliate of the Company shall have executed and delivered
an Affiliate Agreement in the form of Exhibit 5.3 hereto and Acquiror and the
Principal Stockholders shall have entered into the Registration Rights
Agreement;
(f) The Company shall have obtained consents to the assignment and
continuation of all Material Agreements which, in the reasonable judgment of
Acquiror require such consents, and the Company shall have obtained satisfaction
and discharge of all Liens set forth in Section 3.5(a) of the Disclosure
Schedule in favor of Fleet Bank of Massachusetts, N.A., but only to the extent
that Acquiror elects to repay or prepay the Indebtedness corresponding to such
Liens from its own funds;
(g) As of the Closing Date, there shall not have occurred and be
continuing any Adverse Change affecting the Company from the condition thereof
(financial and other) 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 to which Acquiror has
notified the Company that it wants to retain, which notice shall be delivered
not less than twenty (20) 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;
(j) 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 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
(k) 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 and the Principal
Stockholders 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);
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35
(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, 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 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; and
(d) The Company shall have received a favorable opinion, dated the
Closing Date, of Woods, Oviatt, Gilman, Sturman & Clarke, LLP, its special tax
counsel, 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;
(e) Affiliates of the Company who are guarantors of any Company bank
Indebtedness, leases or other obligations shall have been released from all
liability under the guarantees listed on Section 6.3(e) of the Disclosure
Schedule and all collateral granted by them to secure those guarantees shall
have been released and returned to them (it being understood that if any Person
who is benefited by any guaranty does not agree to release such guaranty or
collateral without the receipt of consideration, the condition to Closing shall
be deemed to be satisfied if, at Acquiror's option, Acquiror indemnifies such
Affiliate for any payment made in respect of such guaranty); and
(f) The Escrow Agreement shall have been executed and delivered by
Acquiror and the escrow agent and the Registration Rights Agreement shall have
been executed and delivered by Acquiror and such other parties thereto (other
than the Principal Stockholders).
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;
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36
(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) either (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
consummation of the Merger by or beyond the Termination Date, (II)
the Merger and the Transactions have not been consummated prior to
the Termination Date, or (III) any of the Stockholders is in breach
of the Stockholders' 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 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, 7.5 and 9.11 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
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37
respective officers or directors, to the other and all rights and obligations of
any 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, no amendment, which under
Applicable Law may not be made without the approval of the 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 and Acquiror
Merger Subsidiary or the Company 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) 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 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 $5,000,000, 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 Company's fulfillment
of its obligations hereunder, the costs in delayed opportunity to Acquiror, and
the benefit to the Company, 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. 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 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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38
(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 $5,000,000, which
amount is in recognition of, among other things, the out-of-pocket Expenses of
the Company related to this Agreement, the reliance of the Company on Acquiror's
fulfillment of its obligations hereunder, the costs in delayed opportunity to
the Company, 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 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 Company 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 one (1) year 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. The Parties hereto agree, and
by adopting and approving this Agreement and the Merger, the Stockholders shall
agree, that $3,000,000 in cash (the "Escrow Indemnity Funds") will be withheld
from the Exchange Merger Consideration and held in escrow 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:
<PAGE>
39
(a) any breach of representation or warranty made by the Company
pursuant to this Agreement or any Collateral Document 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;
(b) any Legal Action or other Claim by any third party relating to
the Company to the extent such Legal Action or other Claim has resulted in a
breach of representation or warranty by the Company pursuant to this Agreement
or any Collateral Document; or
(c) the Indebtedness of the Company and its Subsidiaries as of the
Effective Time exceeding $500,000 (unless any adjustment has been made to the
Cash Amount in accordance with Section 8.6).
The Company hereby appoints, and by adopting and approving this
Agreement and the Merger, the Stockholders shall appoint, B. Thomas Golisano
(the "Agent", with full and unqualified power to delegate 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 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.
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 if the Loss and Expense for all Claims exceeds, in the
aggregate, $150,000 and (ii) in no event shall the aggregate amount to be paid
to Acquiror exceed the Escrow Indemnity Funds.
(b) Anything in this Agreement, including without limitation the
provisions of Sections 8.2 or 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
shall be the Escrow Indemnity Funds. 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 8.3 (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 date which is ten (10) days 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 Stockholders (or their nominee or transferee, as set forth in the
Transmittal Documents in respect of the Exchange Merger Consideration) entitled
thereto in accordance with the proportions with their ownership of Shares
immediately prior to the Effective Time. 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, expense and other costs
(including reasonable counsel fees and
<PAGE>
40
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 Persons entitled thereto. 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 Persons entitled thereto.
Section 8.4. Notice of Claims. If Acquiror believes that it has
suffered or incurred any Loss and Expense, it shall notify the Agent promptly in
writing, and in any event within the applicable time period specified in Section
8.2, 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 notify
the Agent of such Legal Action, but the failure to so notify the Agent shall not
relieve the Stockholders of their obligations under this Article, except to the
extent such failure to notify prejudices its ability to defend against such
Claim.
Section 8.5. Defense of Third Party Claims. The Agent 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 Acquiror may, at its election, participate in
the defense thereof at its sole cost and expense; provided, however, that if the
Agent 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 Stockholders at least fifteen (15) days'
notice of the terms of the proposed settlement thereof and permits the
Stockholders 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 Agent 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. Five business days prior to
the Closing Date, the Company shall prepare and deliver to Acquiror a schedule
showing the Company's best estimate of its Indebtedness as of the Effective Time
(the "Company Indebtedness Calculation"). 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 discussions. In addition, at the Closing, the
Company shall deliver to Acquiror a letter from Fleet Bank of Massachusetts,
N.A. certifying to Acquiror the entire unpaid balance (principal and interest)
of the Company's Indebtedness to Fleet Bank of Massachusetts, N.A., such that
the payment thereof at that time would terminate that Indebtedness. If the
Company Indebtedness Calculation indicates that the Indebtedness of the Company
is greater than $500,000, the Cash Amount shall be adjusted in accordance with
the definition thereof; if the Company Indebtedness Calculation indicates that
Indebtedness of the Company is less than $500,000, there shall be no such
adjustment.
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41
Section 8.7. Exclusive Remedy. Except as otherwise provided in this
Article and Section 9.8 of the Merger Agreement and Section 5.1 of the
Stockholders' Agreement, the indemnification provided in this Article shall be
the sole and exclusive post-Closing remedy available to Acquiror against the
Stockholders for any Claim under this Agreement.
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 Merger Subsidiary:
Iron Mountain Incorporated
745 Atlantic Avenue, 10th Floor
Boston, MA 02110
Attention: Chief Executive Officer
Telecopier No.: (617) 357-9031
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: William J. Curry, Esq.
Telecopier No.: (617) 338-2880
(b) If to the Company or the Agent:
c/o B. Thomas Golisano
911 Panorama Trail South
Rochester, NY 14625
Telecopier No.: (716) 383-3428
with a copy to:
Woods, Oviatt, Gilman, Sturman & Clarke LLP
44 Exchange Street
Rochester, NY 14614
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42
Attention: Harry P. Messina, Jr.
Telecopier No.: (716) 454-3968
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 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 extentpermitted 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, 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 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, 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
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43
United States of America and the laws of The Commonwealth of Massachusetts
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. 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.
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.
Section 9.11. Continuation of Covenants. Notwithstanding any
termination by Acquiror of this Agreement, the Company agrees that all of the
representations, warranties and covenants of the Company contained in this
Agreement shall continue and be in full force and effect for so long as Acquiror
has the right to commence an offer to purchase the Company Stock of the
Principal Stockholders pursuant to the terms and provisions of the Stockholders'
Agreement and, in the event Acquiror commences such an offer, until such time as
such offer is consummated.
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
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44
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 Company.
Acquiror Merger Subsidiary shall have the meaning given to it in the
Preamble.
Acquiror SEC Reports shall have the meaning given to it in Section
4.3(a).
Acquiror Stock shall have the meaning given to it in the Preamble.
Adverse, Adversely, when used alone or in conjunction with other
terms (including without limitation "Affect,""Change" and"Effect") shall mean,
with respect to the Company 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, management, properties or the condition, (financial or
other), or results of operation (including without limitation, earnings before
interest, taxes, depreciation and amortization) of the Company or Acquiror, 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 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 Acquiror 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(a).
Agent shall have the meaning given to it in Section 8.2(c).
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45
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.
Alternative Transaction shall have the meaning given to it in Section
1.9.
Applicable Law shall mean 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.
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, 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 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, salary continuation for disability,
or other leave of absence, supplemental unemployment benefits, lay-off,
reduction in force or similar benefits, (v) any 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 shall mean the difference between (a) $12,090,000 and (b)
in the event the Company Indebtedness Calculation exceeds $500,000, an amount
equal to such amount above $500,000.
Cash Conversion Number shall mean the quotient obtained by dividing
(i) the Cash Amount by (ii) 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(b)) and (b) the number of shares of Company Stock which may be
issued pursuant to Option Securities which are exercisable as of the Effective
Time (including those which will become exercisable by virtue of the
consummation of the Merger).
Cash Merger Consideration shall have the meaning given to it in
Section 2.1(a).
Certificate shall have the meaning given to it in Section 2.1(a).
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
<PAGE>
46
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.
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.
Common Stock Amount shall mean the quotient obtained by dividing (a)
$49,910,000 by (b) the Determination Price.
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.
the Company's knowledge (including the term "to the knowledge of the
Company") means the knowledge, information or belief of any Company director,
executive officer or any Principal Stockholder; and that such director,
executive officer or Principal Stockholder, after reasonable investigation
(which shall include, without limitation, interrogation of John Cercone, Kristen
Gardner, Michael Karp and Michael Young 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.
Company Option Plan shall have the meaning given to it in Section
3.13(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
<PAGE>
47
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 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, 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.
Determination Price shall mean the average closing price per share of
Acquiror Stock for the period of 20 trading days ending three trading days prior
to the Closing Date; provided however, that if the average closing price per
share of Acquiror Stock for such period is less than $26.00, then the
Determination Price shall be $26.00, and provided further that if the average
closing price per share of Acquiror Stock for such period is greater than
$31.00, thenthe Determination Price shall be $31.00. The closing price for each
such trading day shall be the last quoted sale price or, if not so quoted, the
average of the low bid and high asked prices on the Nasdaq National Market
System.
DGCL shall have the meaning given to it in the Preamble.
Directors Plan shall have the meaning given to it in Section 3.13(b).
Disclosure Schedule shall mean the disclosure schedule dated as of
the date of this Agreement delivered by the Company to Acquiror.
Dissenting Shares shall have the meaning given to it in Section
2.5(a).
Distribution shall mean, 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 shall have the meaning given to it in Section 1.4.
Employment Arrangement shall mean, 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)), providing for severance,
termination payments, insurance coverage (including any self-insured
arrangements), workers compensation, disability benefits, life, health, medical,
dental or hospitalization benefits, supplemental
<PAGE>
48
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 shall mean 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 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, odors
or industrial, toxic or hazardous substances, materials or wastes, whether as
matter or energy, 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 Company under Sections 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA.
Escrow Agreement shall have the meaning given to it in Section
8.3(b).
Escrow Indemnity Funds shall have the meaning given to it in the
Stockholders' Agreement.
Escrow Indemnity Period shall have the meaning given to it in Section
8.1.
<PAGE>
49
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 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.
Exchange Agent shall have the meaning given to it in Section 2.2(a).
Exchange Fund shall have the meaning given to it in Section 2.2(a).
Exchange Merger Consideration shall have the meaning given to it in
Section 2.1(a).
Expenses shall have the meaning set forth in Section 7.5(a).
Financial Statements shall have the meaning given to it in Section
3.2(a).
GAAP shall mean generally accepted accounting principles as in effect
from time to time in the United States of America.
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 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).
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, pollutive, contaminating, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is regulated by any
Authority; (d) that contains or consists of petroleum or petroleum products,
PCBs, asbestos, or urea formaldehyde foam insulation.
<PAGE>
50
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 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 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 and capitalized leases
incurred in the ordinary course of business shall not be included in the
definition of Indebtedness).
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 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 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); 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.
<PAGE>
51
Loss and Expense shall have the meaning given to it 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.
Material Agreement or Material Commitment shall mean, 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 Twenty-five Thousand Dollars ($25,000), (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 One Hundred Thousand Dollars ($100,000) or (c) which is or
otherwise constitutes a written agency, dealer, license, distributorship, sales
representative or similar written agreement.
Merger shall have the meaning given to it in the Preamble.
Merger Consideration shall have the meaning given to it in Section
2.1(a).
Multiemployer Plan shall mean a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA.
Net Shares shall have the meaning given to it in Section 2.2(a).
Option Plans shall have the meaning given to it in Section 3.13(b).
Option Securities shall mean 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.
Organic Document shall mean 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 shall mean 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
3.17 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 shall mean a signatory to this Agreement.
<PAGE>
52
PBGC shall mean the Pension Benefit Guaranty Corporation and any
Entity succeeding to any or all of its functions under ERISA.
Permitted Liens shall mean any of the following Liens: (i) building
and zoning ordinances and by-laws of any applicable Authority applicable to the
Property; (ii) taxes assessed or to be assessed on the Property for the then
current year to the extent the same are not yet due or payable; and (iii)
rights, easements and restrictions of record, provided the same do not
materially interfere with the current occupancy and use of the Property by the
Company.
Person shall mean any natural individual or any Entity.
Plan shall mean, with respect to the Company and at a particular
time, any employee benefit plan which is covered by ERISA and in respect of
which the Company, or, in the caseof 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.
Principal Stockholders shall mean B. Thomas Golisano and James B.
Wayman, Jr.
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.
Property shall mean each of the premises located at 5 Fortune Drive,
Billerica, Massachusetts, 96 High Street, Billerica, Massachusetts and 520 Metro
Park West, Rochester, New York, including all buildings and other improvements
and fixtures thereon (but only to the extent such improvements and fixtures are
owned by the owner of such Property and not the Company).
Prospectus shall mean the form of prospectus to form part of the
Registration Statement.
Registered Stock shall mean that portion of the Stock Merger
Consideration consisting of shares of Acquiror Stock to be registered pursuant
to the Securities Act.
Registration Rights Agreement shall have the meaning given to it in
Section 5.3(b).
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.
Representatives of a Party shall mean the officers, directors,
employees, accountants, counsel, financial advisors, consultants and other
representatives of such Party.
<PAGE>
53
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 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 shall mean the quotient obtained by dividing (i) the
difference between $62,000,000 and, in the event the Company Indebtedness
Calculation exceeds $500,000, an amount equal to such amount above $500,000, by
(ii) 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(b)) and
(b) the number of shares of Company Stock which may be issued pursuant to Option
Securities which are exercisable as of the Effective Time (including those which
will become exercisable by virtue of the consummation of the Merger).
Shares shall have the meaning given to it in Section 2.1(a).
Special Meeting shall have the meaning given to it in Section 1.2(a).
Stock Conversion Number shall mean the quotient obtained by dividing
(i) the Common Stock Amount by (ii) 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(b)) and (b) the number of shares of Company Stock
which may be issued pursuant to Option Securities which are exercisable as of
the Effective Time (including those which will become exercisable by virtue of
the consummation of the Merger).
Stockholders shall mean the Principal Stockholders and all other
Persons entitled to Merger Consideration (or who would be entitled thereto but
for their dissent from the Merger) pursuant to Sections 2.1(a) or (to the extent
Persons holding Option Securities or Convertible Securities exercise their
rights to acquire Shares prior to the Effective Time, from and after the time
they acquire such Shares) 2.4.
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).
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
<PAGE>
54
Tax (and "Taxable", which shall mean subject to Tax), shall mean,
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 shall mean any Claim which relates to Taxes, including
without limitation the representations and warranties set forth in Section 3.11.
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 Date shall mean September 30, 1997 or such other date as
the Parties may, from time to time, mutually agree; provided, however, that in
the event that any waiting periods or requests under the HSR Act have not
expired or been satisfied by September 30, 1997, the Termination Date shall mean
December 31, 1997.
Transactions shall mean 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 shall have the meaning given to it in Section
2.2(b).
[Signatures appear on following page.]
<PAGE>
55
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/ David S. Wendell
--------------------------------------------
Name: David S. Wendell
Title: President and Chief Operating Officer
IM-1 ACQUISITION CORP.
By: /s/ John P. Lawrence
--------------------------------------------
Name: John P. Lawrence
Title: Treasurer
SAFESITE RECORDS MANAGEMENT
CORPORATION
By: /s/ B. Thomas Golisano
--------------------------------------------
Name: B. Thomas Golisano
Title: Chairman
By: /s/ James B. Wayman, Jr.
--------------------------------------------
Name: James B. Wayman, Jr.
Title: President
Exhibit 10.2A
[CONFORMED COPY]
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of January 15, 1997 among: IRON MOUNTAIN
INCORPORATED, a corporation duly organized and validly existing under the laws
of the State of Delaware (the "Company"); each of the lenders listed on the
signature pages hereof under the caption "LENDERS" (individually, a "Lender"
and, collectively, 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 in effect on the date
hereof, 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 $100,000,000. The Company and the Lenders wish to
amend the Credit Agreement in certain respects. Accordingly, the parties hereto
hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the execution and delivery
hereof by the Company, the Majority Lenders and the Administrative Agent, and
the consent and agreement hereto by the Subsidiary Guarantors, but effective as
of the date hereof, the Credit Agreement is hereby amended as follows:
A. General. References in the Credit Agreement to "this
Agreement" (and indirect references such as "hereunder", "hereby", "herein" and
"hereof") shall be deemed to be references to the Credit Agreement as amended
hereby.
B. Permitted Acquisitions. Section 9.12 of the Credit Agreement
shall be amended by amending clauses (a) and (b) of the definition of "Permitted
Acquisition" therein to read as follows:
Amendment No. 1
<PAGE>
- 2 -
"(a) Maximum Periodic Consideration. Without the consent of the
Majority Lenders, the aggregate amount of Acquisition Consideration paid
in respect of Acquisitions shall not exceed $75,000,000 in any
Calculation Period (or, with respect to the Calculation Period
commencing October 1, 1996, $100,000,000); provided that the aggregate
amount of Acquisition Consideration (excluding, for purposes of this
proviso, Stock Consideration) paid in respect of Acquisitions shall not
exceed $50,000,000 in any Calculation Period).
(b) Maximum Individual Consideration. Without the consent of the
Majority Lenders, the Acquisition Consideration (excluding Stock
Consideration) payable in respect of any single Acquisition or series of
related Acquisitions shall not exceed $30,000,000."
Section 3. Representations and Warranties. The Company represents
and warrants to the Lenders that, both before and after giving effect to each of
the amendments set forth in Section 2 hereof:
(a) no Default has occurred and is continuing; and
(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 (other than the representations and warranties set forth in
Section 8.10 of the Credit Agreement) are true on and as of the date
hereof, with the same force and effect as if made on and as of such date
and as if each reference in the Basic Documents to "this Agreement" or
"the Credit Agreement" included reference to this Amendment No. 1.
Section 4. Miscellaneous. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 1 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 1 by signing any such counterpart. This
Amendment No. 1 shall be governed by, and construed in accordance with, the law
of the State of New York.
Amendment No. 1
<PAGE>
- 3 -
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to be duly executed and delivered as of the day and year first above
written.
THE COMPANY
IRON MOUNTAIN INCORPORATED
By /s/ Eugene Doggett
--------------------------------------
Title: Executive Vice President &
Chief Financial Officer
LENDERS
THE CHASE MANHATTAN BANK
By /s/ William J. Caggiano
--------------------------------------
Title: Managing Director
THE BANK OF NEW YORK
By /s/ Peter H. Abdill
--------------------------------------
Title: Vice President
CIBC INC.
By /s/ Deborah Strek
--------------------------------------
Title: Managing Director, CIBC
Wood Gundy Securities
Amendment No. 1
<PAGE>
- 4 -
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Virginia Dennett
--------------------------------------
Title: Vice President
FLEET NATIONAL BANK
By /s/ Michael Palmer
--------------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ T. M. Pitcher
--------------------------------------
Title: Authorized Signatory
NATIONAL CITY BANK
By /s/ Renold D. Thompson, Jr.
--------------------------------------
Title: Senior Vice President
THE SUMITOMO BANK, LIMITED
By /s/ Daniel G. Eastman
--------------------------------------
Title: Vice President & Manager
By /s/ Alfed De Gemmis
--------------------------------------
Title: Vice President
Amendment No. 1
<PAGE>
- 5 -
UNION BANK OF CALIFORNIA, N.A.
By /s/ Brett Martin
--------------------------------------
Title: Vice President
BANK OF IRELAND GRAND CAYMAN
By /s/ Patrick Dowling
--------------------------------------
Title: Account Manager
GIROCREDIT BANK AG DER SPARKASSEN,
GRAND CAYMAN ISLAND BRANCH
By /s/ John P. Redding
--------------------------------------
Title: Vice President
By /s/ Richard Stone
--------------------------------------
Title: First Vice President
THE ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ William J. Caggiano
--------------------------------------
Title: Managing Director
CONSENTED TO AND AGREED:
Amendment No. 1
<PAGE>
- 6 -
IRON MOUNTAIN RECORDS MANAGEMENT,
INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
CRITERION PROPERTY, INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
CRITERION ATLANTIC PROPERTY, INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
HOLLYWOOD PROPERTY, INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
IRON MOUNTAIN DATA PROTECTION
SERVICES, INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
IRON MOUNTAIN CONSULTING SERVICES,
INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
Amendment No. 1
<PAGE>
- 7 -
IRON MOUNTAIN RECORDS MANAGEMENT OF
OHIO, INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
METRO BUSINESS ARCHIVES, INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
IM SAN DIEGO, INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
IRON MOUNTAIN RECORDS MANAGEMENT OF
MARYLAND, INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
DATA ARCHIVE SERVICES, INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
IRON MOUNTAIN RECORDS MANAGEMENT OF
MISSOURI LLC
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
Amendment No. 1
<PAGE>
- 8 -
IRON MOUNTAIN RECORDS MANAGEMENT OF
BOSTON, INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
IRON MOUNTAIN WILMINGTON, INC.
By /s/ Eugene Doggett
-----------------------------------------
Title: EVP
Amendment No. 1
Exhibit 10.2B
[CONFORMED COPY]
AMENDMENT AND RESTATEMENT
AMENDMENT AND RESTATEMENT dated as March 3, 1997 among:
IRON MOUNTAIN INCORPORATED, a corporation duly organized
and validly existing under the laws of the State of Delaware (the
"Company");
each of the lenders listed on the signature pages hereof
under the caption "LENDERS" (individually, a "Lender" and,
collectively, 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 (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 $100,000,000. The Company, the
Lenders and the Administrative Agent wish to increase the aggregate amount of
the Commitments under the Credit Agreement from $100,000,000 to $150,000,000, to
amend the Credit Agreement in certain other respects and to restate the Credit
Agreement as set forth herein.
Accordingly, the Company, the Lenders and the
Administrative Agent hereto agree to amend the Credit Agreement as set forth
herein and to restate the Credit Agreement in its entirety to read as set forth
in the Credit Agreement with the amendments specified in Section 2 below:
Section 1. Definitions. Except as otherwise defined
in this Amendment and Restatement, terms defined in the Credit Agreement are
used herein as defined therein.
Amendment and Restatement
<PAGE>
- 2 -
Section 2. Amendments. Subject to the satisfaction of
the conditions precedent specified in Section 4 below, but effective as of the
date hereof, the Credit Agreement shall be amended as follows:
A. General. References in the Credit Agreement to the
Credit Agreement (including indirect references thereto such as "hereunder",
"hereby", "herein" and "hereof") shall be deemed to be references to the Credit
Agreement as amended and restated hereby. For all purposes of the Credit
Agreement (as amended and restated hereby) and the other Basic Documents, each
promissory note delivered to a Lender pursuant to Section 4(B) hereof shall
constitute a "Note".
B. Definitions. Section 1.01 of the Credit Agreement
shall be amended by deleting the definition of "Calculation Period" set forth
therein and by inserting the following definitions (or, in the case of any
definition for a term that is defined in the Credit Agreement before giving
effect to this Amendment and Restatement, by amending and restating such
definition to read as set forth below):
"Amendment and Restatement Effective Date" shall mean the
date specified by the Administrative Agent to the Company and the
Lenders in writing as the date on which the conditions precedent set
forth in Section 4 to the Amendment and Restatement of this Agreement
dated as of March 3, 1997 have been satisfied or waived.
"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 Schedule I hereto 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).
Amendment and Restatement
<PAGE>
- 3 -
"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 0.375%
- --------------------------------------------------------------------------------
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.
