SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
- --------------------------------------------------------------------------------
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 8, 1999
IRON MOUNTAIN INCORPORATED
--------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation or Organization)
0-27584 04-3107342
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(Commission file number) (I.R.S. Employer Identification No.)
745 Atlantic Avenue, Boston, MA 02111
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(Address of Principal Executive Offices, Including Zip Code)
(617) 535-4766
--------------
(Registrant's Telephone Number, Including Area Code)
<PAGE>
All share and per share data contained herein has been restated to reflect the
three-for-two stock split previously reported on the Form 8-K filed with the
Securities and Exchange Commission on July 10, 1998.
Item 2. Acquisition or Disposition of Assets
Data Base, Inc. and Affiliate
On April 8, 1999, Iron Mountain Incorporated ("Iron Mountain" or the
"Registrant") acquired all of the outstanding capital stock of Data Base, Inc.
pursuant to a Stock Purchase Agreement among Iron Mountain, Data Base, Inc. and
the stockholders of Data Base, Inc. Data Base, Inc. is a premier provider of
data security services, with over 3,000 customers. In addition, Iron Mountain
acquired certain real estate used in Data Base, Inc.'s operations pursuant to a
Real Estate Purchase and Sale Agreement with Data Base Real Estate Holdings LLC
("DBR" or the "Affiliate"). The acquisition of the stock and real estate was
accounted for as a purchase. Data Base, Inc. and DBR are hereafter collectively
referred to as Data Base.
Total consideration for the Data Base acquisition and related real estate,
including estimated transaction costs, was approximately $116.0 million. This
amount consisted of approximately $70 million in cash and assumed debt and
expenses and 1,476,577 shares of the Registrant's Common Stock, $.01 par value
per share (the "Common Stock"). The funds used for the cash consideration were
comprised of borrowings under Iron Mountain's $250 million revolving credit
facility, dated September 27, 1997, as amended, among Iron Mountain, various
financial institutions and The Chase Manhattan Bank, as administrative agent for
such lenders (the "Credit Agreement").
The assets acquired by Iron Mountain include real property, tangible personal
property (consisting primarily of office equipment, furniture and fixtures,
motor vehicles, racking and shelving) and intangible personal property regularly
used in Data Base's records and information management business. Iron Mountain
intends to use the acquired property and equipment in the operation of its
records and information management business.
Britannia Data Management Limited
On January 4, 1999, as previously reported on Form 8-K filed with the Securities
and Exchange Commission on January 19, 1999, Iron Mountain, through a wholly
owned subsidiary, purchased a controlling 50.1 percent interest in Britannia
Data Management Limited, a corporation formed under the laws of England and
Wales ("BDM"), pursuant to an Agreement, dated December 2, 1998, between Iron
Mountain and Mentmore Abbey plc. The acquisition was accounted for as a purchase
and BDM will be included in Iron Mountain's consolidated financial results from
the date of acquisition.
Total consideration for the 50.1 percent interest in BDM was $49.8 million
consisting of cash and the capital stock of Arcus Data Security Limited ("ADS"),
Iron Mountain's existing data security business in London. The funds used for
the consideration were comprised of borrowings under the Credit Agreement.
National Underground Storage, Inc.
On July 1, 1998, as previously reported on the Form 8-K filed with the
Securities and Exchange Commission on July 10, 1998, National Underground
Storage, Inc. ("NUS") merged with and into a wholly owned subsidiary of Iron
Mountain pursuant to an Agreement and Plan of Merger dated June 5, 1998 among
NUS and the Registrant's wholly owned
subsidiary.
Total consideration was $29.2 million in cash and assumed debt. The funds used
for the consideration
2
<PAGE>
were comprised of a portion of the net proceeds from the Registrant's 1998
public offering (the "Equity Offering") of 6.0 million shares of its Common
Stock and borrowings under the Credit Agreement. The acquisition was accounted
for as a purchase.
Arcus Group, Inc.