"Applicable Margin" shall mean the rate for the respective
Type of Loan set forth below opposite the level
Amendment and Restatement
<PAGE>
- 4 -
(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:
- --------------------------------------------------------------------------------
Range of Applicable Applicable Margin
Leverage Ratio
ABR Eurodollar
Loans Loans
- --------------------------------------------------------------------------------
Level 6
Greater than 5.50 to 1.00 1.75% 2.50%
- --------------------------------------------------------------------------------
Level 5
Less than or equal to 5.50 to 1.00 and 1.50% 2.25%
greater than 5.00 to 1.00
- --------------------------------------------------------------------------------
Level 4
Less than or equal to 5.00 to 1.00 and 1.25% 2.00%
greater than 4.25 to 1.00
- --------------------------------------------------------------------------------
Level 3
Less than or equal to 4.25 to 1.00 and 1.00% 1.75%
greater than 3.75 to 1.00
- --------------------------------------------------------------------------------
Level 2
Less than or equal to 3.75 to 1.00 and 0.75% 1.50%
greater than 3.25 to 1.00
- --------------------------------------------------------------------------------
Level 1
Less than or equal to 3.25 to 1.00 0.50% 1.25%
- --------------------------------------------------------------------------------
C. Definitions (cont'd). Section 1.01 of the Credit
Agreement shall be further amended by substituting, in the second paragraph of
the definition of "EBITDA" therein, a reference to "$500,000" for the reference
to "$750,000" therein.
Amendment and Restatement
<PAGE>
- 5 -
D. Financial Covenants. Sections 9.09 and 9.10 of the
Credit Agreement shall be amended to read in their respective entireties as
follows:
"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 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:
Period Leverage Ratio
From the Closing Date
through December 31, 1998 5.75 to 1
From January 1, 1999
through June 30, 1999 5.50 to 1
From July 1, 1999
through December 31, 1999 5.00 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
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 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:
Amendment and Restatement
<PAGE>
- 6 -
Period Interest Coverage Ratio
From the Closing Date
through December 31, 1998 1.75 to 1
From January 1, 1999
through June 30, 1999 1.90 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
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 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."
E. Fixed Charges Coverage Ratio. Section 9.11 of the
Credit Agreement shall be amended by substituting, in the last paragraph
thereof, a reference to "$500,000" for the reference to "$750,000" therein.
F. Permitted Acquisitions. Section 9.12 of the Credit
Agreement shall be amended by amending clause (a) of the definition of
"Permitted Acquisition" therein to read as follows:
"(a) Maximum Periodic Consideration. Without the consent of
the Majority Lenders, the aggregate amount of Acquisition
Consideration paid in respect of Acquisitions
Amendment and Restatement
<PAGE>
- 7 -
shall not exceed
$100,000,000 in any calendar year; provided that the aggregate amount
of Acquisition Consideration (excluding, for purposes of this
proviso, Stock Consideration) paid in respect of Acquisitions shall
not exceed $75,000,000 in any calendar year."
G. Schedule I. Schedule I to the Credit Agreement
shall be amended to read as set forth on Schedule I hereto.
H. Amendment to Exhibit A. Exhibit A to the Credit
Agreement shall be amended by substituting "(as amended and restated as of March
3, 1997 and as the same may be further modified and supplemented and in effect
from time to time, the "Credit Agreement")" for "(as modified and supplemented
and in effect from time to time, the "Credit Agreement")".
Section 3. Representations and Warranties. The
Company represents and warrants to the Lenders that, both before and after
giving effect to each of the amendments set forth in Section 2 hereof:
(a) no Default has occurred and is continuing; and
(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 (other than the representations and warranties set
forth in Section 8.10 of the Credit Agreement) are true on and as of
the date hereof, with the same force and effect as if made on and as
of such date and as if each reference in the Basic Documents to "this
Agreement" or "the Credit Agreement" included reference to this
Amendment and Restatement.
Section 4. Conditions Precedent. The amendment and
restatement of the Credit Agreement contemplated hereby shall become effective
upon the satisfaction of the following conditions precedent:
A. Execution by All Parties. This Amendment and Restatement
shall have been executed and delivered by each of the Company, the
Lenders and the Administrative Agent, and each of the Subsidiary
Guarantors shall have executed
Amendment and Restatement
<PAGE>
- 8 -
and delivered this Amendment and Restatement as provided under the
caption "CONSENT OF SUBSIDIARY GUARANTORS" on the signature pages
hereof.
B. Promissory Notes. The Company shall have delivered to
the Administrative Agent for each Lender a promissory note of the
Company in substantially the form of Exhibit A to the Credit
Agreement as amended and restated hereby, dated October 1, 1996,
payable to such Lender in a principal amount equal to its Commitment
after giving effect hereto and otherwise duly completed.
C. Documents. The Administrative Agent shall have
received the following documents, each of which shall be
satisfactory to the Administrative Agent in form and
substance:
(1) Corporate Documents. Certified copies of the
charter and by-laws (or equivalent documents) of each
Obligor (or, in the alternative, a certification to the
effect that none of such documents has been modified since
delivery thereof pursuant to Section 7.01 of the Credit
Agreement) and of all corporate authority for each Obligor
(including, without limitation, board of director
resolutions and evidence of the incumbency of officers for
each Obligor) with respect to the execution, delivery and
performance of this Amendment and Restatement and the
Credit Agreement as amended and restated hereby and the
loans under the Credit Agreement as amended and restated
hereby, the Notes delivered pursuant hereto and each other
document to be delivered by each Obligor from time to time
in connection with the Credit Agreement as amended and
restated hereby (and the Administrative Agent and each
Lender may conclusively rely on such certificate until it
receives notice in writing from each Obligor to the
contrary).
(2) Opinion of Counsel to the Obligors. An
opinion, dated the Amendment and Restatement Effective
Date, of Sullivan & Worcester, special New York counsel to
the Obligors, in form and substance satisfactory to
Amendment and Restatement
<PAGE>
- 9 -
the Lenders (and each Obligor hereby instructs each such
counsel to deliver such opinion to the Lenders and the
Administrative Agent).
(3) Opinion of Special New York Counsel to the
Administrative Agent. An opinion of Milbank, Tweed, Hadley
& McCloy, special New York counsel to the Administrative
Agent, in form and substance satisfactory to the
Administrative Agent (and the Administrative Agent hereby
instructs such counsel to deliver such opinion to the
Lenders).
(4) Other Documents. Such other documents as the
Administrative Agent or any Lender or special New York
counsel to Chase may reasonably request.
Section 5. Pro Rata Adjustments. The Company shall,
on the effective date of the amendment and restatement of the Credit Agreement
contemplated hereby, if any Loans are outstanding on said 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 (together 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.
Section 6. Miscellaneous. Except as herein provided,
the Credit Agreement shall remain unchanged and in full force and effect. This
Amendment and Restatement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same amendatory instrument and
any of the parties hereto may execute this Amendment and Restatement by signing
any such counterpart. This Amendment and Restatement shall be governed by, and
construed in accordance with, the law of the State of New York.
Amendment and Restatement
<PAGE>
- 10 -
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Restatement to be duly executed and delivered as of the day and
year first above written.
THE COMPANY
IRON MOUNTAIN INCORPORATED
By /s/ Eugene Doggett
------------------------------------
Title: Executive Vice President
& Chief Financial Officer
LENDERS
THE CHASE MANHATTAN BANK
By /s/ William J. Caggiano
------------------------------------
Title: Managing Director
THE BANK OF NEW YORK
By /s/ Peter H. Abdill
------------------------------------
Title: Vice President
CIBC INC.
By /s/ Deborah Strek
------------------------------------
Title: Managing Director, CIBC
Wood Gundy Securities
Corp., as Agent
Amendment and Restatement
<PAGE>
- 11 -
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Virginia Dennett
------------------------------------
Title: Vice President
FLEET NATIONAL BANK
By /s/ Michael Palmer
------------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ T. M. Pitcher
------------------------------------
Title: Authorized Signatory
NATIONAL CITY BANK
By /s/ Renold D. Thompson, Jr.
------------------------------------
Title: Senior Vice President
Amendment and Restatement
<PAGE>
- 12 -
THE SUMITOMO BANK, LIMITED
By /s/ Daniel G. Eastman
------------------------------------
Title: Vice President & Manager
By /s/ Alfred De Gemmis
------------------------------------
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By /s/ Brett Martin
------------------------------------
Title: Vice President
BANK OF IRELAND GRAND CAYMAN
By /s/ Patrick Dowling
------------------------------------
Title: Account Manager
GIROCREDIT BANK AG DER SPARKASSEN,
GRAND CAYMAN ISLAND BRANCH
By /s/ John P. Redding
------------------------------------
Title: Vice President
By /s/ Richard Stone
------------------------------------
Title: First Vice President
Amendment and Restatement
<PAGE>
- 13 -
THE ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ William J. Caggiano
------------------------------------
Title: Managing Director
CONSENT OF SUBSIDIARY GUARANTORS
Each of the undersigned hereby consents to the foregoing Amendment and
Restatement and reaffirms its obligations under the Subsidiary Guaranty and the
Security Documents to which it is a party with respect to the Credit Agreement
as so amended and restated, it being expressly understood and agreed that all of
the obligations of the Company under the Credit Agreement as amended and
restated by the foregoing Amendment and Restatement and the Notes delivered
pursuant to Section 4(B) thereof shall be "Guaranteed Obligations" under the
Subsidiary Guaranty and "Secured Obligations" under the Security Documents.
IRON MOUNTAIN RECORDS MANAGEMENT,
INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
CRITERION PROPERTY, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
CRITERION ATLANTIC PROPERTY, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
Amendment and Restatement
<PAGE>
- 14 -
HOLLYWOOD PROPERTY, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
IRON MOUNTAIN DATA PROTECTION
SERVICES, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
IRON MOUNTAIN CONSULTING SERVICES,
INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
IRON MOUNTAIN RECORDS MANAGEMENT OF
OHIO, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
METRO BUSINESS ARCHIVES, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
IM SAN DIEGO, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
Amendment and Restatement
<PAGE>
IRON MOUNTAIN RECORDS MANAGEMENT OF
MARYLAND, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
DATA ARCHIVE SERVICES, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
IRON MOUNTAIN RECORDS MANAGEMENT OF
MISSOURI LLC
By /s/ Eugene Doggett
---------------------------------
Title: EVP
IRON MOUNTAIN RECORDS MANAGEMENT OF
BOSTON, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
IRON MOUNTAIN WILMINGTON, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
IRON MOUNTAIN RECORDS MANAGEMENT
OF MICHIGAN, INC.
By /s/ Eugene Doggett
---------------------------------
Title: EVP
Amendment and Restatement
<PAGE>
SCHEDULE I
Lender and Commitments
Lenders Commitment
THE CHASE MANHATTAN BANK $18,000,000.00
THE BANK OF NEW YORK $16,500,000.00
CIBC INC. $16,500,000.00
THE FIRST NATIONAL BANK OF BOSTON $16,500,000.00
FLEET NATIONAL BANK $16,500,000.00
THE BANK OF NOVA SCOTIA $12,000,000.00
NATIONAL CITY BANK $12,000,000.00
THE SUMITOMO BANK, LIMITED $12,000,000.00
UNION BANK OF CALIFORNIA, N.A. $12,000,000.00
BANK OF IRELAND GRAND CAYMAN $ 9,000.000.00
GIROCREDIT BANK AG DER SPARKASSEN, $ 9,000,000.00
GRAND CAYMAN ISLAND BRANCH
Amendment and Restatement
================================================================================
EXHIBIT 10.3
CONFORMED COPY
IRON MOUNTAIN INCORPORATED
and the Restricted Subsidiaries signatories hereto
10-1/8% SENIOR SUBORDINATED NOTES DUE 2006
-----------------
INDENTURE
Dated as of October 1, 1996
-----------------
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1)................................................... 7.10
(a)(2)................................................... 7.10
(a)(3) .................................................. N.A.
(a)(4)................................................... N.A.
(a)(5)................................................... 7.10
(b) ..................................................... 7.10
(c) ..................................................... N.A.
311 (a) ..................................................... 7.11
(b) ..................................................... 7.11
(c) ..................................................... N.A.
312 (a)...................................................... 2.05
(b)...................................................... 12.03
(c) ..................................................... 12.03
313 (a) ..................................................... 7.06
(b)(1) .................................................. N.A.
(b)(2) .................................................. 7.06;7.07
(c) ..................................................... 7.06;12.02
(d)...................................................... 7.06
314 (a) ..................................................... 4.03;12.02
(b) ..................................................... N.A.
(c)(1) .................................................. 12.04
(c)(2) .................................................. 12.04
(c)(3) .................................................. N.A.
(d)...................................................... N.A.
(e) .................................................... 12.05
(f)...................................................... N.A.
315 (a)...................................................... 7.01
(b)...................................................... 7.05,12.02
(c) .................................................... 7.01
(d)...................................................... 7.01
(e)...................................................... 6.11
316 (a)(last sentence) ...................................... 2.09
(a)(1)(A)................................................ 6.05
(a)(1)(B) ............................................... 6.04
(a)(2) .................................................. N.A.
(b) ..................................................... 6.07
(c) ..................................................... 2.13
317 (a)(1) .................................................. 6.08
(a)(2)................................................... 6.09
(b) ..................................................... 2.04
318 (a)...................................................... 12.01
(b)...................................................... N.A.
(c)...................................................... 12.01
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
-i-
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE .................... 1
Section 1.01. Definitions ..................................... 1
Section 1.02. Other Definitions ............................... 15
Section 1.03. Incorporation by Reference of
Trust Indenture Act ............................. 15
Section 1.04. Rules of Construction ........................... 16
ARTICLE 2 THE NOTES ..................................................... 16
Section 2.01. Form and Dating ................................. 16
Section 2.02. Execution and Authentication .................... 17
Section 2.03. Registrar and Paying Agent ...................... 17
Section 2.04. Paying Agent to Hold Money in Trust ............. 18
Section 2.05. Lists of Holders of the Notes ................... 18
Section 2.06. Transfer and Exchange ........................... 18
Section 2.07. Replacement Notes ............................... 20
Section 2.08. Outstanding Notes ............................... 20
Section 2.09. Treasury Notes .................................. 20
Section 2.10. Temporary Notes ................................. 21
Section 2.11. Cancellation .................................... 21
Section 2.12. Defaulted Interest .............................. 21
Section 2.13. Record Date ..................................... 21
Section 2.14. CUSIP Number .................................... 22
Section 2.15. Computation of Interest ......................... 22
ARTICLE 3 REDEMPTION AND OFFERS TO PURCHASE ............................. 22
Section 3.01. Notices to Trustee .............................. 22
Section 3.02. Selection of Notes to Be Redeemed ............... 22
Section 3.03. Notice of Redemption ............................ 23
Section 3.04. Effect of Notice of Redemption .................. 23
Section 3.05. Deposit of Redemption Price ..................... 24
Section 3.06. Notes Redeemed in Part .......................... 24
Section 3.07. Optional Redemption ............................. 24
Section 3.08. Mandatory Redemption ............................ 25
Section 3.09. Asset Sale Offers ............................... 25
ARTICLE 4 COVENANTS ..................................................... 27
Section 4.01. Payment of Notes ................................ 27
Section 4.02. Maintenance of Office or Agency ................. 27
Section 4.03. Reports ......................................... 28
Section 4.04. Compliance Certificate .......................... 28
Section 4.05. Taxes ........................................... 29
Section 4.06. Stay, Extension and Usury Laws .................. 29
Section 4.07. Restricted Payments ............................. 30
-ii-
<PAGE>
TABLE OF CONTENTS (cont.)
Page
Section 4.08. Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries ............... 32
Section 4.09. Incurrence of Indebtedness and
Issuance of Preferred Stock ..................... 33
Section 4.10. Asset Sales ..................................... 33
Section 4.11. Transactions with Affiliates .................... 35
Section 4.12. Liens ........................................... 35
Section 4.13. Additional Subsidiary Guarantees ................ 36
Section 4.14. Offer to Purchase Upon Change of Control ........ 36
Section 4.15. Corporate Existence ............................. 38
Section 4.16. Certain Senior Subordinated Debt ................ 38
Section 4.17. Designation of Unrestricted
Subsidiaries .................................... 38
Section 4.18. Limitation on Sale and Leaseback
Transactions .................................... 39
ARTICLE 5 SUCCESSORS .................................................... 39
Section 5.01. Merger, Consolidation, or
Sale of Assets .................................. 39
Section 5.02. Successor Corporation Substituted ............... 40
ARTICLE 6 CERTAIN DEFAULT PROVISIONS .................................... 40
Section 6.01. Events of Default ............................... 40
Section 6.02. Acceleration .................................... 42
Section 6.03. Other Remedies .................................. 43
Section 6.04. Waiver of Past Defaults ......................... 43
Section 6.05. Control by Majority ............................. 44
Section 6.06. Limitation on Suits ............................. 44
Section 6.07. Rights of Holders of Notes to
Receive Payment ................................. 44
Section 6.08. Collection Suit by Trustee .......................45
Section 6.09. Trustee May File Proofs of Claim ................ 45
Section 6.10. Priorities ...................................... 45
Section 6.11. Undertaking for Costs ........................... 46
ARTICLE 7 TRUSTEE ....................................................... 46
Section 7.01. Duties of Trustee ............................... 46
Section 7.02. Rights of Trustee ............................... 47
Section 7.03. Individual Rights of Trustee .................... 48
Section 7.04. Trustee's Disclaimer ............................ 48
Section 7.05. Notice of Defaults .............................. 48
Section 7.06. Reports by Trustee to Holders
of the Notes .................................... 49
Section 7.07. Compensation and Indemnity ...................... 49
Section 7.08. Replacement of Trustee .......................... 50
Section 7.09. Successor Trustee by Merger, etc ................ 51
Section 7.10. Eligibility; Disqualification ................... 51
-iii-
<PAGE>
TABLE OF CONTENTS (cont.)
Page
Section 7.11. Preferential Collection of
Claims Against Company .......................... 51
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE ...................... 51
Section 8.01. Option to Effect Legal Defeasance
or Covenant Defeasance .......................... 51
Section 8.02. Legal Defeasance and Discharge .................. 51
Section 8.03. Covenant Defeasance.............................. 52
Section 8.04. Conditions to Legal or Covenant
Defeasance ...................................... 53
Section 8.05. Deposited Money and Government
Securities to be Held in Trust; Other
Miscellaneous Provisions ........................ 54
Section 8.06. Repayment to Company ............................ 55
Section 8.07. Reinstatement ................................... 55
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER .............................. 55
Section 9.01. Without Consent of Holders
of Notes ....................................... 55
Section 9.02. With Consent of Holders of Notes ................ 56
Section 9.03. Compliance with Trust Indenture Act ............. 58
Section 9.04. Revocation and Effect of Consents ............... 58
Section 9.05. Notation on or Exchange of Notes ................ 58
Section 9.06. Trustee to Sign Amendments, etc ................. 58
ARTICLE 10 SUBORDINATION................................................. 59
Section 10.01. Agreement to Subordinate ........................ 59
Section 10.02. Liquidation; Dissolution; Bankruptcy ............ 59
Section 10.03. Default on Designated Senior Debt ............... 59
Section 10.04. Acceleration of Notes ........................... 60
Section 10.05. When Distribution Must be Paid Over ............. 60
Section 10.06. Notice By Compan ................................ 61
Section 10.07. Subrogation ..................................... 61
Section 10.08. Relative Rights ................................. 61
Section 10.09. Subordination May Not Be
Impaired by Company ............................. 62
Section 10.10. Distribution or Notice to
Representative .................................. 62
Section 10.11. Rights of Trustee and Paying Agent .............. 62
Section 10.12. Authorization to Effect Subordination ........... 62
Section 10.13. Amendments ...................................... 63
ARTICLE 11 SUBSIDIARY GUARANTEES ........................................ 63
Section 11.01. Subsidiary Guarantee ............................ 63
Section 11.02. Subordination ................................... 64
Section 11.03. Liquidation; Dissolution; Bankruptcy ............ 65
Section 11.04. Default on Senior Debt of the Guarantor ......... 65
Section 11.05. Acceleration of Notes ........................... 66
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<PAGE>
TABLE OF CONTENTS (cont.)
Page
Section 11.06. When Distribution Must Be Paid Over ............. 66
Section 11.07. Notice by a Guarantor ........................... 66
Section 11.08. Subrogation ..................................... 67
Section 11.09. Relative Rights ................................. 67
Section 11.10. Subordination May Not Be Impaired By Any
Guarantor ....................................... 67
Section 11.11. Distribution or Notice to Representative ........ 68
Section 11.12. Rights of Trustee and Paying Agent .............. 68
Section 11.13. Authorization to Effect Subordination ........... 68
Section 11.14. Amendments ...................................... 69
Section 11.15. Limitation of Guarantor's Liability ............. 69
Section 11.16. Restricted Subsidiaries May Consolidate,
etc., on Certain Terms .......................... 69
Section 11.17. Releases Following Sale of Assets
or Designation as Unrestricted Subsidiary ....... 70
ARTICLE 12 MISCELLANEOUS ................................................ 70
Section 12.01. Trust Indenture Act Controls .................... 70
Section 12.02. Notices ......................................... 70
Section 12.03. Communication by Holders of
Notes with Other Holders of Notes ............... 71
Section 12.04. Certificate and Opinion as to
Conditions Precedent............................. 72
Section 12.05. Statements Required in
Certificate or Opinion .......................... 72
Section 12.06. Rules by Trustee and Agents ..................... 72
Section 12.07. No Personal Liability of Directors,
Officers, Employees and Stockholders ............ 72
Section 12.08. Governing Law ................................... 73
Section 12.09. No Adverse Interpretation of
Other Agreements ................................ 73
Section 12.10. Successors ...................................... 73
Section 12.11. Severability .................................... 73
Section 12.12. Counterpart Originals ........................... 73
Section 12.13. Table of Contents, Headings, etc ................ 73
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF SUPPLEMENTAL INDENTURE
Exhibit C FORM OF NOTATION ON NOTE RELATING TO GUARANTEE
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<PAGE>
INDENTURE dated as of October 1, 1996 among Iron
Mountain Incorporated, a Delaware corporation (the
"Company"), the Restricted Subsidiaries signatories
hereto and First Bank National Association, as
trustee (the "Trustee").
The Company, the Restricted Subsidiaries signatories hereto
and the Trustee agree as follows for the benefit of each other and for the equal
and ratable benefit of the Holders of the 10-1/8% Senior Subordinated Notes due
2006:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person,
(a) Indebtedness of any other Person existing at the time such other Person
merged with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person
and (b) Indebtedness encumbering any asset acquired by such specified Person.
"Acquisition EBITDA" means, as of any date of determination,
with respect to an Acquisition EBITDA Entity, the sum of (a) EBITDA of such
Acquisition EBITDA Entity for its last fiscal quarter for which financial
statements are available at such date of determination, multiplied by four (or
if such quarterly statements are not available, EBITDA for the most recent
fiscal year for which financial statements are available), plus (b) projected
quantifiable improvements in operating results (on an annualized basis) due to
cost reductions calculated in good faith by the Company or one of its Restricted
Subsidiaries, as certified by an Officers' Certificate filed with the Trustee,
without giving effect to any operating losses of the acquired Person.
"Acquisition EBITDA Entity" means, as of any date of
determination, a business or Person (a) which has been acquired by the Company
or one of its Restricted Subsidiaries and with respect to which financial
results on a consolidated basis with the Company have not been made available
for an entire fiscal quarter or (b) which is to be acquired in whole or in part
with Indebtedness, the incurrence of which will require the calculation on such
date of the Acquisition EBITDA of such Acquisition EBITDA Entity for purposes of
Section 4.09 hereof.
"Adjusted EBITDA" means, as of any date of determination and
without duplication, the sum of (a) EBITDA of the Company and its Restricted
Subsidiaries for the most recent fiscal quarter for which internal financial
statements are available at such date of determination, multiplied by four, and
(b) Acquisition EBITDA of each business or Person that is an Acquisition EBITDA
Entity as of such date of determination, multiplied by a fraction, the numerator
of which is three minus the number of months (and/or any portion thereof ) in
such most recent fiscal quarter for which the financial results of such
Acquisition EBITDA Entity are included in the EBITDA of the Company and its
Restricted Subsidiaries under clause (a) above,
<PAGE>
and (ii) the denominator of which is three. The effects of unusual or
non-recurring items in respect of the Company, a Restricted Subsidiary or an
Acquisition EBITDA Entity occurring in any period shall be excluded in the
calculation of Adjusted EBITDA.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, will mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise; provided,
however, that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Attributable Indebtedness" in respect of a Sale and Leaseback
Transaction means, as of the time of determination, the greater of (a) the fair
market value of the property subject to such arrangement (as determined by the
Board of Directors) and (b) the present value (discounted at the rate of
interest implicit in such transaction) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such Sale
and Leaseback Transaction (including any period for which such lease has been
extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company, or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be so required to be capitalized on the
balance sheet in accordance with GAAP.
"Capital Stock" means any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock, including, without limitation, with respect to partnerships, partnership
interests (whether general or limited) and any other interest or participation
that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, such partnership.
"Cash Equivalents" means (a) securities with maturities of one
year or less from the date of acquisition, issued, fully guaranteed or insured
by the United States Government or any agency thereof, (b) certificates of
deposit, time deposits, overnight bank deposits, bankers acceptances and
repurchase agreements issued by a Qualified Issuer having maturities of 270 days
or less from the date of acquisition, (c) commercial paper of an issuer rated at
least A-2 by Standard & Poor's Rating Group, a division of McGraw Hill, Inc., or
P-2 by Moody's
2
<PAGE>
Investors Service, or carrying an equivalent rating by a nationally recognized
rating agency if both of the two named rating agencies cease publishing ratings
of investments and having maturities of 270 days or less from the date of
acquisition, (d) money market accounts or funds with or issued by Qualified
Issuers and (e) Investments in money market funds substantially all of the
assets of which are comprised of securities and other obligations of the types
described in clauses (a) through (c) above.
"Change of Control" means the occurrence of any of the
following events:
(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 a majority of the voting power of all
classes of Voting Stock of the Company;
(b) the Company consolidates with,
or merges with or into, another Person or conveys, transfers,
leases or otherwise disposes of all or substantially all of
its assets to any Person, or any Person consolidates with, or
merges with or into, the Company, in any such event pursuant
to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or
other property, other than any such transaction where (i) the
outstanding Voting Stock of the Company is not converted or
exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation) or is converted
into or exchanged for (A) Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person or
(B) cash, securities and other property (other than Capital
Stock described in the foregoing clause (A)) of the surviving
or transferee Person in an amount that could be paid as a
Restricted Payment pursuant to Section 4.07 hereof and (ii)
immediately after such transaction, no "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 the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, of
more than a majority of the total outstanding Voting Stock of
the surviving or transferee Person;
(c) during any consecutive two-year
period, individuals who at the beginning of such period
constituted the Board of Directors (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 66b% of the directors then still in
office who were either directors at the beginning of such
period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; or
(d) the Company is liquidated or
dissolved or adopts a plan of liquidation or dissolution other
than in a transaction which complies with the provisions
described under "Consolidation, Merger and Sale of Assets."
3
<PAGE>
"Chrysler Notes" means the 13.42% Senior Subordinated Notes
due December 41, 2000 in the original principal amount of
$15.0 million issued by Iron Mountain Information Services,
Inc. to Chrysler Capital Corporation.
"Company" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
"Consolidated Adjusted Net Income" means, for any period, the
net income (or net loss) of the Company and its Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP, adjusted
to the extent included in calculating such net income or loss by excluding (a)
any net after-tax extraordinary gains or losses (less all fees and expenses
relating thereto), (b) any net after-tax gains or losses (less all fees and
expenses relating thereto) attributable to Asset Sales, (c) the portion of net
income (or loss) of any Person (other than the Company or a Restricted
Subsidiary), including Unrestricted Subsidiaries, in which the Company or any
Restricted Subsidiary has an ownership interest, except to the extent of the
amount of dividends or other distributions actually paid to the Company or any
Restricted Subsidiary in cash dividends or distributions by such Person during
such period, and (d) the net income (or loss) of any Person combined with the
Company or any Restricted Subsidiary on a "pooling of interests" basis
attributable to any period prior to the date of combination.
"Consolidated Income Tax Expense" means, for any period, the
provision for federal, state, local and foreign income taxes of the Company and
its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without
duplication, the sum of (a) the amount which, in conformity with GAAP, would be
set forth opposite the caption "interest expense" (or any like caption) on a
consolidated statement of operations of the Company and its Restricted
Subsidiaries for such period, including, without limitation, (i) amortization of
debt discount, (ii) the net cost of interest rate contracts (including
amortization of discounts), (iii) the interest portion of any deferred payment
obligation, (iv) amortization of debt issuance costs and (v) the interest
component of Capital Lease Obligations of the Company and its Restricted
Subsidiaries, plus (b) all interest on any Indebtedness of any other Person
guaranteed and paid by the Company or any of its Restricted Subsidiaries;
provided, however, that Consolidated Interest Expense will not include any gain
or loss from extinguishment of debt, including write-off of debt issuance costs.
"Consolidated Non-Cash Charges" means, for any period, the
aggregate depreciation, amortization and other non-cash expenses of the Company
and its Restricted Subsidiaries reducing Consolidated Adjusted Net Income for
such period, determined on a consolidated basis in accordance with GAAP
(excluding any such non-cash charge that requires an accrual of or reserve for
cash charges for any future period).
"Corporate Trust Office of the Trustee" will be at the address
of the Trustee specified in Section 12.02 hereof or such other address as to
which the Trustee may give notice to the Company.
4
<PAGE>
"Credit Agent" means The Chase Manhattan Bank, in its capacity
as administrative agent for the lenders party to the Credit Agreement, or any
successor or successors party thereto.
"Credit Agreement" means the Credit Agreement dated as of
September 30, 1996 among the Company, the Lenders from time to time party
thereto and the Credit Agent, as amended, restated, supplemented, modified,
renewed, refunded, increased, extended, replaced or refinanced from time to
time.
"Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Depositary" means, with respect to Notes issuable in whole or
in part in the form of one or more Global Notes, a clearing agency registered
under the Exchange Act that is designated to act as Depositary for such Notes as
contemplated by Section 2.01.
"Designated Senior Debt" means (a) Senior Bank Debt and (b)
other Senior Debt the principal amount of which is $50.0 million or more at the
date of designation by the Company in a written instrument delivered to the
Trustee; provided that Senior Debt designated as Designated Senior Debt pursuant
to clause (b) shall cease to be Designated Senior Debt at any time that the
aggregate principal amount thereof outstanding is $10.0 million or less.
"Disqualified Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the Holder thereof, in whole or in part, in each
case on or prior to the stated maturity of the Notes.
"distribution" means, for purposes of Articles 10 and 11, a
distribution consisting of cash, securities or other property, by set-off or
otherwise.
"Dollars" and "$" mean lawful money of the United States of
America.
"EBITDA" means for any period Consolidated Adjusted Net Income
for such period increased by (a) Consolidated Interest Expense for such period,
plus (b) Consolidated Income Tax Expense for such period, plus (c) Consolidated
Non-Cash Charges for such period.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Equity Proceeds" means (a) with respect to Equity Interests
(or debt securities converted into Equity Interests) issued or sold for cash
Dollars, the aggregate amount of such
5
<PAGE>
cash Dollars and (b) with respect to Equity Interests (or debt securities
converted into Equity Interests) issued or sold for any consideration other than
cash Dollars, the aggregate Market Price thereof computed on the date of the
issuance or sale thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Restricted Subsidiary" means any Wholly Owned
Restricted Subsidiary principally engaged in the records management business
domiciled outside the United States of America if the issuance of a Subsidiary
Guarantee by such Subsidiary would, as determined in a resolution of the Board
of Directors set forth in an Officers' Certificate delivered to the Trustee,
create a tax disadvantage that is material in relation to the aggregate amount
of the Company's and any Restricted Subsidiary's Investment or proposed
Investment therein.
"Existing Indebtedness" means Indebtedness of the Company and
its Subsidiaries (other than under the Credit Agreement) in existence on the
date of this Indenture, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of this Indenture.
"Global Note" means a Note that evidences all or part of the
Notes and is authenticated and delivered to, and registered in the name of, the
Depositary for the Notes or a nominee thereof.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged.
"Guarantee" means, as applied to any obligation, (a) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (b) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
obligation to reimburse amounts drawn down under letters of credit securing such
obligations.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (a) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (b) other agreements
or arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Note is registered.
6
<PAGE>
"Indebtedness" means (without duplication), with respect to
any Person, whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (a) every obligation of such Person for
money borrowed, (b) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person, (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services, (e) every Capital Lease Obligation and every obligation
of such Person in respect of Sale and Leaseback Transactions that would be
required to be capitalized on the balance sheet in accordance with GAAP, (f) all
Disqualified Stock of such Person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price, plus accrued and unpaid dividends
(unless included in such maximum repurchase price), (g) all obligations of such
Person under or with respect to Hedging Obligations which would be required to
be reflected on the balance sheet as a liability of such Person in accordance
with GAAP and (h) every obligation of the type referred to in clauses (a)
through (g) of another Person and dividends of another Person the payment of
which, in either case, such Person has guaranteed. For purposes of this
definition, the "maximum fixed repurchase price" of any Disqualified Stock that
does not have a fixed repurchase price will be calculated in accordance with the
terms of such Disqualified Stock as if such Disqualified Stock were repurchased
on any date on which Indebtedness is required to be determined pursuant to this
Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Stock, such fair market value will be determined in
good faith by the board of directors of the issuer of such Disqualified Stock.
Notwithstanding the foregoing, trade accounts payable and accrued liabilities
arising in the ordinary course of business and any liability for federal, state
or local taxes or other taxes owed by such Person will not be considered
Indebtedness for purposes of this definition. The amount outstanding at any time
of any Indebtedness issued with original issue discount is the aggregate
principal amount at maturity of such Indebtedness, less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time, as determined in accordance with GAAP.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees), advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities and all other items that
are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
"Issuance Date" means the closing date for the sale and
original issuance of the Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest will
accrue for the intervening period.
7
<PAGE>
"Leverage Ratio" means, at any date, the ratio of (a) the
aggregate principal amount of Indebtedness of the Company and its Restricted
Subsidiaries outstanding as of the most recent available quarterly or annual
balance sheet to (b) Adjusted EBITDA, after giving pro forma effect, without
duplication, to (i) the incurrence, repayment or retirement of any Indebtedness
by the Company or its Restricted Subsidiaries since the last day of the most
recent full fiscal quarter of the Company, (ii) if the Leverage Ratio is being
determined in connection with the incurrence of Indebtedness by the Company or a
Restricted Subsidiary, such Indebtedness to be incurred, and (iii) the
Indebtedness to be incurred in connection with the acquisition of any
Acquisition EBITDA Entity.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code, or equivalent statutes, of any
jurisdiction).
"Market Price" means, (a) with respect to the calculation of
Equity Proceeds from the issuance or sale of debt securities which have been
converted into Equity Interests, the value received upon the original issuance
or sale of such converted debt securities, as determined reasonably and in good
faith by the Board of Directors, and (b) with respect to the calculation of
Equity Proceeds from the issuance or sale of Equity Interests, the average of
the daily closing prices for such Equity Interests for the 20 consecutive
trading days preceding the date of such computation. The closing price for each
day will be (a) if such Equity Interests are then listed or admitted to trading
on the New York Stock Exchange, the closing price on the NYSE Consolidated Tape
(or any successor consolidated tape reporting transactions on the New York Stock
Exchange) or, if such composite tape is not in use or does not report
transactions in such Equity Interests, or if such Equity Interests are listed on
a stock exchange other than the New York Stock Exchange (including for this
purpose the Nasdaq National Market), the last reported sale price regular way
for such day, or in case no such reported sale takes place on such day, the
average of the closing bid and asked prices regular way for such day, in each
case on the principal national securities exchange on which such Equity
Interests are listed or admitted to trading (which will be the national
securities exchange on which the greatest number of such Equity Interests have
been traded during such 20 consecutive trading days), or (b) if such Equity
Interests are not listed or admitted to trading on any such exchange, the
average of the closing bid and asked prices thereof in the over-the-counter
market as reported by the National Association of Securities Dealers Automated
Quotation System or any successor system, or if not included therein, the
average of the closing bid and asked prices thereof furnished by two members of
the National Association of Securities Dealers selected reasonably and in good
faith by the Board of Directors for that purpose. In the absence of one or more
such quotations, the Market Price for such Equity Interests will be determined
reasonably and in good faith by the Board of Directors.
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale,
which amount is equal to the excess, if any, of (a) the cash received by the
Company or such Restricted Subsidiary (including
8
<PAGE>
any cash payments received by way of deferred payment pursuant to, or
monetization of, a note or installment receivable or otherwise, but only as and
when received) in connection with such disposition over (b) the sum of (i) the
amount of any Indebtedness which is secured by such asset and which is required
to be repaid in connection with the disposition thereof, plus (ii) the
reasonable out-of-pocket expenses incurred by the Company or such Restricted
Subsidiary, as the case may be, in connection with such disposition or in
connection with the transfer of such amount from such Restricted Subsidiary to
the Company, plus (iii) provisions for taxes, including income taxes,
attributable to the disposition of such asset or attributable to required
prepayments or repayments of Indebtedness with the proceeds thereof, plus (iv)
if the Company does not first receive a transfer of such amount from the
relevant Restricted Subsidiary with respect to the disposition of an asset by
such Restricted Subsidiary and such Restricted Subsidiary intends to make such
transfer as soon as practicable, the out-of-pocket expenses and taxes that the
Company reasonably estimates will be incurred by the Company or such Restricted
Subsidiary in connection with such transfer at the time such transfer is
expected to be received by the Company (including, without limitation,
withholding taxes on the remittance of such amount).
"Notes" means the 10-1/8% Senior Subordinated Notes due 2006,
as amended or supplemented from time to time pursuant to the terms hereof, that
are issued under this Indenture.
"Obligations" means any principal, interest (including
post-petition interest, whether or not allowed as a claim in any proceeding),
penalties, fees, costs, expenses, indemnifications, reimbursements, damages and
other liabilities payable under or in connection with any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed, unless
otherwise specified, by any two of the Chairman of the Board, a Vice Chairman of
the Board, the President, the Chief Financial Officer, the Controller or an
Executive Vice President of the Company, and delivered to the Trustee, that
meets the requirements of Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Permitted Investments" means (a) any Investments in the
Company or in a Restricted Subsidiary (other than an Excluded Restricted
Subsidiary) of the Company, including without limitation the Guarantee of
Indebtedness permitted under Section 4.09 hereof; (b) any Investments in Cash
Equivalents; (c) Investments by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment (i) such Person becomes a
Restricted Subsidiary (other than an Excluded Restricted Subsidiary) of the
Company or (ii) such
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Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or a Restricted Subsidiary (other than an Excluded Restricted Subsidiary) of the
Company; (d) Investments in assets (including accounts and notes receivable)
owned or used in the ordinary course of business; (e) Investments for any
purpose related to the Company's records management business in an aggregate
outstanding principal amount not to exceed $10.0 million; and (f) Investments by
the Company or a Restricted Subsidiary (other than an Excluded Restricted
Subsidiary) in one or more Excluded Restricted Subsidiaries, the aggregate
outstanding amount of which does not exceed 10% of the consolidated assets of
the Company and its Restricted Subsidiaries.
"Permitted Liens" means:
(a) Liens existing as of the
Issuance Date;
(b) Liens on property or assets of
the Company or any Restricted Subsidiary securing Senior Debt;
(c) Liens on any property or assets
of a Restricted Subsidiary granted in favor of the Company or
any Wholly Owned Restricted Subsidiary;
(d) Liens securing the Notes or the
Subsidiary Guarantees;
(e) any interest or title of a
lessor under any Capital Lease Obligation or Sale and
Leaseback Transaction so long as the Indebtedness, if any,
secured by such Lien does not exceed the principal amount of
Indebtedness permitted under Section 4.09 hereof;
(f) Liens securing Acquired Debt
created prior to (and not in connection with or in
contemplation of) the incurrence of such Indebtedness by the
Company or any Restricted Subsidiary; provided that such Lien
does not extend to any property or assets of the Company or
any Restricted Subsidiary other than the assets acquired in
connection with the incurrence of such Acquired Debt;
(g) Liens securing Hedging
Obligations permitted to be incurred pursuant to clause (g) of
Section 4.09 hereof;
(h) Liens arising from purchase
money mortgages and purchase money security interests, or in
respect of the construction of property or assets, incurred in
the ordinary course of the business of the Company or a
Restricted Subsidiary; provided that (i) the related
Indebtedness is not secured by any property or assets of the
Company or any Restricted Subsidiary other than the property
and assets so acquired or constructed and (ii) the Lien
securing such Indebtedness is created within 60 days of such
acquisition or construction;
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(i) statutory Liens or landlords'
and carriers', warehousemen's, mechanics', suppliers',
materialmen's, repairmen's or other like Liens arising in the
ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate
proceedings, if a reserve or other appropriate provision, if
any, as is then required in conformity with GAAP has been made
therefor;
(j) Liens for taxes, assessments,
government charges or claims with respect to amounts not yet
delinquent or that are being contested in good faith by
appropriate proceedings diligently conducted, if a reserve or
other appropriate provision, if any, as is required in
conformity with GAAP has been made therefor;
(k) Liens incurred or deposits made
to secure the performance of tenders, bids, leases, statutory
obligations, surety and appeal bonds, government contracts,
performance bonds and other obligations of a like nature
incurred in the ordinary course of business (other than
contracts for the payment of money);
(l) easements, rights-of-way,
restrictions and other similar charges or encumbrances not
interfering in any material respect with the business of the
Company or any Restricted Subsidiary incurred in the ordinary
course of business;
(m) Liens arising by reason of any
judgment, decree or order of any court so long as such Lien is
adequately bonded and any appropriate legal proceedings that
may have been duly initiated for the review of such judgment,
decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall
not have expired;
(n) Liens arising under options or
agreements to sell assets;
(o) other Liens securing obligations
incurred in the ordinary course of business, which obligations
do not exceed $1.0 million in the aggregate at any one time
outstanding; and
(p) any extension, renewal or
replacement, in whole or in part, of any Lien described in the
foregoing clauses (a) through (o); provided that any such
extension, renewal or replacement does not extend to any
additional property or assets.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, or any government or any agency or political
subdivision thereof.
"Principal Stockholders" means each of Vincent J. Ryan,
Schooner Capital Corporation, C. Richard Reese, Eugene B. Doggett, and their
respective Affiliates.
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"Qualified Equity Offering" means an offering of Capital
Stock, other than Disqualified Stock, of the Company for Dollars, whether
registered or exempt from registration under the Securities Act.
"Qualified Issuer" means (a) any lender party to the Credit
Agreement or (b) any commercial bank (i) which has capital and surplus in excess
of $500,000,000 and (ii) the outstanding short-term debt securities of which are
rated at least A-2 by Standard & Poor's Rating Group, a division of McGraw-Hill,
Inc. or at least P-2 by Moody's Investors Service, or carry an equivalent rating
by a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments.
"Qualifying Sale and Leaseback Transaction" means any Sale and
Leaseback Transaction between the Company or any of its Restricted Subsidiaries
and any bank, insurance company or other lender or investor providing for the
leasing to the Company or such Restricted Subsidiary of any property (real or
personal) which has been or is to be sold or transferred by the Company or such
Restricted 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
property in question has been constructed or acquired after the date of this
Indenture.
"Refinancing Indebtedness" means new Indebtedness incurred or
given in exchange for, or the proceeds of which are used to repay, redeem,
defease, extend, refinance, renew, replace or refund, other Indebtedness;
provided, however, that (a) the principal amount of such new Indebtedness shall
not exceed the principal amount of Indebtedness so repaid, redeemed, defeased,
extended, refinanced, renewed, replaced or refunded (plus the amount of fees,
premiums, consent fees, prepayment penalties and expenses incurred in connection
therewith); (b) such Refinancing Indebtedness shall have a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to Maturity of
the Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed,
replaced or refunded or shall mature after October 1, 2006; (c) to the extent
such Refinancing Indebtedness refinances Indebtedness that has a final maturity
date occurring after October 1, 2006, such new Indebtedness shall have a final
scheduled maturity not earlier than the final scheduled maturity of the
Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed,
replaced or refunded and shall not permit redemption at the option of the holder
earlier than the earliest date of redemption at the option of the holder of the
Indebtedness so repaid, redeemed, defeased, extended, refinanced, renewed,
replaced or refunded; (d) to the extent such Refinancing Indebtedness refinances
Indebtedness subordinate to the Notes, such Refinancing Indebtedness shall be
subordinated in right of payment to the Notes and to the extent such Refinancing
Indebtedness refinances Notes or Indebtedness pari passu with the Notes, such
Refinancing Indebtedness shall be pari passu with or subordinated in right of
payment to the Notes, in each case on terms at least as favorable to the holders
of Notes as those contained in the documentation governing the Indebtedness so
repaid, redeemed, defeased, extended, refinanced, renewed, replaced or refunded;
and (e) with respect to Refinancing Indebtedness incurred by a Restricted
Subsidiary, such Refinancing Indebtedness shall rank no more senior, and shall
be at least as subordinated, in right of payment to the Subsidiary Guarantee of
such Restricted Subsidiary as the Indebtedness being extended, refinanced,
renewed, replaced or refunded.
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"Representative" means, for purposes of Articles 10 and 11,
the Credit Agent or other agent, trustee or representative for any Senior Debt
of the Company or, with respect to any Restricted Subsidiary, for any Senior
Debt of such Restricted Subsidiary.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means (a) each direct or indirect
Subsidiary of the Company existing on the date of this Indenture and (b) any
other direct or indirect Subsidiary of the Company formed, acquired or existing
after the date of this Indenture, in each case which is not designated by the
Board of Directors as an "Unrestricted Subsidiary."
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Sale and Leaseback Transaction" means any transaction or
series of related transactions pursuant to which a Person sells or transfers any
property or asset in connection with the leasing, or the resale against
installment payments, of such property or asset to the seller or transferor.
"Senior Bank Debt" means all Obligations outstanding under or
in connection with the Credit Agreement (including Guarantees of such
Obligations by Subsidiaries of the Company).
"Senior Debt" means (a) the Senior Bank Debt and (b) any other
Indebtedness permitted to be incurred by the Company or any Restricted
Subsidiary, as the case may be, under the terms of this Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Notes.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not
include (i) any liability for federal, state, local or other taxes owed or owing
by the Company, (ii) any Indebtedness of the Company to any of its Subsidiaries
or other Affiliates, (iii) any trade payables or (iv) any Indebtedness that is
incurred in violation of this Indenture; provided, however, that such
Indebtedness shall be deemed not to have been incurred in violation of this
Indenture for purposes of this clause (iv) if, in the case of any obligations
under the Credit Agreement, the holders of such obligations or their agent or
representative shall have received a written representation from the Company to
the effect that the incurrence of such Indebtedness does not violate the
provisions of this Indenture.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
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"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of such Person or a
combination thereof.
"Subsidiary Guarantee" means a Guarantee of a Guarantor
pursuant to Article 11 hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SS
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means (a) any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary in accordance
with Section 4.17 hereof and (b) any Subsidiary of an Unrestricted Subsidiary.
"Voting Stock" means 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 any 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).
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted
Subsidiary of the Company all of the outstanding Capital Stock or other
ownership interests of which (other than director's qualifying shares) shall at
the time be owned by the Company or by one of more Wholly Owned Restricted
Subsidiaries of the Company.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"....................... 4.11
"Asset Sale".................................. 4.10
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"Asset Sale Offer"............................ 4.10
"Benefitted Party"............................ 11.01
"Change of Control Offer"..................... 4.14
"Change of Control Payment"................... 4.14
"Change of Control Payment Date".............. 4.14
"Covenant Defeasance"......................... 8.03
"Commencement Date"........................... 4.10
"Event of Default"............................ 6.01
"Excess Proceeds"............................. 4.10
"Guarantor"................................... 11.01
"incur"....................................... 4.09
"Legal Defeasance" ........................... 8.02
"Non-Monetary Default"........................ 10.03
"Offer Amount"................................ 3.09
"Offer Period"................................ 3.09
"Paying Agent"................................ 2.03
"Payment Blockage Notice"..................... 10.03
"Payment Default"............................. 10.03
"Purchase Date"............................... 3.09
"Registrar"................................... 2.03
"Restricted Payments"......................... 4.07
"Separation Date"............................. 2.06
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture,
other than those provisions of the TIA that may be excluded herein, which
provision shall be excluded to the extent specifically excluded in this
Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and the Subsidiary Guarantees,
if any;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, the Guarantors and any
successor obligor upon the Notes or any Subsidiary Guarantee, as the case may
be.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule or regulation
promulgated by the SEC under the TIA have the meanings so assigned to them.
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SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act or
the Exchange Act shall be deemed to include substitute,
replacement or successor sections or rules adopted by the SEC
from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. The notation on each Note
relating to the Subsidiary Guarantees shall be substantially in the form set
forth on Exhibit C, which is part of this Indenture. The Notes may have
notations, legends or endorsements approved as to form by the Company and
required by law, stock exchange rule, agreements to which the Company or each
Restricted Subsidiary is subject, or usage. Each Note shall be dated the date of
its authentication. The Notes shall be issuable only in denominations of $1,000
and integral multiples thereof.
The Notes may, at the option of the Company, be issuable in whole or
in part in the form of one or more Global Notes and, in such case, the
Depositary or Depositaries for such Global Note or Global Notes shall be
designated by the Company in an Officers' Certificate delivered to the Trustee
on or prior to the Issuance Date. Every Global Note authenticated and delivered
hereunder will bear a legend substantially in the form thereof set forth on
Exhibit A hereto.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers of the Company shall sign the Notes for the Company by
manual or facsimile signature. The Company's seal shall be reproduced on the
Notes and may be in
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facsimile form. An Officer of each Guarantor shall sign the Subsidiary Guarantee
for such Guarantor by manual or facsimile signature.
If an Officer of the Company or a Guarantor whose signature is on a
Note or a Subsidiary Guarantee, as the case may be, no longer holds that office
at the time the Note is authenticated, the Note or the Subsidiary Guarantee, as
the case may be, shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature of the Trustee shall be conclusive evidence that
the Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company, authenticate Notes for original issue up to an
aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time shall not exceed $165,000,000
except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or any Guarantor or an Affiliate of the Company
or any Guarantor.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange (including any
co-registrar, the "Registrar") and (ii) an office or agency where Notes may be
presented for payment ("Paying Agent"). The Registrar shall keep a register of
the Notes and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent, Registrar or co-registrar without prior notice to any Holder of a Note.
The Company shall notify the Trustee and the Trustee shall notify the Holders of
the Notes of the name and address of any Agent not a party to this Indenture.
The Company or any Guarantor may act as Paying Agent, Registrar or co-registrar.
The Company shall enter into an appropriate agency agreement with any Agent not
a party to this Indenture, which shall be subject to any obligations imposed by
the provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the Trustee of the
name and address of any such Agent. If the Company fails to maintain a Registrar
or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such, and shall be entitled to appropriate compensation in accordance with
Section 7.07 hereof.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes.
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SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders of the Notes or the Trustee all money held by the Paying Agent for
the payment of principal of, premium, if any, and interest on the Notes, and
shall notify the Trustee of any Default by the Company or the Guarantors in
making any such payment. While any such Default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or a Guarantor) shall have no further liability for the money delivered
to the Trustee. If the Company or a Guarantor acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders of
the Notes, subject to Article 10 hereof, all money held by it as Paying Agent.
Upon any bankruptcy or reorganization proceeding relating to the Company or a
Guarantor, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. LISTS OF HOLDERS OF THE NOTES.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders of the Notes and shall otherwise comply with TIA S 312(a). If the
Trustee is not the Registrar, the Company and/or the Guarantors shall furnish to
the Trustee at least seven Business Days before each interest payment date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Holders of the Notes, including the aggregate principal amount of
the Notes held by each thereof, and the Company and each Guarantor shall
otherwise comply with TIA S 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
When Notes are presented to the Registrar with a request to register
the transfer or to exchange them for an equal principal amount of Notes of other
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met; provided, however, that any Note
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar and the Trustee duly executed by the Holder
thereof or by his attorney duly authorized in writing. To permit registrations
of transfer and exchanges, the Company shall issue and the Trustee shall
authenticate Notes at the Registrar's request, subject to such rules as the
Trustee may reasonably require.
Neither the Company nor the Registrar shall be required to (a) issue,
register the transfer of or exchange Notes during a period beginning at the
opening of business on a Business Day 15 days before the day of any selection of
Notes for redemption under Section 3.02 hereof and ending at the close of
business on the day of selection or (b) register the transfer of or exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
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No service fee shall be charged to any Holder of a Note for any
registration of transfer or exchange (except as otherwise expressly permitted
herein), but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof, which shall be paid by
the Company).
Prior to due presentment to the Trustee for registration of the
transfer of any Note, the Trustee, any Agent, the Company and each Guarantor may
deem and treat the Person in whose name any Note is registered as the absolute
owner of such Note for the purpose of receiving payment of principal of,
premium, if any, and interest on such Note and for all other purposes
whatsoever, whether or not such Note is overdue, and none of the Trustee, any
Agent, the Company or any Guarantor shall be affected by notice to the contrary.
Notwithstanding any other provision in this Indenture, no Global Note
may be transferred to, or registered or exchanged for Notes registered in the
name of, any Person other than the Depositary for such Global Note or any
nominee thereof, and no such transfer may be registered, unless (a) such
Depositary (i) notifies the Company that it is unwilling or unable to continue
as Depositary for such Global Note or (ii) ceases to be a clearing agency
registered under the Exchange Act, (b) the Company delivers to the Trustee an
Officers' Certificate stating that such Global Note shall be so transferable,
registrable, and exchangeable, and such transfers shall be registrable, or (c)
there shall have occurred and be continuing an Event of Default with respect to
the Notes evidenced by such Global Note. Notwithstanding any other provision in
this Indenture, a Global Note to which the restriction set forth in the
preceding sentence shall have ceased to apply may be transferred only to, and
may be registered and exchanged for Notes registered only in the name or names
of, such Person or Persons as the Depositary for such Global Note shall have
directed and no transfer thereof other than such a transfer may be registered.
Every Note authenticated and delivered upon registration of transfer of, or in
exchange for or in lieu of, a Global Note to which the restriction set forth in
the first sentence of this paragraph shall apply, whether pursuant to this
Section 2.06 or otherwise, shall be authenticated and delivered in the form of,
and shall be, a Global Note.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate a
replacement Note (accompanied by a notation of the Subsidiary Guarantees duly
endorsed by each Guarantor) if the Trustee's requirements for replacements of
Notes are met. If required by the Trustee, the Company or the Guarantors, an
indemnity bond must be supplied by the Holder that is sufficient in the judgment
of the Trustee, the Company and the Guarantors to protect the Company, the
Guarantors, the Trustee, any Agent or any authenticating agent from any loss
which any of them may suffer if a Note is replaced. Each of the Company, the
Guarantors and the Trustee may charge for its expenses in replacing a Note.
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Every replacement Note is an additional obligation of the Company and
the Guarantors and shall be entitled to all of the benefits of this Indenture
equally and ratably with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation and those described in this Section 2.08 as not outstanding. If a
Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Note is
held by a bona fide purchaser. If the principal amount of any Note is considered
paid under Section 4.01 hereof, it ceases to be outstanding and interest on it
ceases to accrue. Subject to Section 2.09 hereof, a Note does not cease to be
outstanding because the Company, a Guarantor, a Subsidiary of the Company or a
Guarantor or an Affiliate of the Company or a Guarantor holds the Note.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, any Guarantor, any of their respective Subsidiaries or any Affiliate of
the Company or any Guarantor shall be considered as though not outstanding,
except that for purposes of determining whether the Trustee shall be protected
in relying on any such direction, waiver or consent, only Notes which the
Trustee knows to be so owned shall be so considered. Notwithstanding the
foregoing, Notes that are to be acquired by the Company, any Guarantor, any
Subsidiary of the Company or any Guarantor or an Affiliate of the Company or any
Guarantor pursuant to an exchange offer, tender offer or other agreement shall
not be deemed to be owned by the Company, such Guarantor, a Subsidiary of the
Company or such Guarantor or an Affiliate of the Company or such Guarantor until
legal title to such Notes passes to the Company, such Guarantor, such Subsidiary
or such Affiliate, as the case may be.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes (accompanied by a
notation of the Subsidiary Guarantees duly endorsed by each Guarantor).
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company and the Trustee consider appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare and the
Trustee, upon receipt of the written order of the Company signed by two Officers
of the Company, shall authenticate definitive Notes (accompanied by a notation
of the Subsidiary Guarantees duly endorsed by each Guarantor) in exchange for
temporary Notes. Until such exchange, temporary Notes shall be entitled to the
same rights, benefits and privileges as definitive Notes.
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SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall destroy canceled Notes
(subject to the record retention requirement of the Exchange Act), unless the
Company directs canceled Notes to be returned to it. The Company may not issue
new Notes to replace Notes that it has redeemed or paid or that have been
delivered to the Trustee for cancellation. All canceled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
the Company, unless by a written order, signed by two Officers of the Company,
the Company shall direct that canceled Notes be returned to it.
SECTION 2.12. DEFAULTED INTEREST.
If the Company and the Guarantors default in a payment of interest on
the Notes, the Company or any such Guarantor (to the extent of its obligations
under its Subsidiary Guarantee) shall pay the defaulted interest in any lawful
manner plus, to the extent lawful, interest payable on the defaulted interest,
to the Persons who are Holders of the Notes on a subsequent special record date,
which date shall be at the earliest practicable date but in all events at least
five Business Days prior to the payment date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall fix or cause to be
fixed each such special record date and payment date, and shall, promptly
thereafter, notify the Trustee of any such date. At least 15 days before the
special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail to Holders of the Notes a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders
of the Notes entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in TIA S 316(c).
SECTION 2.14. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number and, if it
does so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company will
promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.15. COMPUTATION OF INTEREST.
Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months.
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ARTICLE 3
REDEMPTION AND OFFERS TO PURCHASE
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the Section of this Indenture pursuant
to which the redemption shall occur, (ii) the redemption date, (iii) the
principal amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the applicable Holders of
the Notes in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not so listed, on a pro rata basis, by lot or in accordance with any other
method the Trustee considers fair and appropriate, provided that no Notes of
$1,000 or less shall be redeemed in part. In the event of partial redemption by
lot, the particular Notes to be redeemed shall be selected, unless otherwise
provided herein, not less than 30 nor more than 60 days prior to the redemption
date by the Trustee from the outstanding Notes not previously called for
redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose Notes are to be redeemed at its registered
address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price (including accrued interest
to the redemption date);
(c) if any Note is being redeemed in part, the
portion of the principal amount of such Note to be redeemed and that,
after the redemption date upon surrender of such Note,
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a new Note or Notes in principal amount equal to the unredeemed portion
shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption shall cease to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed in such notice
or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional. On and after the redemption date, unless the Company defaults in
the payment of the redemption price, interest will cease to accrue on the Notes
or portions thereof called for redemption and all rights of Holders with respect
to such Notes will terminate except for the right to receive payment of the
redemption price upon surrender for redemption.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption, whether or not such
Notes are presented for payment. If a Note is redeemed on or after an interest
record date but on or prior to the related interest payment date, then any
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accrued and unpaid interest shall be paid to the Person in whose name such Note
was registered at the close of business on such record date. If any Note called
for redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest shall be
paid on the unpaid principal, from the redemption date until such principal is
paid, and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes and in Section 4.01
hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note (accompanied by a
notation of the Subsidiary Guarantees duly endorsed by each Guarantor) equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
The Notes shall not be redeemable at the Company's option prior to
October 1, 2001. Thereafter, the Notes shall be subject to redemption at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on October 1 of the years indicated below:
Year Percentage
2001........................................ 105.06%
2002........................................ 103.38%
2003........................................ 101.69%
2004 and thereafter......................... 100.00%
Notwithstanding the foregoing, at any time prior to October 1, 1999,
the Company may redeem up to 35% of the initial principal amount of the Notes
originally issued with the net proceeds of one or more Qualified Equity
Offerings at a redemption price equal to 109.125% of the principal amount of
such Notes, plus accrued and unpaid interest, if any, to the date of redemption;
provided, that at least 65% of the principal amount of Notes originally issued
remains outstanding immediately after the occurrence of any such redemption and
that such redemption occurs within 60 days following the closing of any such
Qualified Equity Offering.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth below under Section 4.10 and Section 4.14 hereof,
the Company shall not be required to make sinking fund or redemption payments
with respect to the Notes.
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SECTION 3.09. ASSET SALE OFFERS.
In the event that the Company shall commence an Asset Sale Offer
pursuant to Section 4.10 hereof, it shall follow the procedures specified below:
The Asset Sale Offer shall remain open for 20 Business Days after the
Commencement Date relating to such Asset Sale Offer, except to the extent
required to be extended by applicable law (as so extended, the "Offer Period").
No later than one Business Day after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount (the "Offer
Amount") of Notes required to be purchased in such Asset Sale Offer pursuant to
Sections 3.02 and 4.10 hereof or, if less than the Offer Amount has been
tendered, all Notes tendered in response to the Asset Sale Offer.
If the Purchase Date is on or after an interest payment record date
and on or before the related interest payment date, any interest accrued to such
Purchase Date shall be paid to the Person in whose name a Note is registered at
the close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
On the Commencement Date of any Asset Sale Offer, the Company shall
send or cause to be sent, by first class mail, a notice to each of the Holders,
with a copy to the Trustee. Such notice, which shall govern the terms of the
Asset Sale Offer, shall contain all instructions and materials necessary to
enable the Holders to tender Notes pursuant to the Asset Sale Offer and shall
state:
(1) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset
Sale Offer shall remain open;
(2) the Offer Amount, the Purchase Price and the Purchase Date;
(3) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Purchase
Price, any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest after the Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address
specified in the notice prior to the close of business on the
Business Day preceding the Purchase Date;
(6) that Holders shall be entitled to withdraw their election if the
Company, depositary or Paying Agent, as the case may be,
receives, not later than the close of business
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on the Business Day preceding the termination of the Offer
Period, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of
the Note the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have the Note
purchased;
(7) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Trustee shall select the
Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only Notes
in denominations of $1,000, or integral multiples thereof, shall
be purchased); and
(8) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
On or before 12:00 p.m. on each Purchase Date, the Company shall
irrevocably deposit with the Trustee or Paying Agent in immediately available
funds the aggregate Purchase Price with respect to a principal amount of Notes
equal to the Offer Amount, together with accrued interest thereon, if any, to be
held for payment in accordance with the terms of this Section 3.09. On the
Purchase Date, the Company shall, to the extent lawful, (i) accept for payment,
on a pro rata basis to the extent necessary, an aggregate principal amount equal
to the Offer Amount of Notes tendered pursuant to the Asset Sale Offer, or if
less than the Offer Amount has been tendered, all Notes or portions thereof
tendered, (ii) deliver or cause the Paying Agent or depositary, as the case may
be, to deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee
an Officers' Certificate stating that such Notes or portions thereof were
accepted for payment by the Company in accordance with the terms of this Section
3.09. The Company, depositary or Paying Agent, as the case may be, shall
promptly (but in any case not later than three Business Days after the Purchase
Date) mail or deliver to each tendering Holder an amount equal to the Purchase
Price with respect to the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee shall authenticate and mail or deliver such new Note, to such Holder,
equal in principal amount to any unpurchased portion of such Holder's Notes
surrendered. Any Note not accepted in the Asset Sale Offer shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce in a newspaper of general circulation the results of the Asset
Sale Offer on the Purchase Date.
The Asset Sale Offer shall be made by the Company in compliance with
all applicable laws, including, without limitation, Regulation 14E of the
Exchange Act and the rules thereunder, to the extent applicable, and all other
applicable federal and state securities laws.
Each purchase pursuant to this Section 3.09 shall be made pursuant to
the provisions of the second paragraph of Section 3.05 hereof to the extent
applicable.
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In the event the amount of Excess Proceeds to be applied to an Asset
Sale Offer would result in the purchase of a principal amount of Notes which is
not evenly divisible by $1,000, the Trustee shall promptly refund to the Company
the portion of such Excess Proceeds that is not necessary to purchase the
immediately lesser principal amount of Notes that is so divisible.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Restricted
Subsidiary, holds as of 10:00 a.m. Eastern Time on the due date money deposited
by the Company in immediately available funds and designated for and sufficient
to pay all principal, premium, if any, and interest then due.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company or any Restricted Subsidiary in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03 hereof.
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SECTION 4.03. REPORTS.
Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all financial information that would be
required to be included in a Form 8-K filed with the SEC if the Company were
required to file such reports. In addition, whether or not required by the rules
and regulations of the SEC, the Company will file a copy of all such information
and reports with the SEC for public availability (unless the SEC will not accept
such a filing) and make such information available to investors who request it
in writing. Notwithstanding anything to the contrary contained herein, the
Trustee shall have no duty to review such documents for purposes of determining
compliance with any provisions of this Indenture.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company and each Restricted Subsidiary has kept,
observed, performed and fulfilled its obligations under this Indenture
(including with respect to any Restricted Payments made during such year, the
basis upon which the calculations required by Section 4.07 hereof were computed,
which calculations may be based on the Company's latest available financial
statements), and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge, the Company and each
Restricted Subsidiary has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of this Indenture (or,
if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company and each Restricted Subsidiary, as the case may be, is taking
or proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company and each Restricted Subsidiary, as the case may be, is taking
or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 hereof shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the
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nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except (i) such as are contested in good faith and by appropriate
proceedings or (ii) the nonpayment of which would not materially adversely
affect the business, condition (financial or otherwise), operations, performance
or properties of the Company and its Subsidiaries, taken as a whole.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
Each of the Company and the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and each of
the Company and the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly: (a) declare or pay any dividend or make
any distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or such
Restricted Subsidiary or dividends or distributions payable to the Company or
any Restricted Subsidiary); (b) purchase, redeem or otherwise acquire or retire
for value any Equity Interests of the Company or any Restricted Subsidiary or
other Affiliate of the Company (other than any such Equity Interests owned by
the Company or any Restricted Subsidiary); (c) purchase, redeem or otherwise
acquire or retire prior to scheduled maturity for value any Indebtedness that is
subordinated in right of payment to the Notes; or (d) make any Investment other
than a Permitted Investment (all such payments and other actions set forth in
clauses (a) through (d) above being collectively referred to as "Restricted
Payments"), unless, at the time of such Restricted Payment:
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(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a
consequence thereof; and
(ii) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the test set forth in
the first paragraph of Section 4.09 hereof; and
(iii) such Restricted Payment, together with the aggregate of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture is less than (x) the
cumulative EBITDA of the Company, minus 1.75 times the cumulative
Consolidated Interest Expense of the Company, in each case for the period
(taken as one accounting period) from June 30, 1996, to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment, plus (y)
the aggregate net Equity Proceeds received by the Company from the
issuance or sale since the date of this Indenture of Equity Interests of
the Company or of debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests or convertible
debt securities sold to a Restricted Subsidiary of the Company and other
than Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (z) $2.0 million.
The foregoing provisions will not prohibit (A) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (B) the redemption, repurchase, retirement or other acquisition or
retirement for value of any Equity Interests of the Company in exchange for, or
with the net cash proceeds of, the substantially concurrent sale (other than to
a Restricted Subsidiary of the Company) of other Equity Interests of the Company
(other than any Disqualified Stock); (C) the defeasance, redemption, repurchase,
retirement or other acquisition or retirement for value of Indebtedness that is
subordinated or pari passu in right of payment to the Notes in exchange for, or
with the net cash proceeds of, a substantially concurrent issuance and sale
(other than to a Restricted Subsidiary of the Company) of Equity Interests of
the Company (other than Disqualified Stock); (D) the defeasance, redemption,
repurchase, retirement or other acquisition or retirement for value of
Indebtedness that is subordinated or pari passu in right of payment to the Notes
in exchange for, or with the net cash proceeds of, a substantially concurrent
issue and sale (other than to the Company or any of its Restricted Subsidiaries)
of Refinancing Indebtedness; (E) the repurchase of any Indebtedness subordinated
or pari passu in right of payment to the Notes at a purchase price not greater
than 101% of the principal amount of such Indebtedness in the event of a Change
of Control in accordance with provisions similar to the covenant set forth in
Section 4.14 hereof, provided that prior to or contemporaneously with such
repurchase the Company has made the Change of Control Offer as provided in such
covenant with respect to the Notes and has repurchased all Notes validly
tendered for payment in connection with such Change of Control Offer; (F) the
prepayment of the Chrysler Notes, together with premium and interest thereon;
(G) the prepayment of $450,000 of junior subordinated notes originally issued by
the Company to First Document Storage, Inc. in connection with a 1990
acquisition, together with interest thereon; and (H) additional payments to
current or former employees or directors of the Company for repurchases of
stock,
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stock options or other equity interests, provided that the aggregate amount of
all such payments under this clause (H) does not exceed $500,000 in any year and
$2.0 million in the aggregate.
The Restricted Payments described in clauses (B), (C), (E) and (H) of
the immediately preceding paragraph will be Restricted Payments that will be
permitted to be taken in accordance with such paragraph but will reduce the
amount that would otherwise be available for Restricted Payments under clause
(iii) of the first paragraph of this section, and the Restricted Payments
described in clauses (A), (D), (F) and (G) of the immediately preceding
paragraph will be Restricted Payments that will be permitted to be taken in
accordance with such paragraph and will not reduce the amount that would
otherwise be available for Restricted Payments under clause (iii) of the first
paragraph of this section.
If an Investment results in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments deemed to have been made as
calculated under the foregoing provision will be reduced by the amount of any
net reduction in such Investment (resulting from the payment of interest or
dividends, loan repayment, transfer of assets or otherwise) to the extent such
net reduction is not included in the Company's EBITDA; provided, however, that
the total amount by which the aggregate amount of all Restricted Payments may be
reduced may not exceed the lesser of (a) the cash proceeds received by the
Company and its Restricted Subsidiaries in connection with such net reduction
and (b) the initial amount of such Investment.
If the aggregate amount of all Restricted Payments calculated under
the foregoing provision includes an Investment in an Unrestricted Subsidiary or
other Person that thereafter becomes a Restricted Subsidiary, such Investment
will no longer be counted as a Restricted Payment for purposes of calculating
the aggregate amount of Restricted Payments. For the purpose of making any
calculations under this Indenture, (a) an Investment will include the fair
market value of the net assets of any Restricted Subsidiary at the time that
such Restricted Subsidiary is designated an Unrestricted Subsidiary and will
exclude the fair market value of the net assets of any Unrestricted Subsidiary
that is designated as a Restricted Subsidiary, (b) any property transferred to
or from an Unrestricted Subsidiary will be valued at fair market value at the
time of such transfer, provided that, in each case, the fair market value of an
asset or property is as determined by the Board of Directors in good faith, and
(c) subject to the foregoing, the amount of any Restricted Payment, if other
than cash, will be determined by the Board of Directors, whose good faith
determination will be conclusive.
The Board of Directors may designate a Restricted Subsidiary to be an
Unrestricted Subsidiary in compliance with Section 4.17 hereof. Upon such
designation, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments made at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this Section 4.07. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
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The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) (i) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits, or (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (b) make loans or advances to the Company or any of its
Restricted Subsidiaries or (c) transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (1) Existing Indebtedness as in
effect on the date of this Indenture, (2) the Credit Agreement as in effect as
of the date of this Indenture, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancing
thereof, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are no more
restrictive in the aggregate with respect to such dividend and other payment
restrictions than those contained in the Credit Agreement as in effect on the
date of this Indenture, (3) this Indenture and the Notes, (4) applicable law,
(5) any instrument governing Indebtedness or Capital Stock of a Person acquired
by the Company or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, provided that the EBITDA of such Person is not taken into account in
determining whether such acquisition was permitted by the terms of this
Indenture, (6) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (7) restrictions
on the transfer of property subject to purchase money or capitalized lease
obligations otherwise permitted by clause (e) of Section 4.09 hereof, or (8)
permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Refinancing Indebtedness are no more restrictive
in the aggregate than those contained in the agreements governing the
Indebtedness being refinanced.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty
or otherwise become directly or indirectly liable with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt) and the Company will not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness and may permit
a Restricted Subsidiary to incur Indebtedness if at the time of such incurrence
and after giving effect thereto the Leverage Ratio would be less than 6.0 to
1.0.
The foregoing limitations will not apply to (a) the incurrence by the
Company or any Restricted Subsidiary of Senior Bank Debt in an aggregate amount
not to exceed $25.0 million at any one time outstanding, (b) the issuance by the
Restricted Subsidiaries of Subsidiary Guarantees, (c) the incurrence by the
Company and its Restricted Subsidiaries of the Existing Indebtedness, (d) the
issuance by the Company of the Notes, (e) the incurrence by the Company and its
Restricted Subsidiaries of Capital Lease Obligations and/or additional
Indebtedness
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constituting purchase money obligations up to an aggregate of $2.5 million at
any one time outstanding, provided that the Liens securing such Indebtedness
constitute Permitted Liens, (f) the incurrence of Indebtedness between (i) the
Company and its Restricted Subsidiaries and (ii) the Restricted Subsidiaries,
(g) Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding, (h) the incurrence
by the Company and its Restricted Subsidiaries of Indebtedness arising out of
letters of credit, performance bonds, surety bonds and bankers' acceptances
incurred in the ordinary course of business up to an aggregate of $2.0 million
at any one time outstanding, (i) the incurrence by the Company and its
Restricted Subsidiaries of Indebtedness consisting of guarantees, indemnities or
obligations in respect of purchase price adjustments in connection with the
acquisition or disposition of assets, including, without limitation, shares of
Capital Stock, and (j) the incurrence by the Company and its Restricted
Subsidiaries of Refinancing Indebtedness issued in exchange for, or the proceeds
of which are used to repay, redeem, defease, extend, refinance, renew, replace
or refund, Indebtedness referred to in clauses (b) through (e) above, and this
clause (j).
SECTION 4.10. ASSET SALES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, (a) sell, lease, convey or otherwise dispose of any assets
(including by way of a Sale and Leaseback Transaction, but excluding a
Qualifying Sale and Leaseback Transaction) other than sales of inventory in the
ordinary course of business (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company will be
governed by the provisions of Section 4.14 hereof and/or the provisions of
Section 5.01 hereof, and not by the provisions of this Section 4.10), or (b)
issue or sell Equity Interests of any of its Restricted Subsidiaries, that, in
the case of either clause (a) or (b) above, whether in a single transaction or a
series of related transactions, (i) have a fair market value in excess of $1.0
million, or (ii) result in Net Proceeds in excess of $1.0 million (each of the
foregoing, an "Asset Sale"), unless (x) the Company (or the Restricted
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by an Officers'
Certificate delivered to the Trustee, and for Asset Sales having a fair market
value or resulting in net proceeds in excess of $5.0 million, evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets sold or otherwise disposed of and (y) at
least 75% of the consideration therefor received by the Company or such
Restricted Subsidiary is in the form of cash or like-kind assets (in each case
as determined in good faith by the Company, evidenced by a resolution of the
Board of Directors and certified by an Officers' Certificate filed with the
Trustee); provided, however, that the amount of (A) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet or in
the notes thereto) of the Company or such Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes or any Subsidiary
Guarantee) that are assumed by the transferee of any such assets and (B) any
notes or other obligations received by the Company or such Restricted Subsidiary
from such transferee that are immediately converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received) or Cash
Equivalents, shall be deemed to be cash for purposes of this provision; and
provided, further, that the 75% limitation referred to in the foregoing clause
(y) shall not apply to any Asset Sale in which the cash portion of the
consideration received therefrom is equal to or greater than what
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the after-tax proceeds would have been had such Asset Sale complied with the
aforementioned 75% limitation. A transfer of assets or issuance of Equity
Interests by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly
Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary will not be deemed to be an Asset Sale.
Within 360 days of any Asset Sale, the Company may, at its option,
apply an amount equal to the Net Proceeds from such Asset Sale either (a) to
permanently reduce Senior Debt, or (b) to an investment in a Restricted
Subsidiary or in another business or capital expenditure or other
long-term/tangible assets, in each case, in the same or a similar line of
business as the Company or any of its Restricted Subsidiaries was engaged in on
the date of this Indenture or in businesses similar or reasonably related
thereto. Pending the final application of any such Net Proceeds, the Company may
temporarily reduce Senior Bank Debt or otherwise invest such Net Proceeds in any
manner that is not prohibited by this Indenture. Any Net Proceeds from such
Asset Sale that are not applied or invested as provided in the first sentence of
this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5.0 million, the Company shall make
an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase, in
accordance with the procedures set forth in this Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
An Asset Sale Offer shall be made pursuant to the provisions of
Section 3.09 hereof. No later than the date which is five Business Days after
the date on which the aggregate amount of Excess Proceeds exceeds $5 million,
the Company shall notify the Trustee of such Asset Sale Offer and provide the
Trustee with an Officers' Certificate setting forth the calculations used in
determining the amount of Net Proceeds to be applied to the purchase of
Securities. The Company shall commence or cause to be commenced the Asset Sale
Offer on a date no later than 15 Business Days after such notice (the
"Commencement Date").
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with a non-Affiliated Person and (b) the Company delivers
to the Trustee (i) with respect to any Affiliate Transaction involving aggregate
payments in excess of $1.0 million, a resolution of the Board of Directors set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (a)
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above and such Affiliate Transaction is approved by a majority of the
disinterested members of the Board of Directors and (ii) with respect to any
Affiliate Transaction involving aggregate payments in excess of $5.0 million, an
opinion as to the fairness to the Company or such Restricted Subsidiary from a
financial point of view issued by an investment banking firm of national
standing; provided, however, that (A) any employment agreement entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such Restricted
Subsidiary, (B) transactions between or among the Company and/or its Restricted
Subsidiaries, (C) transactions permitted by the provisions of Section 4.07
hereof and (D) the grant of stock, stock options or other equity interests to
employees and directors of the Company in accordance with duly adopted Company
stock grant, stock option and similar plans, in each case, shall not be deemed
Affiliate Transactions; and further provided that (1) the provisions of clause
(b) shall not apply to sales of inventory by the Company or any Restricted
Subsidiary to any Affiliate in the ordinary course of business and (2) the
provisions of clause (b)(ii) shall not apply to loans or advances to the Company
or any Restricted Subsidiary from, or equity investments in the Company or any
Restricted Subsidiary by, any Affiliate to the extent permitted by Section 4.09
hereof.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than a Permitted Lien) upon any property or assets now
owned or hereafter acquired, or any income, profits or proceeds therefrom, or
assign or otherwise convey any right to receive income therefrom, unless (a) in
the case of any Lien securing any Indebtedness that is subordinate to the Notes,
the Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Lien and (b) in the case of any other Lien, the Notes
are equally and ratably secured with the obligation or liability secured by such
Lien.
SECTION 4.13. ADDITIONAL SUBSIDIARY GUARANTEES.
If any entity (other than an Excluded Restricted Subsidiary) shall
become a Restricted Subsidiary after the date of this Indenture, then such
Restricted Subsidiary shall execute a Subsidiary Guarantee and deliver an
opinion of counsel with respect thereto, in accordance with the terms of this
Indenture.
No Restricted Subsidiary shall consolidate with or merge with or into
(whether or not such Restricted Subsidiary is the surviving Person), another
Person (other than the Company) whether or not affiliated with such Restricted
Subsidiary unless (a) subject to the provisions of the following paragraph, the
Person formed by or surviving any such consolidation or merger (if other than
such Restricted Subsidiary) assumes all the obligations of such Restricted
Subsidiary under its Subsidiary Guarantee, if any, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee; (b)
immediately after giving effect to such transaction, no Default or Event of
Default exists; and (c) such Restricted Subsidiary, or any Person formed by or
surviving any such consolidation or merger, would be permitted to incur,
immediately after giving effect to such transaction, at least $1.00 of
additional Indebtedness pursuant to Section 4.09 hereof.
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In the event of (a) a sale or other disposition of all of the assets
of any Guarantor by way of merger, consolidation or otherwise, (b) a sale or
other disposition of all of the capital stock of any Guarantor, or (c) the
designation of a Guarantor as an Unrestricted Subsidiary in accordance with the
terms of Section 4.17, then such Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all of the
capital stock of such Guarantor, or in the event of the designation of such
Guarantor as an Unrestricted Subsidiary) or the corporation acquiring the
property (in the event of a sale or other disposition of all of the assets of
such Guarantor) shall be released and relieved of any obligations under its
Subsidiary Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of this
Indenture.
SECTION 4.14. OFFER TO PURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, to but excluding the date of purchase (the "Change of Control
Payment"). Within 30 calendar days following any Change of Control, the Company
will mail a notice to each Holder stating:
(a) that the Change of Control Offer is being made
pursuant to this Section 4.14 and that all Notes tendered will be accepted
for payment;
(b) the purchase price and the purchase date, which
will be no earlier than 30 calendar days nor later than 60 calendar days
from the date such notice is mailed (the "Change of Control Payment
Date");
(c) that any Note not tendered will continue to
accrue interest;
(d) that, unless the Company defaults in the payment
of the Change of Control Payment, all Notes accepted for payment pursuant
to the Change of Control Offer will cease to accrue interest on and after
the Change of Control Payment Date;
(e) that Holders electing to have any Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address
specified in such notice prior to the close of business on the fifth
Business Day preceding the Change of Control Payment Date;
(f) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Notes delivered for
purchase, and a statement that such Holder is withdrawing his election to
have such Notes purchased; and
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(g) that Holders whose Notes are being purchased only
in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased portion
must be equal to $1,000 in principal amount or an integral multiple
thereof.
The Company will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable to the repurchase of the Notes in connection
with a Change of Control.
On the Change of Control Payment Date, the Company will, to the
extent lawful, (a) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (b) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (c) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
Notes or portions thereof tendered to the Company. The Paying Agent will
promptly mail to each Holder of Notes so accepted the Change of Control Payment
for such Notes, and the Trustee will promptly authenticate and mail to each
Holder a new Note equal in principal amount to any unpurchased portion of the
Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. Prior to complying
with the provisions of this Section 4.14, but in any event within 90 calendar
days following a Change of Control, the Company shall either repay all
outstanding Senior Debt or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the repurchase of Notes
required by this Section 4.14. The Company shall publicly announce in The Wall
Street Journal, or if no longer published, a national newspaper of general
circulation the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
SECTION 4.15. CORPORATE EXISTENCE.
Subject to Article 5 and Article 11 hereof, as the case may be, the
Company and each of the Restricted Subsidiaries shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of their
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company, any such Restricted
Subsidiary or any such Subsidiary, as the case may be, and (ii) the rights
(charter and statutory), licenses and franchises of the Company, the Restricted
Subsidiaries and their respective Subsidiaries; provided, however, that the
Company and the Restricted Subsidiaries shall not be required to preserve any
such right, license or franchise, or the corporate, partnership or other
existence of any of their respective Subsidiaries, if an officer of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company, the Restricted Subsidiaries and their
Subsidiaries, taken as a whole and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.16. CERTAIN SENIOR SUBORDINATED DEBT.
Notwithstanding the provisions of Section 4.09 hereof, (a) the
Company shall not incur any Indebtedness that is subordinated or junior in right
of payment to any Senior Debt of the
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Company and senior in any respect in right of payment to the Notes, and (b)
the Company shall not permit any Restricted Subsidiary to incur any Indebtedness
that is subordinated or junior in right of payment to its Senior Debt and senior
in any respect in right of payment to its Subsidiary Guarantee.
SECTION 4.17. DESIGNATION OF UNRESTRICTED SUBSIDIARIES.
The Board of Directors may designate any Subsidiary (including any
Restricted Subsidiary or any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary so long as: (i) neither the Company nor any Restricted
Subsidiary is directly or indirectly liable for any Indebtedness of such
Subsidiary; (ii) no default with respect to any Indebtedness of such Subsidiary
would permit (upon notice, lapse of time or otherwise) any holder of any other
Indebtedness of the Company or any Restricted Subsidiary to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; (iii) any Investment in such Subsidiary
deemed to be made as a result of designating such Subsidiary an Unrestricted
Subsidiary will not violate the provisions of Section 4.07 hereof; (iv) neither
the Company nor any Restricted Subsidiary has a contract, agreement,
arrangement, understanding or obligation of any kind, whether written or oral,
with such Subsidiary other than (A) those that might be obtained at the time
from Persons who are not Affiliates of the Company or (B) administrative, tax
sharing and other ordinary course contracts, agreements, arrangements and
understandings or obligations entered into in the ordinary course of business;
and (v) neither the Company nor any Restricted Subsidiary has any obligation to
subscribe for additional shares of Capital Stock or other Equity Interests in
such Subsidiary, or to maintain or preserve such Subsidiary's financial
condition or to cause such Subsidiary to achieve certain levels of operating
results, other than as permitted under Section 4.07 hereof. Notwithstanding the
foregoing, the Company may not designate as an Unrestricted Subsidiary any
Subsidiary which, on the date of this Indenture, is a Significant Subsidiary,
and may not sell, transfer or otherwise dispose of any properties or assets of
any such Significant Subsidiary to an Unrestricted Subsidiary, other than in the
ordinary course of business.
The Board of Directors may designate any Unrestricted Subsidiary as a
Restricted Subsidiary; provided that such designation will be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation will only be
permitted if (i) such Indebtedness is permitted under Section 4.09 hereof and
(ii) no Default or Event of Default would occur as a result of such designation.
SECTION 4.18. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale and Leaseback Transaction unless (a) the consideration
received in such Sale and Leaseback Transaction is at least equal to the fair
market value of the property sold, as determined by a resolution of the Board of
Directors, and (b) the Company or such Restricted Subsidiary could incur the
Attributable Indebtedness in respect of such Sale and Leaseback Transaction in
compliance with Section 4.09 hereof.
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ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another Person unless (a) the
Company is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (b) the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the obligations
of the Company under the Notes and this Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (c) immediately
after such transaction no Default or Event of Default exists; and (d) the
Company or any Person formed by or surviving any such consolidation or merger,
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made will, at the time of such transaction and after
giving pro forma effect thereto, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of Section 4.09 hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company or the Company and its Subsidiaries on a consolidated basis in
accordance with Section 5.01 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
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ARTICLE 6
CERTAIN DEFAULT PROVISIONS
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company and the Guarantors default in the
payment of interest on the Notes (whether or not prohibited by the
subordination provisions of Article 10 or Article 11 hereof, as the case
may be) when the same becomes due and payable and such default continues
for a period of 30 days;
(b) the Company and the Guarantors default in the
payment of principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of Article 10 or Article 11
hereof, as the case may be) when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to
purchase) or otherwise;
(c) the Company fails to comply with the provisions
of Section 4.14 hereof;
(d) the Company or the Guarantors fail to comply with
any of their other respective agreements or covenants in, or provisions
of, the Notes, the Subsidiary Guarantees or this Indenture and the Default
continues for the period and after the notice specified below;
(e) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or
any of its Restricted Subsidiaries (or the payment of which is Guaranteed
by the Company or any of its Restricted Subsidiaries), whether such
Indebtedness or Guarantee now exists or shall be created hereafter if (i)
such default results in the acceleration of such Indebtedness prior to its
express maturity or shall constitute a default in the payment of such
Indebtedness at final maturity of such Indebtedness and (ii) the principal
amount of such Indebtedness that has been accelerated or not paid at
maturity, together with the principal amount of any other Indebtedness
that has been accelerated or not paid at maturity, exceeds $5.0 million;
(f) a final judgment or final judgments for the
payment of money are entered by a court or courts of competent
jurisdiction against the Company or any of its Restricted Subsidiaries and
such judgments remain unpaid, undischarged or unstayed for a period of 60
days, provided that the aggregate of all such unpaid, undischarged or
unstayed judgments exceeds $5.0 million;
(g) except as otherwise permitted hereunder, any
Subsidiary Guarantee issued by a Guarantor shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to
be in full force and effect or any Guarantor (or its successors or
assigns), or any Person acting on behalf of any Guarantor (or its
successors or
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assigns), shall deny or disaffirm its obligations in writing under its
Subsidiary Guarantee;
(h) the Company or any of its Restricted Subsidiaries
that is a Significant Subsidiary:
(i) commences a voluntary case,
(ii) consents to the entry of an order for
relief against it in an involuntary case,
(iii)consents to the appointment of a Custodian
of it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit
of its creditors, or
(v) admits in writing its inability generally to
pay its debts as the same
become due,
in each case, pursuant to or within the meaning of any Bankruptcy
Law; or
(i) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(i) is for relief against the Company or any
Restricted Subsidiary that is a Significant Subsidiary of the Company
in an involuntary case,
(ii) appoints a Custodian of the Company or any
Restricted Subsidiary that is a Significant Subsidiary of the Company
or for all or substantially all of the property of the Company or any
Restricted Subsidiary that is a Significant Subsidiary of the
Company, or
(iii) orders the liquidation of the Company or
any Restricted Subsidiary that is a Significant Subsidiary of the
Company,
and such order or decree remains unstayed and in effect for 60 consecutive
days.
A Default under clause (d) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in principal amount
of the then outstanding Notes notify the Company and the Trustee, of the Default
and the Company does not cure the Default within 60 days after receipt of the
notice. The notice must specify the Default, demand that it be remedied and
state that the notice is a "Notice of Default."
In the case of any Event of Default pursuant to the provisions of
this Section 6.01 occurring by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding
payment of the premium that the Company would
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have had to pay if the Company then had elected to redeem the Notes pursuant to
Section 3.07 hereof, an equivalent premium shall also become and be immediately
due and payable to the extent permitted by law upon acceleration of the Notes as
provided below, anything in this Indenture or in the Notes to the contrary
notwithstanding. If an Event of Default occurs prior to October 1, 2004 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding the prohibition on redemption of
the Notes prior to October 1, 2004 pursuant to Section 3.07 hereof, then the
premium payable for purposes of this paragraph for each of the years beginning
on October 1 of the years set forth below shall be as set forth in the following
table expressed as a percentage of the amount that would otherwise be due but
for the provisions of this sentence, plus accrued interest, if any, to the date
of payment:
Year Percentage
---- ----------
1996...................................... 110.13%
1997...................................... 109.11%
1998...................................... 108.10%
1999...................................... 107.09%
2000...................................... 106.08%
2001...................................... 150.06%
2002...................................... 103.38%
2003...................................... 101.69%
2004...................................... 100.00%
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (h)(i) through (h)(iv) and (i) of Section 6.01 hereof relating to the
Company or any Significant Subsidiary) occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in principal amount of the
then outstanding Notes by notice to the Company and the Trustee may declare the
unpaid principal of and any accrued interest on all the Notes to be due and
payable. Upon such declaration the principal and interest shall be due and
payable immediately (together with the premium referred to in Section 6.01
hereof, if applicable); provided, however, that if any Obligation with respect
to Senior Bank Debt is outstanding pursuant to the Credit Agreement upon a
declaration of acceleration of the Notes, the principal, premium, if any, and
interest on the Notes will not be payable until the earlier of (1) the day which
is five Business Days after written notice of acceleration is received by the
Company and the Credit Agent, and (2) the date of acceleration of the
Indebtedness under the Credit Agreement. If an Event of Default specified in
clauses (h)(i) through (h)(iv) or (i) of Section 6.01 hereof relating to the
Company or any Significant Subsidiary occurs, such an amount shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder. In the event of a declaration of
acceleration of the Notes because an Event of Default has occurred and is
continuing as a result of the acceleration of any Indebtedness described in
Section 6.01(e) hereof, the declaration of acceleration of the Notes shall be
automatically annulled if the holders of any Indebtedness described in Section
6.01(e) have rescinded the declaration of acceleration in respect of such
Indebtedness within 30 days of the date of such declaration and if (a) the
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annulment of the acceleration of the Notes would not conflict with any judgment
or decree of a competent jurisdiction, and (b) all existing Events of Default,
except non-payment of principal or interest on the Notes that became due solely
because of the acceleration of the Notes, have been cured or waived.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, or interest on, the Notes
(including in connection with an offer to purchase) (provided, however, that the
Holders of a majority in aggregate principal amount of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration). Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes if, and only if:
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(a) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default or the Trustee receives such
notice from the Company;
(b) the Holders of at least 25% in principal amount
of the then outstanding Notes make a written request to the Trustee to
pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer
and, if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer and, if
requested, the provision of indemnity; and
(e) during such 60-day period the Holders of a
majority in principal amount of the then outstanding Notes do not give the
Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note. Nothing contained in this Section 6.06 shall affect the right of a Holder
of a Note to sue for enforcement of any overdue payment thereon.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Subject to Articles 10 and 11 hereof, notwithstanding any other
provision of this Indenture, the right of any Holder of a Note to receive
payment of principal of, premium, if any, and interest on the Note, on or after
the respective due dates expressed in the Note (including in connection with a
Purchase Offer), or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium, if any, and interest remaining unpaid on the
Notes and interest on overdue principal and, to the extent lawful, interest and
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes, including the Guarantors), its creditors
or its
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property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for
amounts due under Section 7.07 hereof, including payment of all
compensation, expense and liabilities incurred, and all advances made, by
the Trustee and the costs and expenses of collection;
Second: to the holders of Senior Debt of the Company
or the Restricted Subsidiaries, as the case may be, to the extent required
by Article 10 or Article 11 hereof, as applicable;
Third: to Holders of Notes for amounts due and unpaid
on the Notes for principal, premium, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for principal, premium, if any, and interest,
respectively; and
Fourth: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its
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discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07
hereof, or a suit by Holders of more than 10% in principal amount of the then
outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined
solely by the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iii)the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
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(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(g) Except with respect to Sections 4.01 and 4.04 herein, the Trustee
shall have no duty to inquire as to the performance of the Company's covenants
in Article 4 hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 6.01(a), 6.01(b), 4.01 and 4.04 herein or (ii)
any Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
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SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Restricted Subsidiary or any Affiliate of the Company or any Restricted
Subsidiary with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to the Holders of the Notes a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA S 313(a) (but if no event described in TIA
S 313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA S 313(b)(2).
The Trustee shall also transmit by mail all reports as required by TIA S 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA S 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
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SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company and the Restricted Subsidiaries shall pay to the Trustee
from time to time reasonable compensation for its acceptance of this Indenture
and services hereunder. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Company and the
Restricted Subsidiaries shall reimburse the Trustee promptly upon request for
all reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company and the Restricted Subsidiaries shall indemnify the
Trustee against any and all losses, liabilities or expenses incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, including the costs and expenses of enforcing this
Indenture against the Company and the Restricted Subsidiaries (including this
Section 7.07), and defending itself against any claim (whether asserted by the
Company, any Restricted Subsidiary or any Holder or any other person) or
liability in connection with the exercise or performance of any of its powers or
duties hereunder, except to the extent any such loss, liability or expense may
be attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company and the
Restricted Subsidiaries of their obligations hereunder. The Company and the
Restricted Subsidiaries shall defend the claim and the Trustee shall cooperate
in the defense. The Trustee may have separate counsel and the Company and the
Restricted Subsidiaries shall pay the reasonable fees and expenses of such
counsel. The Company and the Restricted Subsidiaries need not pay for any
settlement made without their consent, which consent shall not be unreasonably
withheld.
The obligations of the Company and the Restricted Subsidiaries under
this Section 7.07 shall survive the satisfaction and discharge of this
Indenture.
To secure the Company's and the Restricted Subsidiaries' payment
obligations in this Section, the Trustee shall have a Lien prior to the Notes on
all money or property held or collected by the Trustee, except that held in
trust to pay principal and interest on particular Notes. Such Lien shall survive
the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA S 313(b)(2) to
the extent applicable.
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SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10
hereof;
(b) the Trustee is adjudged a bankrupt or an
insolvent or an order for relief is entered with respect to the Trustee
under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, any
Restricted Subsidiary, or the Holders of Notes of at least 10% in principal
amount of the then outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10 hereof, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's and the Restricted Subsidiaries' obligations
under Section 7.07 hereof shall continue for the benefit of the retiring
Trustee.
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SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $50 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA S 310(a)(1), (2) and (5). The Trustee is subject to TIA S
310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA S 311(a), excluding any creditor
relationship listed in TIA S 311(b). A Trustee who has resigned or been removed
shall be subject to TIA S 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, each of the Company and the Guarantors, if any,
shall, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, be deemed to have been discharged from its obligations with respect to
all outstanding Notes and Subsidiary Guarantees on the date the conditions set
forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose,
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Notes, which
shall thereafter be deemed to be "outstanding" only for the purposes of Section
8.05 hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all its other obligations under such Notes and this
Indenture (and the Trustee, on demand of and at the expense of the
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Company, shall execute proper instruments acknowledging the same), except for
the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b) the Company's
and Guarantors' obligations with respect to such Notes under Article 2 and
Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of
the Trustee hereunder and the Company's and the Guarantors' obligations in
connection therewith and (d) this Article Eight. Subject to compliance with this
Article Eight, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, each of the Company and the Guarantors, if any,
shall, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, be released from its obligations under the covenants contained in
Sections 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17
and Article V hereof with respect to the outstanding Notes and Subsidiary
Guarantees on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture, such Notes and the Subsidiary
Guarantees, if any, shall be unaffected thereby. In addition, upon the Company's
exercise under Section 8.01 hereof of the option applicable to this Section 8.03
hereof, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, Sections 6.01(c) through 6.01(f) and Section 6.01(h) and 6.01(i) hereof
shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the
Trustee, in trust, for the benefit of the Holders, cash in United States
dollars, non-callable Government Securities, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally
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recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest on the outstanding Notes on the stated
date for payment thereof or on the applicable redemption date, as the case
may be, of such principal or installment of principal of, premium, if any,
or interest on the outstanding Notes;
(b) in the case of an election under Section 8.02
hereof, the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States (which counsel may be an employee of the
Company or any Subsidiary of the Company) reasonably acceptable to the
Trustee confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the
Issuance Date, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03
hereof, the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States (which counsel may be an employee of the
Company or any Subsidiary of the Company) reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or, insofar as
Sections 6.01(h) and 6.01(i) hereof are concerned, at any time in the
period ending on the 91st day after the date of deposit (or greater period
of time in which any such deposit of trust funds may remain subject to
Bankruptcy Law insofar as those apply to the deposit by the Company);
(e) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default
under, any material agreement or instrument (other than this Indenture) to
which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee
an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over any other
creditors of the Company with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others; and
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(h) the Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company and the Guarantors shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 hereof or
the principal and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest, if any, on any Note and remaining unclaimed for two years
after such principal, and premium, if any, or interest, if any, have become due
and payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in The New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or
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publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02
or 8.03 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's and the Restricted Subsidiaries'
obligations under this Indenture, the Notes and the Subsidiary Guarantees shall
be revived and reinstated as though no deposit had occurred pursuant to Section
8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted
to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the
case may be; provided, however, that, if the Company and the Restricted
Subsidiaries make any payment of principal of, premium, if any, or interest, if
any, on any Note following the reinstatement of its obligations, the Company and
the Restricted Subsidiaries shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture or the Notes
without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition
to or in place of certificated Notes;
(c) to provide for the assumption of the Company's or
any Guarantor's obligations to the Holders of the Notes in the case of a
merger or consolidation pursuant to Article Five or Article 11 hereof, as
the case may be;
(d) to make any change that would provide any
additional rights or benefits to the Holders of the Notes (including
providing for additional Subsidiary Guarantees pursuant to Section 4.13
hereof) or that does not materially adversely affect the legal rights
hereunder of any Holder of the Note; or
(e) to comply with requirements of the SEC in order
to effect or maintain the qualification of this Indenture under the TIA.
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Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture or the Notes
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and
6.07 hereof, any existing Default or Event of Default (other than a Default or
Event of Default in the payment of the principal of, premium, if any, or
interest on the Notes, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of this Indenture or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence reasonably
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company and the Guarantors in the
execution of such amended or supplemental Indenture unless such amended or
supplemental Indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company or any Guarantor with any
provision of this Indenture, the Note or the Subsidiary Guarantees. However,
without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
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(a) reduce the principal amount of Notes whose
Holders must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed
maturity of any Note or alter any of the provisions with respect to the
redemption of the Notes in a manner adverse to the Holders of the Notes;
(c) reduce the rate of or change the time for payment
of interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the
payment of principal of or premium, if any, or interest on the Notes
(except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the then outstanding
Notes and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that
stated in the Notes;
(f) make any change in the provisions of this
Indenture relating to waivers of past Defaults or the rights of Holders of
Notes to receive payments of principal of or premium, if any, or interest
on the Notes;
(g) waive a redemption payment with respect to any
Note (other than a payment required by Section 4.10 or Section 4.14
hereof);
(h) except pursuant to Article 4, Article 8 and
Article 11 hereof, release any Guarantor from its obligations under its
Subsidiary Guarantee, or change any Subsidiary Guarantee in any manner
that would materially adversely affect the Holders; or
(i) make any change in Section 6.04 or 6.07 hereof or
in the foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
(accompanied by a notation of the Subsidiary Guarantees duly endorsed by the
Restricted Subsidiaries) that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company and the Guarantors may not sign an amendment or supplemental
Indenture until the Board of Directors of the Company and each of the Guarantors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company, the Trustee and each Holder by accepting a Note agrees,
that the indebtedness and obligations evidenced by the Note are subordinated in
right of payment, to the extent and in the manner provided in this Article, to
the prior payment in full, in cash, of all Obligations with respect to Senior
Debt of the Company (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt of the Company.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any payment or distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or any marshaling of the
Company's assets and liabilities:
(1) holders of Senior Debt of the Company shall be
entitled to receive payment in full in cash of all Obligations due in
respect of such Senior Debt of the Company (including interest after the
commencement of any such proceeding at the rate specified in the
applicable Senior Debt of the Company, whether or not allowed as a claim
in such
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proceeding) before Holders shall be entitled to receive any payment or
distribution from the Company with respect to the Notes; and
(2) until all Obligations with respect to Senior Debt
of the Company (as provided in subsection (1) above) are paid in full in
cash, any payment or distribution to which the Trustee or any Holder would
be entitled but for this Article shall be made to holders of Senior Debt
of the Company, as their interests may appear.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company may not make any payment or distribution upon or in
respect of the Notes, including, without limitation, by way of set-off or
otherwise, or redeem (or make a deposit in redemption of), defease or acquire
any of the Notes, for cash, properties or securities if:
(i) a default in the payment of any principal,
premium, if any, or interest or other Obligations (a "Payment Default")
with respect to Senior Debt of the Company occurs and is continuing; or
(ii) a default (other than a Payment Default) or any
event that, after notice or passage of time would become a default (a
"Non-Monetary Default"), on Senior Debt of the Company occurs and is
continuing that then permits holders of the Senior Debt of the Company to
accelerate its maturity and the Trustee receives a notice of the default
(a "Payment Blockage Notice") from a Person who may give it pursuant to
Section 10.11 hereof. Any number of such Payment Blockage Notices may be
given, provided, however, that (i) not more than one Payment Blockage
Notice may be commenced during any period of 360 consecutive days and (ii)
any Non-Monetary Default that existed or was continuing on the date of
delivery of any such notice to the Trustee (to the extent the holder of
Designated Senior Debt, or such trustee or agent, giving such Payment
Blockage Notice had knowledge of the same) shall not be the basis for a
subsequent Payment Blockage Notice, unless such default has been cured or
waived for a period of not less than 90 days.
The Company may and shall resume payments on and distributions in
respect of the Notes and all Obligations with respect thereto, and may acquire
such Notes or Obligations upon the earlier of:
(1) in the case of a Payment Default, the date upon
which such default is cured or waived, or
(2) in the case of a Non-Monetary Default, on the
earlier of the date on which such Non-Monetary Default is cured or waived
or 179 days after the date on which the applicable Payment Blockage Notice
is received, if the maturity of such Senior Debt of the Company has not
been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time thereof.
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SECTION 10.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify Representatives of the holders of
Senior Debt of the Company of the acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives from the Company
any payment of any Obligations with respect to the Notes at a time when the
Trustee or such Holder, as applicable, has actual knowledge that such payment is
prohibited by Section 10.02 or 10.03 hereof, such payment shall be held by the
Trustee or such Holder in trust for the benefit of, and shall be paid forthwith
over and delivered upon written request to, the holders of Senior Debt of the
Company, as their interests may appear, or their Representative under the
indenture or other agreement (if any) pursuant to which Senior Debt of the
Company may have been issued, as their respective interests may appear, for
application to the payment of all Obligations with respect to Senior Debt of the
Company remaining unpaid to the extent necessary to pay such Obligations in full
in accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt of the Company.
With respect to the holders of Senior Debt of the Company, the
Trustee undertakes to perform only such obligations on the part of the Trustee
as are specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt of the Company shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Debt of the Company, and shall
not be liable to any such holders if the Trustee shall pay over or distribute to
or on behalf of Holders or the Company or any other Person money or assets to
which any holders of Senior Debt of the Company shall be entitled by virtue of
this Article 10, except if such payment is made as a result of the willful
misconduct or gross negligence of the Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt of the
Company as provided in this Article.
SECTION 10.07. SUBROGATION.
After all Obligations with respect to Senior Debt of the Company are
paid in full, in cash, and until the Notes are paid in full, Holders shall be
subrogated (equally and ratably with all other Indebtedness pari passu with the
Notes) to the rights of holders of Senior Debt of the Company to receive
distributions applicable to Senior Debt of the Company to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt of the Company. A distribution made under this Article to holders
of Senior Debt of the
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Company that otherwise would have been made to Holders is not, as between the
Company and Holders, a payment by the Company on the Notes.
SECTION 10.08. RELATIVE RIGHTS.
This Article defines the relative rights of Holders and holders of
Senior Debt of the Company. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and
creditors of the Company other than their rights in relation to holders of
Senior Debt of the Company; or
(3) prevent the Trustee or any Holder from exercising
its available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt of the Company to receive
distributions and payments otherwise payable to Holders.
If the Company fails because of this Article 10 to pay principal of,
premium or interest on a Note on the due date, the failure is still a Default or
Event of Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt of the Company to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt of the Company, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt of the Company and other
Indebtedness of the Company, the amount or amounts thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
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SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least one Business Day prior to the date of such
payment a Payment Blockage Notice. Only the holders or the Representative of
holders of Designated Senior Debt of the Company may give a Payment Blockage
Notice. Nothing in this Article 10 shall impair the claims of, or payments to,
the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt of the Company with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
this Article 10, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of the
time to file such claim, the Representatives of the Senior Debt of the Company
are hereby authorized to file an appropriate claim for and on behalf of the
Holders of the Notes.
SECTION 10.13. AMENDMENTS.
The provisions of this Article 10 shall not be amended or
modified without the written consent of the holders of all Senior Debt of the
Company.
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEE.
Each Subsidiary that is a signatory hereto and each
Restricted Subsidiary of the Company which in accordance with Section 4.13
hereof is required to guarantee the obligations of the Company under the Notes
(each, a "Guarantor"), upon execution of a counterpart of this Indenture, hereby
jointly and severally unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee irrespective of the validity or
enforceability of this Indenture, the Notes or the obligations of the Company
under this Indenture or the Notes, that: (i) the principal of and interest on
the Notes will be paid in full when due, whether at the
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maturity or interest payment or mandatory redemption date, by acceleration, call
for redemption or otherwise, and interest on the overdue principal of and
interest, if any, on the Notes and all other obligations of the Company to the
Holders or the Trustee under this Indenture or the Notes will be promptly paid
in full or performed, all in accordance with the terms of this Indenture and the
Notes; and (ii) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, they will be paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed for whatever reason, each Guarantor will be obligated to pay the
same whether or not such failure to pay has become an Event of Default which
could cause acceleration pursuant to Section 6.02 hereof. Each Guarantor agrees
that this is a guarantee of payment not a guarantee of collection.
Each Guarantor hereby agrees that its obligations with regard
to this Subsidiary Guarantee shall be joint and several, unconditional,
irrespective of the validity or enforceability of the Notes or the obligations
of the Company under this Indenture, the absence of any action to enforce the
same, the recovery of any judgment against the Company or any other obligor with
respect to this Indenture, the Notes or the obligations of the Company under
this Indenture or the Notes, any action to enforce the same or any other
circumstances (other than complete performance) which might otherwise constitute
a legal or equitable discharge or defense of a Guarantor. Each Guarantor
further, to the extent permitted by law, waives and relinquishes all claims,
rights and remedies accorded by applicable law to guarantors and agrees not to
assert or take advantage of any such claims, rights or remedies, including but
not limited to: (a) any right to require the Trustee, the Holders or the Company
(each, a "Benefitted Party") to proceed against the Company or any other Person
or to proceed against or exhaust any security held by a Benefitted Party at any
time or to pursue any other remedy in any Benefitted Party's power before
proceeding against such Guarantor; (b) the defense of the statute of limitations
in any action hereunder or in any action for the collection of any Indebtedness
or the performance of any obligation hereby guaranteed; (c) any defense that may
arise by reason of the incapacity, lack of authority, death or disability of any
other Person or the failure of a Benefitted Party to file or enforce a claim
against the estate (in administration, bankruptcy or any other proceeding) of
any other Person; (d) demand, protest and notice of any kind including but not
limited to notice of the existence, creation or incurring of any new or
additional Indebtedness or obligation or of any action or non-action on the part
of such Guarantor, the Company, any Benefitted Party, any creditor of such
Guarantor, the Company or on the part of any other Person whomsoever in
connection with any Indebtedness or obligations hereby guaranteed; (e) any
defense based upon an election of remedies by a Benefitted Party, including but
not limited to an election to proceed against such Guarantor for reimbursement;
(f) any defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in other respects
more burdensome than that of the principal; (g) any defense arising because of a
Benefitted Party's election, in any proceeding instituted under Bankruptcy Law,
of the application of 11 U.S.C. Section 1111(b)(2); or (h) any defense based on
any borrowing or grant of a security interest under 11 U.S.C. Section 364. Each
Guarantor hereby covenants that its Subsidiary Guarantee will not be discharged
except by complete performance of the obligations contained in its Subsidiary
Guarantee and this Indenture.
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If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or any Guarantor, or any Custodian
acting in relation to either the Company or such Guarantor, any amount paid by
the Company or such Guarantor to the Trustee or such Holder, the applicable
Subsidiary Guarantees, to the extent theretofore discharged, shall be reinstated
and be in full force and effect. Each Guarantor agrees that it will not be
entitled to any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
Each Guarantor further agrees that, as between such Guarantor,
on the one hand, and the Holders and the Trustee, on the other hand, (i) the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Section 6.02 hereof for the purposes of this Subsidiary Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration as to the Company or any other obligor on the Notes of the
obligations guaranteed hereby, and (ii) in the event of any declaration of
acceleration of those obligations as provided in Section 6.02 hereof, those
obligations (whether or not due and payable) will forthwith become due and
payable by such Guarantor for the purpose of this Subsidiary Guarantee.
SECTION 11.02. SUBORDINATION.
Each Guarantor, the Trustee, and each Holder by accepting a
Note agrees, that the Indebtedness evidenced by the Subsidiary Guarantees is
subordinated in right of payment, to the extent and in the manner provided in
this Article 11, to the prior payment in full, in cash, of all Obligations with
respect to Senior Debt of such Guarantor (whether outstanding on the date hereof
or hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Senior Debt of such
Guarantor.
SECTION 11.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any payment or distribution to creditors of any Guarantor
in a liquidation or dissolution of such Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to such
Guarantor or its property, in an assignment for the benefit of creditors or any
marshaling of such Guarantor's assets and liabilities:
(1) holders of Senior Debt of such Guarantor shall be
entitled to receive payment in full in cash of all Obligations due in
respect of such Senior Debt of such Guarantor (including interest after
the commencement of any such proceeding at the rate specified in the
applicable Senior Debt of such Guarantor, whether or not allowed as a
claim in such proceeding) before the Holders shall be entitled to receive
any payment or distribution from the Guarantor with respect to such
Guarantor's Subsidiary Guarantee; and
(2) until all Obligations with respect to Senior Debt
of such Guarantor (as provided in subsection (1) above) are paid in full
in cash, any payment or distribution to which the Trustee or any Holder
would be entitled but for this Article shall be made to holders of Senior
Debt of such Guarantor, as their interests may appear.
SECTION 11.04. DEFAULT ON SENIOR DEBT OF THE GUARANTOR.
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No Guarantor shall make any payment or distribution upon or in
respect of the Notes or its Subsidiary Guarantee, including, without limitation,
by way of set-off or otherwise, or redeem (or make a deposit in redemption of),
defease or acquire any of the Notes, for cash, properties or securities if:
(i) a Payment Default with respect to Senior
Debt of such Guarantor occurs and is continuing; or
(ii) a Non-Monetary Default on Senior Debt
of such Guarantor occurs and is continuing that then permits holders of
the Senior Debt of such Guarantor to accelerate its maturity and the
Trustee receives a Payment Blockage Notice from a Person who may give it
pursuant to Section 11.12 hereof. Any number of such Payment Blockage
Notices may be given, provided, however, that (i) not more than one
Payment Blockage Notice may be commenced during any period of 360
consecutive days and (ii) any default or event of default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to
the Trustee (to the extent the holder of Designated Senior Debt, or such
trustee or agent, giving such Payment Blockage Notice had knowledge of the
same) shall not be the basis for a subsequent Payment Blockage Notice
pursuant to Section 11.12 herein, unless such default has been cured or
waived for a period of not less than 90 consecutive days.
Each Guarantor may and shall resume payments on and
distributions in respect of its Subsidiary Guarantee, the Notes and all
Obligations with respect thereto, and may acquire such Notes or Obligations upon
the earlier of:
(1) in the case of a payment default, the
date upon which such default is cured or waived, or
(2) in the case of a Non-Monetary Default,
on the earlier of the date on which such Non-Monetary Default is cured or
waived or 179 days after the date on which the applicable Payment Blockage
Notice is received, if the maturity of such Senior Debt of such Guarantor
has not been accelerated,
if this Article 11 otherwise permits the payment, distribution or acquisition at
the time thereof.
SECTION 11.05. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of
Default, each Guarantor shall promptly notify the Representative of the holders
of Senior Debt of such Guarantor of the acceleration.
SECTION 11.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives from a
Guarantor any payment of any Obligations with respect to the Notes or the
Subsidiary Guarantees at a time when the Trustee or such Holder, as applicable,
has actual knowledge that such payment is prohibited by Section 11.03 or 11.04
hereof, such payment shall be held by the Trustee or such Holder, in trust for
the
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benefit of, and shall be paid forthwith over and delivered upon written request
to, the holders of Senior Debt of such Guarantor, as their interests may appear,
or their Representative under the indenture or other agreement (if any) pursuant
to which Senior Debt of such Guarantor may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt of such Guarantor remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Debt of such Guarantor.
With respect to the holders of Senior Debt of any Guarantor,
the Trustee undertakes to perform only such obligations on the part of the
Trustee as are specifically set forth in this Article 11, and no implied
covenants or obligations with respect to the holders of Senior Debt of such
Guarantor shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of
such Guarantor, and shall not be liable to any such holders if the Trustee shall
pay over or distribute to or on behalf of Holders or the Company or any other
Person money or assets to which any holders of Senior Debt of such Guarantor
shall be entitled by virtue of this Article 11, except if such payment is made
as a result of the willful misconduct or gross negligence of the Trustee.
SECTION 11.07. NOTICE BY A GUARANTOR.
Each Guarantor shall promptly notify the Trustee and the
Paying Agent of any facts known to such Guarantor that would cause a payment of
any Obligations with respect to the Notes or its Subsidiary Guarantee to violate
this Article, but failure to give such notice shall not affect the subordination
of its Subsidiary Guarantee or of the Notes to the Senior Debt of such Guarantor
as provided in this Article.
SECTION 11.08. SUBROGATION.
With respect to any Guarantor, after all Obligations with
respect to Senior Debt of such Guarantor is paid in full, in cash, and until the
Notes are paid in full, Holders shall be subrogated (equally and ratably with
all other Indebtedness pari passu with such Guarantor's Subsidiary Guarantee) to
the rights of holders of Senior Debt of such Guarantor to receive distributions
applicable to Senior Debt of such Guarantor to the extent that distributions
otherwise payable to the Holders have been applied to the payment of Senior Debt
of such Guarantor. A distribution made under this Article to holders of Senior
Debt of such Guarantor that otherwise would have been made to Holders is not, as
between such Guarantor and Holders, a payment by such Guarantor on the Notes or
the Subsidiary Guarantee.
SECTION 11.09. RELATIVE RIGHTS.
This Article defines the relative rights of Holders and
holders of Senior Debt of such Guarantor. Nothing in this Indenture shall:
(1) impair, as between such Guarantor and
the Holders, the obligation of such Guarantor, which is absolute and
unconditional, to pay principal of and interest on the Notes in accordance
with the terms of the Subsidiary Guarantee;
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(2) affect the relative rights of Holders
and creditors of such Guarantor other than their rights in relation to
holders of Senior Debt of such Guarantor; or
(3) prevent the Trustee or any Holder from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders of Senior Debt of such Guarantor set
forth herein to receive distributions and payments otherwise payable to
Holders.
If any Guarantor fails because of this Article 11 to pay
principal of, premium or interest on a Note on the due date, the failure is
still a Default or Event of Default.
SECTION 11.10. SUBORDINATION MAY NOT BE IMPAIRED BY ANY GUARANTOR.
With respect to any Guarantor, no right of any holder of
Senior Debt of such Guarantor to enforce the subordination of the Indebtedness
evidenced by the Subsidiary Guarantee shall be impaired by any act or failure to
act by such Guarantor or any Holder or by failure of such Guarantor or any
Holder to comply with this Indenture.
SECTION 11.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
With respect to any Guarantor, whenever a distribution is to
be made or a notice given to holders of Senior Debt of such Guarantor, the
distribution may be made and the notice given to their Representative.
Upon any payment or distribution of assets of any Guarantor
referred to in this Article 11, the Trustee and the Holders shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt of such Guarantor and other
Indebtedness of such Guarantor, the amount or amounts thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 11.
SECTION 11.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 11 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least one Business Day prior to the date of such
payment a Payment Blockage Notice. Only the Representative of holders of
Designated Senior Debt may give a Payment Blockage Notice. Nothing in this
Article 11 shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.07 hereof.
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With respect to any Guarantor, the Trustee in its individual
or any other capacity may hold Senior Debt of such Guarantor with the same
rights it would have if it were not Trustee. Any Agent may do the same with like
rights.
SECTION 11.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
this Article 11, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
relative to any Guarantor referred to in Section 6.09 hereof at least 30 days
before the expiration of the time to file such claim, the Representatives of
Senior Debt of such Guarantor are hereby authorized to file an appropriate claim
for and on behalf of the Holders of the Notes.
SECTION 11.14. AMENDMENTS.
With respect to any Guarantor, the provisions of Section 11.02
through 11.14 hereof shall not be amended or modified without the written
consent of the holders of all Senior Debt of such Guarantor.
SECTION 11.15. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and, by its acceptance hereof, the Trustee and
each Holder hereby confirm that it is its intention that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, each such person hereby irrevocably agrees that the obligation of
such Guarantor under its Subsidiary Guarantee under this Article 11 shall be
limited to the maximum amount as will, after giving effect to such maximum
amount and all other (contingent or other) liabilities of such Guarantor that
are relevant under such laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under this
Article 11, result in the obligations of such Guarantor in respect of such
maximum amount not constituting a fraudulent transfer or conveyance under said
laws. The Trustee and each Holder by accepting the benefits hereof, confirms its
intention that, in the event of a bankruptcy, reorganization or other similar
proceeding of the Company or any Guarantor in which concurrent claims are made
upon such Guarantor hereunder, to the extent such claims will not be fully
satisfied, each such claimant with a valid claim against the Company shall be
entitled to a ratable share of all payments by such Guarantor in respect of such
concurrent claims. For all purposes of this Section 11.15, Senior Debt shall be
deemed to have been incurred prior to the incurrence of the obligations in
respect of the Subsidiary Guarantees.
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SECTION 11.16. RESTRICTED SUBSIDIARIES MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor shall consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person), another Person whether
or not it is affiliated with such Guarantor unless (i) subject to the provisions
of Section 11.17 hereof, the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture in form
reasonably satisfactory to the Trustee, under its Subsidiary Guarantee, the
Notes and this Indenture, (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists, and (iii) such Guarantor, or
any Person formed by or surviving any such consolidation or merger, will be
permitted to incur, immediately after giving effect to such transaction, at
least $1.00 of additional Indebtedness pursuant to the first paragraph of
Section 4.09 hereof. In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form to the
Trustee, of the Subsidiary Guarantee in this Indenture and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by the Guarantor, such successor corporation shall
succeed to and be substituted for the Guarantor with the same effect as if it
had been named herein as a Guarantor.
SECTION 11.17. RELEASES FOLLOWING SALE OF ASSETS OR DESIGNATION AS UNRESTRICTED
SUBSIDIARY.
In the event of (a) a sale or other disposition of all or
substantially all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or (b) a sale or other disposition of all of the
capital stock of any Guarantor, or (c) the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary in accordance with the terms of Section
4.17 hereof, then such Guarantor (in the event of a sale or other disposition,
by way of such a merger, consolidation or otherwise, of all of the capital stock
of such Guarantor, or in the event of the designation of such Guarantor as an
Unrestricted Subsidiary) or the corporation acquiring the property (in the event
of a sale or other disposition of all or substantially all of the assets of such
Guarantor) shall be released and relieved of its obligations under its
Subsidiary Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with Section 4.10 hereof.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA S318(c), the imposed duties shall
control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company, the Restricted
Subsidiaries or the Trustee to the others is duly given if in writing and
delivered in Person or mailed by first class mail
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(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company or any Restricted Subsidiary:
Iron Mountain Incorporated
745 Atlantic Avenue
Boston, MA 02111
Attention: President
Telecopier No.: (617) 350-7881
With a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Telecopier No.: (617) 338-2880
Attention: William J. Curry, Esq.
If to the Trustee:
First Bank National Association
c/o First Trust National Association
180 East Fifth Street
St. Paul, MN 55101
Telecopier No.: (612) 244-0711
Attention: Richard Prokosch, 2nd Floor
The Company, the Restricted Subsidiaries or the Trustee, by
notice to the others may designate additional or different addresses for
subsequent notices or communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA S 313(c), to the extent required by the
TIA. Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
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If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company or any Restricted Subsidiary mails a notice or
communication to Holders, it shall mail a copy to the Trustee and each Agent at
the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA S 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Restricted Subsidiaries, the Trustee, the Registrar and anyone else
shall have the protection of TIA S 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or the
Restricted Subsidiaries to the Trustee to take any action under this Indenture,
the Company or the Restricted Subsidiaries shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants provided for in this Indenture relating
to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA S 314(a)(4)) shall comply with the provisions of TIA S
314(e) and shall include:
(a) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(b) a brief statement as to the nature and
scope of the examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such
Person, he or she has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or
not such covenant or condition has been satisfied; and
(d) a statement as to whether or not, in the
opinion of such Person, such condition or covenant has been satisfied.
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SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company or any Restricted Subsidiary, as
such, shall have any liability for any obligations of the Company or any
Restricted Subsidiary under the Notes, the Subsidiary Guarantees, this Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Notes by accepting a Note and the related
Subsidiary Guarantees waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes and the
Subsidiary Guarantees.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Company and the Restricted Subsidiaries
in this Indenture and the Notes and the Subsidiary Guarantees, as the case may
be, shall bind their respective successors. All agreements of the Trustee in
this Indenture shall bind its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture, in the Notes or in
the Subsidiary Guarantees shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
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SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
Dated as of October 1, 1996 IRON MOUNTAIN INCORPORATED
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 IRON MOUNTAIN RECORDS MANAGEMENT,
INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 CRITERION PROPERTY, INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 CRITERION ATLANTIC PROPERTY, INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 HOLLYWOOD PROPERTY, INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
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<PAGE>
Dated as of October 1, 1996 IRON MOUNTAIN DATA PROTECTION
SERVICES, INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 IRON MOUNTAIN INFORMATION PARTNERS,
INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 IRON MOUNTAIN RECORDS MANAGEMENT
OF OHIO, INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 METRO BUSINESS ARCHIVES, INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 IM SAN DIEGO, INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 IRON MOUNTAIN RECORDS MANAGEMENT
OF MARYLAND, INC.
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<PAGE>
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 DATA STORAGE SYSTEMS, INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 DATA ARCHIVE SERVICES, INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 IRON MOUNTAIN RECORDS MANAGEMENT
OF MISSOURI LLC
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 IRON MOUNTAIN RECORDS MANAGEMENT
OF BOSTON, INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
Dated as of October 1, 1996 IRON MOUNTAIN WILMINGTON, INC.
By: /s/ C. Richard Reese
------------------------------------------
Name: C. Richard Reese
Title: Chairman of the Board and
Chief Executive Officer
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<PAGE>
Dated as of October 1, 1996 FIRST BANK NATIONAL ASSOCIATION, as Trustee
By: /s/ Richard Prokosch
------------------------------------------
Name: Richard Prokosch
Title: Trust Officer of
Corporate Finance
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EXHIBIT A
(Face of Note)
10-1/8% Senior Subordinated Notes due 2006
No. $__________
IRON MOUNTAIN INCORPORATED
promises to pay to ___________________________________ or registered assigns,
the principal sum of _____________________________ Dollars on October 1, 2006.
Interest Payment Dates: April 1 and October 1.
Record Dates: March 15 and September 15.
Dated: October 1, 1996
[Every Global Note authenticated and delivered hereunder will bear a legend in
substantially the following form:]
[This Note is a Global Note within the meaning of the
Indenture hereinafter referred to and is registered in the name of a Depositary
or a nominee thereof. This Note may not be transferred to, or registered or
exchanged for Notes registered in the name of, any Person other than the
Depositary or a nominee thereof, and no such transfer may be registered, except
in the limited circumstances described in the Indenture. Every Note
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, this Note will be a Global Note subject to the foregoing,
except in such limited circumstances.]
IRON MOUNTAIN INCORPORATED
Title:
By:____________________________________
Name:
Title:
CUSIP No. __________ Title:
By:____________________________________
Name:
Title:
This is one of the Notes
referred to in the
within-mentioned Indenture:
FIRST BANK NATIONAL ASSOCIATION, as Trustee
By: _____________________________________
Authorized Signatory
A - 1
<PAGE>
(Back of Note)
10-1/8% SENIOR SUBORDINATED NOTE
DUE 2006
Capitalized terms used herein have the meanings assigned to
them in the Indenture (as defined below) unless otherwise indicated.
1. Interest. Iron Mountain Incorporated, a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate and in the manner specified below.
The Company shall pay in cash interest on the principal amount
of this Note at the rate per annum of __%. The Company will pay interest
semi-annually in arrears on April 1 and October 1 of each year, commencing on
April 1, 1997 or if any such day is not a Business Day (as defined in the
Indenture), on the next succeeding Business Day (each an "Interest Payment
Date"), to Holders of record on the immediately preceding March 15 and September
15.
Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Interest shall accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of the original issuance of the Notes. To the extent lawful, the Company
shall pay interest on overdue principal at the rate of 1% per annum in excess of
the then applicable interest rate on the Notes; it shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) at the
same rate to the extent lawful.
2. Method of Payment. The Company will pay interest on the
Notes (except defaulted interest) to the Persons who are registered Holders of
Notes at the close of business on the record date next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date. The Company will pay principal and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Company, however, may pay principal,
premium, if any, and interest by check payable in such money. It may mail an
interest check to a Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without notice to any Holder. The Company or any
Restricted Subsidiary may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture
dated as of October 1, 1996 (the "Indenture") between the Company, the
Restricted Subsidiaries named therein and the Trustee. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code SS 77aaa-77bbbb) as
in effect on the date of the Indenture. The Notes are subject to all
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<PAGE>
such terms, and Holders of the Notes are referred to the Indenture and such act
for a statement of such terms. The terms of the Indenture shall govern any
inconsistencies between the Indenture and the Notes. The Notes are unsecured
general obligations of the Company limited to $165,000,000 in aggregate
principal amount.
5. Optional Redemption. The Company shall not have the option
to redeem the Notes pursuant to Section 3.07 of the Indenture prior to October
1, 2001. Thereafter, the Company shall have the option to redeem the Notes, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of the principal amount) set forth
below, plus accrued and unpaid interest thereon to the applicable redemption
date, if redeemed during the 12 month period beginning on October 1 of the years
indicated below:
Year Percentage
2001.................................... 105.06%
2002.................................... 103.38%
2003.................................... 101.69%
2004 and thereafter..................... 100.00%
Notwithstanding the foregoing, at any time prior to October 1,
1999, the Company may redeem up to 35% of the initial principal amount of the
Notes originally issued with the net proceeds of one or more Qualified Equity
Offerings at a redemption price equal to 109.125% of the principal amount of
such Notes, plus accrued and unpaid interest, if any, to the date of redemption;
provided, that at least 65% of the principal amount of Notes originally issued
remains outstanding immediately after the occurrence of any such redemption and
that such redemption occurs within 60 days following the closing of any such
Qualified Equity Offering.
6. Mandatory Redemption. Except as described in paragraph 7
below, the Company shall not be required to make sinking fund or redemption
payments with respect to the Notes.
7. Redemption or Repurchase at Option of Holder. This Note is
subject to purchase at the option of the Holder upon the circumstances set forth
in Section 3.09 and 4.14 of the Indenture.
8. Notice of Redemption. Notice of redemption shall be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at its registered address. Notes may be redeemed
in part but only in whole multiples of $1,000, unless all of the Notes held by a
Holder are to be redeemed. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
9. Subordination. The Notes are subordinated to Senior Debt
(as defined in the Indenture) (whether outstanding on the date of the Indenture
or thereafter created, incurred, assumed or guaranteed) and all Obligations (as
defined in the Indenture) with respect thereto. To the extent provided in the
Indenture, Senior Debt must be paid in full in cash before the Notes
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<PAGE>
may be paid. The Company agrees, and each Holder by accepting a Note agrees, to
the subordination and authorizes the Trustee to give it effect.
10. Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not exchange or register the transfer of any
Note or portion of a Note selected for redemption. Also, it need not exchange or
register the transfer of any Notes for a period of 15 days before a selection of
Notes to be redeemed, or during the period between a record date and the
corresponding Interest Payment Date.
11. Persons Deemed Owners. Prior to due presentment to the
Trustee for registration of the transfer of this Note, the Trustee, any Agent,
the Company and the Guarantors may deem and treat the Person in whose name this
Note is registered as its absolute owner for the purpose of receiving payment of
principal of, premium, if any, and interest on this Note and for all other
purposes whatsoever, whether or not this Note is overdue, and none of the
Trustee, any Agent, the Company or any Guarantor shall be affected by notice to
the contrary. The registered holder of a Note shall be treated as its owner for
all purposes.
12. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes). Without
the consent of any Holder, the Indenture or the Notes may be amended to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for assumption of the
Company's or any Restricted Subsidiary's obligations to Holders in the case of a
merger or consolidation or to make any change that would provide any additional
rights or benefits to the Holders or that does not adversely affect the rights
of any Holder under the Indenture or to comply with the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
13. Defaults and Remedies. Events of Default include: default
for 30 days in the payment when due of interest on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); default in payment
when due of principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); failure by the
Company to comply with Section 4.14 of the Indenture; failure by the Company or
the Restricted Subsidiaries for 60 days after notice from the Trustee or the
Holders of not less than 25% of the aggregate principal amount of the Notes
outstanding to comply with any of its other agreements in the Indenture or the
Notes; default under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any
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<PAGE>
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or
is created after the date of the Indenture, if (a) such default results in the
acceleration of such Indebtedness prior to its express maturity or shall
constitute a default in the payment of such Indebtedness at final maturity of
such Indebtedness and (b) the principal amount of such Indebtedness that has
been accelerated or not paid at maturity, together with the principal amount of
any other Indebtedness that has been accelerated or not paid at maturity,
exceeds $5.0 million; failure by the Company or any of its Subsidiaries to pay
final judgments aggregating in excess of $5.0 million, which judgments remain
unpaid, undischarged or unstayed for a period of 60 days; except as permitted by
the Indenture, any Subsidiary Guarantee issued by a Restricted Subsidiary shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Restricted Subsidiary, or
any Person acting on behalf of any Restricted Subsidiary, shall deny or
disaffirm its obligations under its Subsidiary Guarantees; and certain events of
bankruptcy or insolvency with respect to the Company or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable immediately, except that in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, relating to
the Company or any Significant Subsidiary, all outstanding Notes will become due
and payable without further action or notice; provided, however, that if any
Obligation with respect to Senior Bank Debt is outstanding pursuant to the
Credit Agreement upon a declaration of acceleration of the Notes, the principal,
premium, if any, and interest on the Notes will not be payable until the earlier
of (1) the day which is five Business Days after written notice of acceleration
is received by the Company and the Credit Agent, and (2) the date of
acceleration of the Indebtedness under the Credit Agreement. Holders of the
Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Company must furnish an annual
compliance certificate to the Trustee.
14. Subsidiary Guarantees. Payment of principal of, premium,
if any, and interest (including interest on overdue principal, premium, if any,
and interest, if lawful) on the Notes is guaranteed on an unsecured, senior
subordinated basis by the Guarantors pursuant to Article 11 of the Indenture.
15. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company, any Restricted Subsidiary
or their respective Affiliates, and may otherwise deal with the Company, any
Restricted Subsidiary or their respective Affiliates, as if it were not Trustee.
16. No Recourse Against Others. No past, present or future
director, officer, employee, incorporator or stockholder, as such, of the
Company or any Restricted Subsidiary
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<PAGE>
shall have any liability for any obligations of the Company or any Restricted
Subsidiary under the Notes, the Subsidiary Guarantees or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Note and the related Subsidiary Guarantees,
if any, waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Notes.
17. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
20. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE
GUARANTEES, IF ANY.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Request may be made to:
Iron Mountain Incorporated
745 Atlantic Avenue
Boston, MA 602111
Telecopier No.: (617) 350-7881
Attention: Chief Financial Officer
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<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date: ___________________________
Your Signature: _______________________________
(Sign exactly as your name
appears on the face of this
Note)
Signature Guarantee.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
Date: ____________________ Your Signature: _______________________________
(Sign exactly as your name
appears on the face of this
Note)
Tax Identification No.: _________________________
Signature Guarantee.
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<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY FUTURE RESTRICTED SUBSIDIARIES
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of ________________, between __________________ (the "Restricted
Subsidiary"), a subsidiary of Iron Mountain Incorporated (or its successor), a
Delaware corporation (the "Company"), and ______________________________, a
national banking association, as trustee under the indenture referred to below
(the "Trustee").
W I T N E S S E T H
WHEREAS, Iron Mountain Incorporated, a Delaware corporation
has heretofore executed and delivered to the Trustee an indenture (the
"Indenture"), dated as of ________, 1996, providing for the issuance of an
aggregate principal amount of $___,000,000 of __% Senior Subordinated Notes due
2006 (the "Notes");
WHEREAS, Section 4.13 of the Indenture provides that under
certain circumstances the Company is required to cause the Restricted Subsidiary
to execute and deliver to the Trustee a supplemental indenture pursuant to which
the Restricted Subsidiary shall unconditionally guarantee all of the Company's
obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and
conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Restricted Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Restricted Subsidiary hereby agrees that
its obligations to the Holder and the Trustee pursuant to this Subsidiary
Guarantee shall be as expressly set forth in Article 11 of the Indenture and in
such other provisions of the Indenture as are applicable to Restricted
Subsidiaries, and reference is made to the Indenture for the precise terms of
this Supplemental Indenture. The terms of Article 11 of the Indenture and such
other provisions of the Indenture as are applicable to Restricted Subsidiaries
are incorporated herein by reference.
3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.
(a) To evidence its Subsidiary Guarantee set forth in this
Supplemental Indenture, the Restricted Subsidiary hereby agrees that a
notation of such Subsidiary Guarantee substantially
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<PAGE>
in the form of Exhibit C to the Indenture shall be endorsed by an Officer
of such Restricted Subsidiary on each Note authenticated and delivered by
the Trustee after the date hereof.
(b) Notwithstanding the foregoing, the Restricted Subsidiary
hereby agrees that its Subsidiary Guarantee set forth herein shall remain
in full force and effect notwithstanding any failure to endorse on each
Note a notation of such Subsidiary Guarantee.
(c) If an Officer whose signature is on this Supplemental
Indenture or on the Subsidiary Guarantee no longer holds that office at
the time the Trustee authenticates the Note on which a Subsidiary
Guarantee is endorsed, the Subsidiary Guarantee shall be valid
nevertheless.
(d) The delivery of any Note by the Trustee, after the
authentication thereof under the Indenture, shall constitute due delivery
of the Subsidiary Guarantee set forth in this Supplemental Indenture on
behalf of the Restricted Subsidiary.
4. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder of the Restricted Subsidiary, as
such, shall have any liability for any obligations of the Company or any
Restricted Subsidiary under the Notes, any Subsidiary Guarantee, the Indenture
or this Supplemental Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
5. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture and the
Subsidiary Guarantee.
6. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
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<PAGE>
7. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ____________, ____ [RESTRICTED SUBSIDIARY]
By: _____________________________________
Name:
Title:
Dated: ____________, ____
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
By: _____________________________________
Name:
Title:
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<PAGE>
EXHIBIT C
FORM OF NOTATION ON SENIOR SUBORDINATED NOTE
RELATING TO SUBSIDIARY GUARANTEE
Each Guarantor set forth below and each Restricted Subsidiary
of the Company which in accordance with Section 4.13 of the Indenture is
required to guarantee the obligations of the Company under the Notes, upon
execution of a counterpart of the Indenture, jointly and severally
unconditionally guarantees (i) the due and punctual payment of the principal of
and interest on the Notes, whether at the maturity or interest payment or
mandatory redemption date, by acceleration, call for redemption or otherwise,
and of interest on the overdue principal of and interest, if any, on the Notes
and all other obligations of the Company to the Holders or the Trustee under the
Indenture or the Notes and (ii) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration or otherwise.
The obligations of each Guarantor to the Holder and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are as expressly
set forth in Article 11 of the Indenture and in such other provisions of the
Indenture as are applicable to Guarantors, and reference is hereby made to such
Indenture for the precise terms of this Subsidiary Guarantee. The terms of
Article 11 of the Indenture and such other provisions of the Indenture as are
applicable to Guarantors are incorporated herein by reference. This Subsidiary
Guaranty is subject to release as described in Sections 4.13 and 11.17 of the
Indenture, and the obligations of each Guarantor under this Subsidiary Guaranty
and the Indenture are limited as provided in Section 11.15 of the Indenture.
This is a continuing guarantee and shall remain in full force
and effect and shall be binding upon each Guarantor and its successors and
assigns until full and final payment of all of the Company's obligations under
the Notes and the Indenture and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This is a guarantee of payment and not a guarantee of collection.
This Subsidiary Guarantee shall not be valid or obligatory for
any purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
[RESTRICTED SUBSIDIARY]
By:__________________________________
Name:
Title:
C - 1
<PAGE>
C - 2
<PAGE>
Exhibit 10.20
CONFORMED COPY
STOCKHOLDERS' AGREEMENT
AGREEMENT, dated as of February 19, 1997, among Iron
Mountain Incorporated, a Delaware corporation ("Acquiror"), those stockholders
of Safesite Records Management Corporation, a Delaware corporation (the
"Company") signatory hereto (the "Initial Stockholders"), including, without
limitation, B. Thomas Golisano, an individual residing at 911 Panorama Trail
South, Rochester, NY 14625 ("Golisano"), and James B. Wayman, Jr., an individual
residing at 251 Old Billerica Road, Bedford, MA 01730 ("Wayman"), in his
individual capacity and as custodian for Alexander B. Wayman and Catherine Lia
Wayman and those other stockholders of the Company which have become party
hereto by execution of an instrument in accordance with Section 6.8 hereof (the
"Additional Stockholders" and, together with the Initial Stockholders, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, each of the Initial Stockholders is the beneficial
and record owner of the shares of Common Stock, $.01 par value per share (the
"Company Stock") of the Company, set forth opposite each such Initial
Stockholder's name on Schedule A-1;
WHEREAS, concurrently with the execution of this Agreement,
Acquiror and the Company are entering into an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which a wholly owned subsidiary of Acquiror will
be merged with and into the Company (the "Merger"), with the Company continuing
as the Surviving Corporation; and
WHEREAS, in order to induce Acquiror to enter into the
Merger Agreement, the Stockholders wish to make certain representations,
warranties, covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms used herein but not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Merger Agreement and the following terms shall have the following meanings:
"Additional Stockholders" shall have the meaning set forth
in the opening paragraph of this Agreement.
<PAGE>
"beneficially own" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.
"Equity Securities" shall have the meaning set forth in
Rule 405 under the Securities Act.
"Golisano" shall have the meaning set forth in the opening
paragraph of this Agreement.
"Initial Stockholders" shall have the meaning set forth in
the opening paragraph of this Agreement.
"Intention" shall have the meaning set forth in Section
2.1(f).
"Merger Agreement" shall have the meaning set forth in the
second recital of this Agreement.
"Offer" and "Offer Consideration" shall have the meanings
set forth in Section 3.7(a).
"Permitted Assignee" shall mean with respect to each
Stockholder, (x) such Stockholder's lineal descendants, siblings and lineal
descendants of siblings, (y) a trust for the benefit of, the estate of,
executors, personal representatives, administrators, guardians or conservators
of, any of the individuals referred to in the foregoing clause (x) (but only in
their capacity as such) and (z) charitable trusts and charitable foundations
formed by such Stockholder.
"Proportionate Share" shall mean, as to each Stockholder, a
fraction the numerator of which is the Offer Consideration such Stockholder
receives pursuant to the Offer and the denominator of which is the Offer
Consideration all Stockholders receive pursuant to the Offer.
"Related Transaction" shall mean a transaction that is in
contemplation of, or related or pursuant to, the Merger or the Merger Agreement.
"Restricted Stockholder" shall mean any Stockholder that,
individually or together with its Affiliates, beneficially owns, or is a member
of a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) that
beneficially owns, 5% or more of Acquiror Stock.
"Sale" shall have the meaning set forth in Section 2.1(f).
"Stockholder Disclosure Letter" shall have the meaning set
forth in Section 2.1(a).
"Third Party" shall mean a party or parties unaffiliated
with either the Company or Acquiror.
"Transfer" shall have the meaning set forth in Section 3.8.
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<PAGE>
"Voting Securities" shall have the meaning set forth in
Rule 405 under the Securities Act.
"Wayman" shall have the meaning set forth in the opening
paragraph of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
2.1 Representations and Warranties of the Stockholders.
Each Stockholder represents and warrants, severally but not jointly, to Acquiror
as follows:
(a) Ownership of Company Shares. Except as disclosed in
Section 2.1(a) of the letter from the Stockholders to Acquiror, dated the date
hereof or the date such Stockholder becomes party hereto (the "Stockholder
Disclosure Letter"), such Stockholder is the beneficial owner of the shares of
Company Stock set forth opposite such Stockholder's name on Schedule A-1, free
and clear of all Liens and, except for this Agreement and the Merger Agreement,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which such 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. The shares of Company Stock set forth opposite such
Stockholder's name on Schedule A-1 constitute all of the outstanding shares of
capital stock of the Company owned beneficially or of record by such Stockholder
and such Stockholder does not have any options, warrants or other rights to
acquire any additional shares of capital stock of the Company or any security
exercisable or exchangeable for, or convertible into, shares of capital stock of
the Company other than as set forth on Schedule A-1.
(b) Authority to Execute and Perform Agreements. Such
Stockholder has the full legal right and power and all authority required to
enter into, execute and deliver this Agreement and to perform fully such
Stockholder's obligations hereunder. The execution and delivery of this
Agreement by such Stockholder have been duly authorized by all requisite
organizational action, if any, on the part of such Stockholder. This Agreement
has been duly executed and delivered and constitutes the legal, valid and
binding obligation of such Stockholder enforceable against such Stockholder in
accordance with its terms (subject to the Enforceability Exceptions).
(c) No Conflicts; Consents. (i) Except as set forth in
Section 2.1(c) of the Stockholder Disclosure Letter, the execution and delivery
by such Stockholder of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with or result in any
violation of or default (with or without notice or lapse of time, or both) under
(A) any contract, agreement or other binding arrangement to which such
Stockholder is a party or (B)
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<PAGE>
any judgment, order, writ, injunction or decree of any court, governmental body,
administrative agency or arbitrator applicable to such Stockholder.
(ii) Except as set forth in Section 2.1(c) of the
Stockholder Disclosure Letter, no Governmental Authorizations or Private
Authorizations are required to be obtained or made by such Stockholder in
connection with the execution and delivery by such Stockholder of this Agreement
and the consummation of the transactions contemplated hereby.
(d) Information Supplied. None of the information
specifically supplied or to be supplied by such Stockholder with respect to such
Stockholder for inclusion or incorporation by reference in (i) the Registration
Statement will, at the time the Registration Statement is filed with the SEC and
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 thereon or necessary to make the statements therein not misleading and
(ii) the proxy statement to be delivered to all stockholders of the Company (the
"Proxy Statement") will, at the date the Proxy Statement is first mailed to the
Company's Stockholders and at the time of the special meeting of Company
Stockholders for the purpose of voting on the Merger Agreement, 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.
(e) Investigation. Such Stockholder has had a full
opportunity to review and discuss this Agreement, the Escrow Agreement and the
Merger Agreement (including, without limitation, with respect to the
representations and warranties in the Merger Agreement and the related
Disclosure Schedule) and to ask all questions of the Company and its directors
and executive officers necessary in order for such Stockholder to make an
informed decision to enter into this Agreement.
(f) Intent to Transfer Shares. Such Stockholder has, and as
of the Closing Date, will have, no present plan or intention (an "Intention") to
sell, transfer, exchange, pledge (other than in a pre-existing bona fide margin
account) or otherwise dispose of, including a distribution by a partnership to
its partners, or a corporation to its shareholders, or any other transaction
which results in a reduction of ownership (any of the foregoing, a "Sale") of
any of the shares of Acquiror Stock issued to such Stockholder in the Merger, or
any securities that may be paid as a dividend otherwise distributed thereon or
with respect thereto, or issued or delivered in exchange or substitution
therefor or upon exercise of options held by such Stockholder. For purposes of
the preceding sentence, shares of Acquiror Stock (or the portion thereof) with
respect to which a Sale will occur prior to the Merger shall be considered to be
shares of Company Stock that are exchanged for Acquiror Stock in the Merger and
then disposed of pursuant to an Intention. A Sale of Acquiror Stock shall be
considered to have occurred pursuant to an Intention if, among other things,
such Sale occurs in a related transaction. Subject to Section 3.8, each
Stockholder (i) reserves the rights at any time after the Closing Date to
evaluate his or her investment portfolio, including shares of Acquiror Stock and
any other securities issued by Acquiror, in light of new, material developments,
and to make such investment decision with respect to such securities as
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<PAGE>
such Stockholder and his or her investment advisors, if any, shall deem to be in
his or her best interests, and (ii) specifically disavows any undertaking to
hold any securities issued by Acquiror for any specific period.
ARTICLE III
COVENANTS
3.1 No Disposition or Acquisition of Shares. Each Initial
Stockholder agrees that, except as set forth in Section 3.1 of the Stockholder
Disclosure Letter, such Initial Stockholder shall not sell, transfer, pledge,
hypothecate, encumber or otherwise dispose of (except upon such Stockholder's
death), or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, hypothecation, encumbrance or other
disposition of, any of the shares of Company Stock set forth opposite his or her
name on Schedule A-1; provided, however, that each Initial Stockholder shall
have the right to transfer such shares to a Permitted Assignee if such Permitted
Assignee becomes a party to this Agreement and agrees to be bound by the terms
hereof. Each Initial Stockholder agrees that the certificates representing the
shares of Company Stock owned by him shall bear a legend indicating that such
shares are subject to this Agreement, which legend may be removed upon
termination of this Agreement.
3.2 Voting Arrangements. Each of Golisano and Wayman agrees
that, except pursuant to this Agreement, he shall not grant any proxies, deposit
any shares of Company Stock into a voting trust or enter into any voting
agreement with respect to any shares of Company Stock now or hereafter owned,
beneficially or of record, by him, other than proxies to vote such shares at any
annual or special meeting of Stockholders of the Company on matters unrelated to
the matters set forth in Section 4.1 hereof.
3.3 Satisfaction of Conditions to the Merger. Each of
Golisano and Wayman agrees that each, in his capacity as a Stockholder, shall
assist and cooperate with the parties to the Merger Agreement in doing all
things necessary, proper or advisable under Applicable Laws as promptly as
practicable to consummate and make effective the Merger and the other
Transactions and each of them shall not take any action that would or is
reasonably likely to result in any of its representations and warranties set
forth in this Agreement being untrue as of the date made or in any of the
conditions set forth in Article 6 of the Merger Agreement not being satisfied.
In addition, (i) Acquiror, Golisano and Wayman agree that they will enter into,
or, in the case of Acquiror, cause its nominee to enter into, and, in the case
of Golisano and Wayman, cause their Affiliate which owns any Property to enter
into, a purchase and sale agreement relating to each Property reasonably
satisfactory in form and substance to Acquiror, Golisano and Wayman, for the
price of $2,200,000 for the Property located at 5 Fortune Drive, Billerica,
Massachusetts, $2,400,000 for the Property located at 96 High Street, Billerica,
Massachusetts, and $2,700,000 for the Property located at 520 Metro Park West,
Rochester, New York, and (ii) Acquiror, Golisano and Wayman agree that they will
enter into the Registration Rights Agreement.
-5-
<PAGE>
3.4 No Solicitation. Each Stockholder agrees that he shall
not, nor shall he permit any of such Stockholder's Representatives (including,
without limitation, any investment banker, attorney or accountant retained by
such Stockholder) 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, such Stockholder 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 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 nothing contained in this Section shall prohibit any Stockholder, if such
Stockholder is a member of Board of Directors of the Company, from making any
disclosure, in his or her capacity as a director of the Company, to other
Stockholders of the Company that, in the reasonable judgment of the Company's
Board of Directors in accordance with, and based upon the written advice of,
outside counsel, is required under Applicable Law. Each Stockholder shall
promptly advise Acquiror of, and communicate the material terms of, any proposal
such Stockholder may receive, or any inquiries such Stockholder 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. Each Stockholder 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, each Stockholder agrees that he shall not 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 other Stockholders under this Agreement.
3.5 Standstill. Golisano agrees that, (i) from the date
hereof until the Closing Date and (ii) from and after the Closing Date for so
long as he shall be a Restricted Stockholder, he shall not, and shall use his
best efforts to cause his Affiliates not to, without the prior written consent
of the board of directors of Acquiror, (A) in any manner acquire, agree to
acquire or make any proposal to acquire, directly or indirectly, any Equity
Securities of Acquiror or any rights or options to acquire such Equity
Securities (other than the shares of Acquiror Stock received by him in the
Merger), (B) propose to enter into, directly or indirectly, a merger or other
business combination involving Acquiror or propose to purchase, directly or
indirectly, a material portion of the assets of Acquiror, (C) make, or in any
way participate, directly or indirectly, in, any "solicitation" of "proxies" (as
such terms are used in Regulation 14A under the Exchange Act) to vote or consent
or seek to advise or influence any Person with respect to the voting of, or
granting of a consent with respect to, any Voting Securities of Acquiror, (D)
form, join or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the Exchange Act) for the purpose of acquiring, holding voting or
disposing of any Equity Securities of Acquiror, (E) otherwise act, alone or in
concert with others, to seek to control or influence in any public manner or
public forum the management or policies of Acquiror; provided, however, that the
foregoing shall not limit the ability to vote any shares of any Equity
Securities of Acquiror, (F) disclose any intention, plan or arrangement
inconsistent with the foregoing, (G) advise, assist (including by knowingly
providing or arranging financing for that purpose) or encourage any other Person
in connection with any of the foregoing or (H) take any action which might
require Acquiror to make
-6-
<PAGE>
a public announcement regarding the possibility of a transaction between
Golisano and Acquiror (including any of their respective Affiliates).
3.6 Non-Competition.
(a) Except with the prior written consent of Acquiror, for
a period of five years from the Closing Date or the date of the closing of the
Offer, each of Golisano and Wayman shall not disclose to others or use for his
or others' benefit confidential information related to the Company or Acquiror
and its Subsidiaries, including the names of customers, the contact persons at
customers, pricing, the software programs utilized by the Company or Acquiror
and its Subsidiaries in the operation of its business and all other information
material to the operation, management, marketing or financing of the Company,
Acquiror and its Subsidiaries which is not known or generally available to the
public or competitors in the records management or records storage industries.
The confidentiality obligations of this Section shall not apply to information:
(i) which is required to be disclosed by judicial or
administrative process or order, or by other requirements of law;
(ii) which is or becomes generally available to the public
other than as a result of a breach of this Section;
(iii) which is received from a third party who obtained
such information other than under an obligation of confidentiality; or
(iv) which Acquiror discloses on a nonconfidential basis or
otherwise makes available to the general public or the trade.
(b) Each of the Golisano and Wayman agrees that he shall
not, for a period of five years from the Closing Date or from the date of the
closing of the Offer, directly or indirectly own, manage, engage in, participate
in, provide advice to, be employed by or have a financial interest in, any
enterprise which provides records management or records storage services to
business facilities located in any jurisdiction in which Acquiror or the Company
operates.
This Section 3.6(b) shall not prohibit either Golisano or Wayman from
acquiring up to five percent (5%) of any class of securities registered pursuant
to the Exchange Act of any corporation which may engage in the records
management storage service business in direct competition with the business of
Acquiror within the geographical areas set forth in this Section 3.6.
(c) Each of Golisano and Wayman acknowledges that it has
carefully read all the terms herein stated and agrees that the same are
necessary for the reasonable and proper protection of the value of the Company;
and that each and every covenant is reasonable with respect to such matter,
length of time, and the geographical areas described; and that irrespective
-7-
<PAGE>
of all other conditions, the covenants and restrictions hereinabove provided
shall be operative during the full period and throughout the geographical area
described. In the event any court finds any such restraint or limitation to be
unreasonable, then it is the intent of the parties that such court should
determine the maximum restraint or limitation which is reasonable and
enforcement will be of that restraint or limitation.
(d) Each of Golisano and Wayman acknowledges that
confidential information in his possession related to the Company has particular
value, the loss of confidentiality of which by communication to unauthorized
persons cannot be reasonably or adequately compensated for by damages alone.
Moreover, each of Golisano and Wayman agrees that any breach of paragraphs (a)
and (b) of this Section 3.6 would give rise to damages which would be difficult
to calculate. Therefore, the parties hereby agree that in the event of a breach
of any of the terms and conditions of this Section 3.6, Acquiror shall be
entitled to equitable relief by way of an injunction. This Section 3.6 shall not
be construed as a limitation upon Acquiror's remedies for such breach.
(e) The restrictions contained in this Section 3.6 shall be
broadly construed by any court having jurisdiction of the matter in order to
protect Acquiror to the maximum degree possible.
3.7 Tender Offer; Commitment to Sell.
(a) If Acquiror terminates the Merger Agreement pursuant to
Section 7.1(d) thereof (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 therein or the failure of the representations and warranties of the
Company to be true and correct in all material respects), it shall have the
right, but not the obligation, to commence an offer (the "Offer") to purchase
all of the outstanding Shares at a per share purchase price (the "Offer
Consideration") equal to the Merger Consideration (assuming for such purposes
that the commencement of the Offer would constitute a Change of Control under
the Option Plans and, as a consequence thereof, there would be an acceleration
of the Option Securities as of the date of commencement of the Offer, as set
forth in Section 3.13(b) of the Disclosure Schedule). Shares tendered in the
Offer shall be free and clear of all Liens. The Offer shall comply in all
material respects with Applicable Law.
(b) Each of Golisano and Wayman hereby agrees that they
will irrevocably tender their shares of Company Stock identified on Schedule A-1
hereto in any such Offer commenced by Acquiror and, in connection therewith,
transfer to Acquiror all of the right, title and interest of each of Golisano
and Wayman in and to such shares, free and clear of all Liens.
(c) All of the representations, warranties and covenants
made by the Company in the Merger Agreement shall be deemed made in connection
with the Offer by each Stockholder who tenders shares in the Offer, which
representations, warranties and covenants shall survive for a period of one year
after the closing of the Offer. Any claim for indemnification in respect of
breaches of such representations, warranties and covenants shall be conducted in
accordance with
-8-
<PAGE>
the provisions of Article 8 of the Merger Agreement and Article 5 of this
Agreement (except that there will be no Escrow Indemnity Fund).
(d) The closing of the Offer shall take place in accordance
with the instructions set forth in the Offer. At such closing, (A) Acquiror
shall make payment of the Offer Consideration to each Stockholder who tenders
their shares in the Offer in shares of Acquiror Stock, which shares shall be
duly authorized, validly issued, fully paid and nonassessable, and the cash
portion of the Exchange Merger Consideration and cash in lieu of fractional
shares, (B) each of Golisano and Wayman shall deliver to Buyer evidence
reasonably satisfactory to Buyer and its counsel that all necessary
authorizations, consents, orders, waivers and approvals have been obtained to
vest in Buyer all of the right, title and interest of the Shares being
transferred to Buyer by them, and (C) each Stockholder who tenders Shares in the
Offer shall deliver to Acquiror the Certificates representing such Shares duly
endorsed for transfer to Acquiror or with stock powers duly executed by such
Stockholder and otherwise in a form and at the time which complies with the
terms of the Offer.
(e) It is the understanding of Acquiror, and each of
Golisano and Wayman hereby represents, that, in the event of an acquisition of
shares of Acquiror Stock in the Offer, each of Golisano and/or Wayman will be
acquiring the shares of Acquiror Stock to be acquired by him through the Offer
for his own account for investment with no intention of presently distributing
or reselling the same, subject, nevertheless, to his right to dispose of such
Shares, or any part of any thereof held by him, if at some future time in his
sole discretion he deems it advisable so to do. Each of Golisano and Wayman
hereby agrees that he will not sell, transfer or otherwise dispose of any such
shares of Acquiror Stock in violation of the Securities Act, and that such
shares of Acquiror Stock may contain a legend, reasonably satisfactory to
Acquiror, referring to the provisions of this Section. Each of Golisano and
Wayman understands that the Company is not and will not be required to file a
registration statement under the Securities Act in connection with any sale,
transfer or other disposition of shares of Acquiror Stock which may be acquired
by either Golisano or Wayman pursuant to the Offer.
(f) The undertakings in this Section 3.7 shall terminate
upon the earlier of (i) the Effective Time, (ii) the termination of the Merger
Agreement in accordance with Section 7.1 thereof (other than a termination which
results in Acquiror having the right to make the Offer in accordance with this
Section 3.7) or (iii) six months after a termination which results in Acquiror
having the right to make the Offer in accordance with this Section 3.7 (provided
that on or before thirty days after such termination Acquiror shall have
provided notice to Golisano of its intention to commence the Offer).
3.8 Post-Closing Transfer Restrictions. In the event the
Merger is consummated as an Alternative Transaction, each of the Stockholders
agrees that, from and after the Closing Date until the one-year anniversary
thereof, such Stockholder shall not sell, transfer, pledge, encumber or
otherwise dispose of, including through any "short sale" or derivative
transactions (collectively "Transfer"), any shares of Acquiror
-9-
<PAGE>
Stock received by such Stockholder as a result of the Merger if, after giving
effect to such Transfer, the aggregate number of shares of Acquiror Stock
received in the Merger by all Stockholders and not Transferred would be less
than a number of shares of Acquiror Stock having a value, as of the date of the
Merger, of less than fifty percent (50%) of the value of all of the formerly
outstanding Company Stock as of the same date. For purposes of the preceding
computation, shares of Company Stock surrendered by dissenters or exchanged for
cash in lieu of fractional shares of Acquiror Stock will be treated as
outstanding Company Stock on the date of the Merger that has subsequently been
Transferred, and all shares of Company Stock and all shares of Acquiror Stock
held by the Stockholders and Transferred prior or subsequent to the Merger will
be included in the computation.
3.9 [Intentionally Omitted.]
ARTICLE IV
PROXY; CONVERSION;
ELECTIONS; WAIVER OF RIGHTS
4.1 Proxy. Each of Golisano and Wayman hereby agrees that,
at any meeting of the stockholders of the Company, however called, and at every
adjournment thereof, and in any action by written consent of the stockholders of
the Company, to (a) vote all of the shares of Company Stock then owned,
beneficially or of record, by him in favor of the adoption of the Merger
Agreement as in effect on the date hereof (as such agreement may be amended (1)
as contemplated by Section 7.3 of the Merger Agreement or (2) with the consent
of such Stockholder) and each of the other transactions contemplated thereby and
any action required in furtherance thereof, (b) vote such shares against any
action or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation of the Company
under the Merger Agreement, and (c) vote such shares against any Other
Transaction or any other action or agreement that, directly or indirectly, is
inconsistent with or that would, or is reasonably likely to, directly or
indirectly, impede, interfere with or attempt to discourage the Merger or any
other transaction contemplated by the Merger Agreement, including, but not
limited to (i) any extraordinary corporate transaction (other than the Merger on
the terms set forth in the Merger Agreement), such as a merger, consolidation,
business combination, reorganization recapitalization or liquidation involving
the Company, (ii) a sale or transfer of a material amount of assets of the
Company, or (iii) any material change in the Company's corporate structure or
business; provided, however, that, if either Golisano or Wayman is a member of
the Board of Directors of the Company, nothing herein shall be construed to
obligate such Stockholder or representative to act in his capacity as a director
in any manner which may conflict with such Person's fiduciary duties as a
director of the Company.
-10-
<PAGE>
In furtherance of the foregoing, (i) each of Golisano and
Wayman hereby appoints Acquiror and the proper officers of Acquiror, and each of
them, with full power of substitution in the premises, its proxies to vote all
his shares of Company Capital Stock at any meeting, general or special, of the
Stockholders of the Company, and to execute one or more written consents or
other instruments from time to time in order to take such action without the
necessity of a meeting of the Stockholders of the Company, in accordance with
the provisions of the preceding paragraph and (ii) Acquiror hereby agrees to
vote such shares or execute written consents or other instruments in accordance
with the provisions of the preceding paragraph.
The proxy and power of attorney granted herein shall be
irrevocable during the term of this Agreement, shall be deemed to be coupled
with an interest and shall revoke all prior proxies granted by such Golisano and
Wayman. Each of Golisano and Wayman shall not grant any proxy to any person
which conflicts with the proxy granted herein, and any attempt to do so shall be
void. The power of attorney granted herein is a durable power of attorney and
shall survive the disability or incompetence of such Stockholder.
4.2 Appraisal Rights. Each of Golisano and Wayman hereby
waives his rights to appraisal under Section 262 of the DGCL with respect to any
shares of Company Stock owned by him in connection with the transactions
contemplated by the Merger Agreement. Each of Golisano and Wayman hereby agrees
that he will not in any way attempt to influence, encourage or persuade any
Person who beneficially owns any Company Stock to exercise any rights to
appraisal such Person may have pursuant to Section 262 of the DGCL in connection
with said transactions.
4.3 Waiver of Certain Rights. Each Initial Stockholder
hereby waives and agrees not to assert any claims or rights it may have against
any officer or director of the Company relating to or arising out of actions or
omissions occurring at or prior to the Effective Time or the closing of the
Offer, as the case may be, including, without limitation, in respect of approval
or adoption of the Merger Agreement or the consummation of the Merger or the
other transactions contemplated thereby.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification in the Event of the Offer. Each
Stockholder agrees that the indemnification provisions set forth in Article 8 of
the Merger Agreement shall be applicable in the event Acquiror consummates the
Offer pursuant to Section 3.7 hereof; provided, however, that only Stockholders
who tender Shares in the Offer shall be responsible for such indemnification and
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<PAGE>
each such Stockholder shall only be responsible for such Stockholder's
Proportionate Share of any claim. In addition, (i) the Escrow Indemnity Period
shall terminate on the first anniversary of the closing of the Offer and the
Closing Date shall be deemed to be the closing of the Offer, (ii) the amount of
Acquiror Stock received by each Stockholder who tenders Shares in the Offer
shall be adjusted to reflect the escrow to be established, and (iii) each
Stockholder will agree to execute the Escrow Agreement with such changes
therein, if any, as are necessary to reflect the differences between the Merger
and the Offer.
5.2 Exclusive Remedy. Except as otherwise provided in
Article 8 and Section 9.8 of the Merger Agreement, the indemnification provided
in this Article shall be the sole and exclusive post-Closing remedy available to
Acquiror against the Stockholders for any Claim under this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Termination. This Agreement shall terminate upon the
earlier to occur of (i) the mutual consent of Acquiror and all of the
Stockholders, (ii) one year after the termination of the Merger Agreement prior
to the consummation of the Merger and (iii) the tenth anniversary of the Closing
Date.
6.2 Amendment. This Agreement may be amended only by a
written instrument executed by the parties or their respective successors or
assigns.
6.3 Notices. Notices, requests, permissions, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if signed by the respective persons giving them (in the case of
any corporation the signature shall be by an officer thereof) and delivered by
hand, deposited in the United States mail (registered or certified, return
receipt requested), properly addressed and postage prepaid, or delivered by
telecopy:
If to Acquiror, to:
Iron Mountain Incorporated
745 Atlantic Avenue, 10th Floor
Boston, Massachusetts 02111
Telephone: (617) 357-4455
Telecopy: (617) 350-7881
Attention: Chairman of the Board
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<PAGE>
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Telephone: (617) 338-2800
Telecopy: (617) 338-2880
Attention: William J. Curry, Esq.
If to the Stockholders, to:
c/o B. Thomas Golisano
911 Panorama Trail South
Rochester, NY 14625
Telephone: (716) 385-6666
Telecopy: (716) 383-3428
with a copy to:
Woods, Oviatt, Gilman, Sturman & Clarke LLP
44 Exchange Street
Rochester, NY 14614
Telephone: (716) 987-2821
Telecopy: (716) 454-3968
Attention: Harry P. Messina, Jr., Esq.
6.4 Counterparts. This Agreement may be executed in one or
more counterparts and each counterpart shall be deemed to be an original, but
all of which shall constitute one and the same original.
6.5 Applicable Law. This Agreement shall be governed by,
and construed in accordance with the laws of the State of Delaware without
reference to choice of law principles, including all matters of construction,
validity and performance.
6.6 Severability; Enforcement. The invalidity of any
portion hereof shall not affect the validity, force or effect of the remaining
portions hereof. If it is ever held that any restriction hereunder is too broad
to permit enforcement of such restriction to its fullest extent, each party
agrees that a court of competent jurisdiction may enforce such restriction to
the maximum extent permitted by law, and each party hereby consents and agrees
that such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction. In furtherance of the foregoing, if any court
construes any of the provisions of Section 3.6, or any part thereof, to be
unreasonable because of the duration of such provision or the geographic scope
thereof, such court shall have the power to reduce the duration or restrict the
geographic scope of such provision and to enforce such provision as so reduced
or restricted.
-13-
<PAGE>
6.7 Further Assurances. Each party hereto shall execute and
deliver such additional documents as may be necessary or desirable to consummate
the transactions contemplated by this Agreement.
6.8 Additional Stockholders; Parties in Interest;
Assignment. The parties hereto agree that, from time to time, any and all
Additional Stockholders of the Company may be added as parties hereto by (i)
approving a resolution or taking such other action at the Special Meeting as
Acquiror and the Company may agree upon or (ii) executing a counterpart of this
Agreement or an agreement by which such stockholder agrees to join and to be
bound hereby, and without in either case further action by any party hereto or
thereto. Neither this Agreement nor any of the rights, interest or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties. Notwithstanding the foregoing, for the
purposes of Sections 3.5 and 3.6, the term Acquiror shall include any Entity
controlling, controlled by or under common control with Acquiror, any successor,
by operation of law or otherwise of Acquiror, or any entity controlling,
controlled by or under common control with Acquiror, and any assignee of
Acquiror.
6.9 Entire Agreement. This Agreement and the Merger
Agreement and the Collateral Documents contain the entire understanding of the
parties hereto and thereto with respect to the subject matter contained herein
and therein, and supersede and cancel all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
respecting such subject matter. There are no restrictions, promises,
representations, warranties, agreements or undertakings of any party hereto or
to the Merger Agreement or any of the Collateral Documents with respect to the
transactions contemplated by this Agreement and the Merger Agreement and the
Collateral Documents other than those set forth herein or therein or made
hereunder or thereunder.
6.10 Specific Performance. The parties hereto agree that
the remedy at law for any breach of this Agreement will be inadequate and that
any party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
6.11 Headings; References. The section and paragraph
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. All
references herein to "Sections" or "Exhibits" shall be deemed to be references
to Articles or Sections hereof or Exhibits hereto unless otherwise indicated.
[Signatures appear on following page.]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto had caused
this Agreement to be duly executed and delivered as of the day and year first
above written.
IRON MOUNTAIN INCORPORATED
By: /s/ David S. Wendell
---------------------------------------------
Name: David S. Wendell
Title: President and Chief Operating Officer
/s/ B. Thomas Golisano
---------------------------------------------
B. Thomas Golisano
/s/ James B. Wayman, Jr.
---------------------------------------------
James B. Wayman, in his individual capacity
and as custodian for Alexander B. Wayman
and Catherine Lia Wayman
[Additional signature pages follow.]
-15-
<PAGE>
---------------------------------------------
Roselee Wayman
---------------------------------------------
John Glynn
/s/ Harvey H. Bundy III
---------------------------------------------
Harvey H. Bundy III, in his capacities
as Trustee for each of the Clark H. Bundy
1992 Trust, Elizabeth Lowell Bundy 1996
Trust, H. Hollister Bundy III 1990 Trust
and Harvey H. Bundy III 1992 Trust
/s/ Blakely F. Bundy
---------------------------------------------
Blakely F. Bundy , in her capacities as
Trustee for the Blakely F. Bundy 1992
Trust and as Custodian for Reed F. Bundy
/s/ David F. Bellet
---------------------------------------------
David F. Bellet
/s/ Hugh J. Rundle
---------------------------------------------
Hugh J. Rundle
---------------------------------------------
Paul R. Altavena
/s/ Charles T. Graham
---------------------------------------------
Charles T. Graham
-16-
<TABLE>
<CAPTION>
Exhibit 11
IRON MOUNTAIN INCORPORATED
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Amounts in thousands except per share data)
----------------------------------------------------
1994 1995 1996
--------------- ------------ --------------
<S> <C> <C> <C>
Net loss applicable to common stockholders .................... $ (128) $ (1,859) $ (2,049)
=============== ============= ==============
Weighted average shares:
Common stock - voting ...................................... -- -- 8,812
Common stock - non-voting .................................. -- -- 458
Class A common stock ....................................... 29 38 4
Class C common stock ....................................... 185 -- --
Series A1 preferred stock .................................. 1,152 556 11
Series A2 preferred stock .................................. 1,808 1,948 164
Series A3 preferred stock .................................. -- 432 73
Series C preferred Stock .................................. 4,810 4,810 407
--------------- ------------ -------------
Weighted average shares outstanding ........................... 7,984 7,784 9,929
Dilutive effect of stock options considered common stock
equivalents computed under the treasury stock method using
the average price - (1) .................................... -- -- 208
---------------- ------------ -------------
Weighted average common and common equivalent shares
outstanding ................................................ 7,984 7,784 10,137
=============== ============ =============
Net loss per common and common equivalent
share $ (0.02) $ (0.24) $ (0.20)
=============== ============ =============
</TABLE>
(1) These shares are included pursuant to APB Opinion No. 15 which provides
that the determination of whether shares are antidilutive should be based on the
higher of Net income (loss) or Income before extraordinary charge.
<TABLE>
<CAPTION>
Exhibit 12
IRON MOUNTAIN INCORPORATED
STATEMENT OF THE CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
Year Ended December 31,
--------------------------------------------------------------------------
1992 1993 1994 1995 1996
---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Earnings:
Income from operations before provision
for income taxes ..................... $ 3,682 $ 3,656 $ 3,241 $ 1,945 $ 1,792
Add: Fixed charges .................... 12,079 12,430 13,472 17,058 21,939
---------- --------- --------- --------- ---------
$ 15,761 $ 16,086 $ 16,713 $ 19,003 $ 23,731
========== ========= ========= ========= =========
Fixed charges:
Interest expense ...................... $ 8,412 $ 8,203 $ 8,954 $ 11,838 $ 14,901
Interest portion of rent expense ...... 3,667 4,227 4,518 5,220 7,038
---------- ---------- --------- --------- ---------
$ 12,079 $ 12,430 $ 13,472 $ 17,058 $ 21,939
========== ========= ========= ========= =========
Ratio of earnings to fixed charges ......... 1.3x 1.3x 1.2x 1.1x 1.1x
========== ========= ========= ========= =========
</TABLE>
Exhibit 21
LIST OF SUBSIDIARIES OF REGISTRANT
Subsidiary of Registrant
1. Iron Mountain Records Management, Inc.
(in California, also does business as Metro Records Management)
State of incorporation -- Delaware
Subsidiaries of Iron Mountain Records Management, Inc.
1. Metro Business Archives, Inc. (doing business at Metro Business Archives)
State of incorporation -- New York
2. Criterion Atlantic Property, Inc.
State of incorporation -- Delaware
3. Criterion Property, Inc.
State of incorporation -- Delaware
4. Hollywood Property, Inc.
State of incorporation -- California
5. IM San Diego, Inc.
State of incorporation -- Delaware
6. Iron Mountain Consulting Services, Inc.
State of incorporation -- Delaware
7. Iron Mountain Data Protection Services, Inc.
State of incorporation -- Massachusetts
8. Iron Mountain Records Management of Maryland, Inc.
State of incorporation -- Delaware
9. Iron Mountain Records Management of Ohio, Inc.
State of incorporation -- Delaware
10. Iron Mountain Wilmington, Inc.
State of incorporation -- Delaware
11. Iron Mountain Records Management of Missouri LLC
State of organization -- Delaware
12. Iron Mountain Records Management of Boston, Inc.
State of incorporation -- Massachusetts
13. Data Archive Services, Inc.
State of incorporation -- Delaware
14. Iron Mountain Records Management of Minnesota, Inc.
State of incorporation -- Delaware
15. Iron Mountain Records Management of Michigan, Inc.
State of incorporation -- Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the audited consolidated Balance Sheet at December 31, 1996 and the
audited consolidated Statement of Operations for the Year 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. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1.000
<CASH> 3,453
<SECURITIES> 0
<RECEIVABLES> 25,197
<ALLOWANCES> (1,061)
<INVENTORY> 767
<CURRENT-ASSETS> 34,788
<PP&E> 163,495
<DEPRECIATION> (45,146)
<TOTAL-ASSETS> 281,799
<CURRENT-LIABILITIES> 26,830
<BONDS> 184,733
0
0
<COMMON> 101
<OTHER-SE> 52,283
<TOTAL-LIABILITY-AND-EQUITY> 281,799
<SALES> 138,718
<TOTAL-REVENUES> 138,718
<CGS> 70,747
<TOTAL-COSTS> 122,025
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,901
<INCOME-PRETAX> 1,792
<INCOME-TAX> 1,435
<INCOME-CONTINUING> 357
<DISCONTINUED> 0
<EXTRAORDINARY> 2,126
<CHANGES> 0
<NET-INCOME> (1,769)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