On January 6, 1998, as previously reported on the Form 8-K filed with the
Securities and Exchange Commission on January 13, 1998, the Registrant, Arcus
Group, Inc. ("AGI"), United Acquisition Company ("UAC") and Arcus Technology
Services, Inc. ("ATSI" and together with AGI and UAC, "Arcus") consummated the
transactions contemplated by a certain Agreement and Plan of Merger among the
Registrant and Arcus dated September 26, 1997.
In consideration, the Registrant issued approximately 2.2 million shares of its
Common Stock valued at $39.4 million and options to purchase approximately 0.9
million shares of its Common Stock valued at $15.6 million. In addition, Iron
Mountain paid cash and assumed debt totaling $98.7 million. The funds used for
the consideration were comprised of a portion of the net proceeds from the sale
of the Registrant's $250 million in aggregate principal amount of 8.75% Senior
Subordinated Notes due 2009 (the "1997 Notes") and borrowings under the Credit
Agreement. The acquisition was accounted for as a purchase.
Item 5. Other Events
Proposed Equity Offering
The Company is currently planning an underwritten public offering of 5,000,000
shares of its Common Stock. The Company intends to use the proceeds from such
offering to repurchase shares of Common Stock issued in Iron Mountain's
acquisition of Data Base, to repay debt and for general corporate purposes,
including future acquisitions. Although the Company currently expects to
complete such public equity offering within the second quarter of 1999, the
Company cannot assure you that this will occur. The public equity offering will
be made only by means of a prospectus. This does not constitute an offer to sell
or solicit an offer to buy shares of Common Stock.
As part of the Data Base acquisition, the Company has agreed with the sellers to
purchase from them all or a portion of the 1,476,577 shares of the Common Stock
issued to them if the Company completes its currently proposed public equity
offering. The Company would repurchase their shares at a per share price equal
to the per share offering price in Iron Mountain's proposed public offering,
less underwriting discounts. This repurchase is contingent on closing Iron
Mountain's proposed public equity offering.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the Businesses Acquired:
Data Base, Inc. and Affiliate Page
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Independent Auditor's Report 6
Combined Balance Sheets as of December 31, 1997 and 1998 7
Combined Statements of Operations for the years ended
December 31, 1996, 1997 and 1998 8
Combined Statements of Stockholders' and Members' Equity for
the years ended December 31, 1996, 1997 and 1998 9
Combined Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998 10
Notes to Combined Financial Statements 11
3
<PAGE>
Britannia Data Management Limited
The audited financial statements of BDM as of and for the years
ended October 31, 1997 and 1998 were previously filed on the Form
8-K/A filed with the Securities and Exchange Commission on March 22,
1999.
National Underground Storage, Inc.
The audited financial statements of NUS as of and for the years
ended December 31, 1997 and 1996, and the unaudited financial
statements as of June 30, 1998 and for the six months ended June 30,
1998 and 1997, were previously filed on the Form 8-K filed with the
Securities and Exchange Commission on August 7, 1998.
Arcus Technology Services, Inc.
The audited financial statements of ATSI as of December 31, 1997 and
1996 and for the five month period ended December 31, 1995 and each
of the two years ended December 31, 1997, and of Arcus, Inc. (the
"Predecessor Company") for the seven month period ended July 31,
1995, were previously filed on the Form 8-K filed with the
Securities and Exchange Commission on March 9, 1998.
Page
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(b) Pro Forma Financial Information: 22
Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of December 31, 1998 23
Unaudited Pro Forma Condensed Consolidated Statement
of Operations for the Year Ended
December 31, 1998 24
Notes to the Unaudited Pro Forma Condensed
Consolidated Financial Statements 25
(c) Exhibits:
Exhibit 2.1 Stock Purchase Agreement, dated as of February 28, 1999, by
and among Iron Mountain, Data Base and all of the
Stockholders of Data Base (portions of this exhibit have been
omitted pursuant to a request for confidential treatment)
filed as an exhibit to Iron Mountain's Annual Report on Form
10-K for the year ended December 31, 1998 filed with the
Securities and Exchange Commission (File No. 0-27584).
Exhibit 2.2 Stock Purchase Agreement, dated as of April 1, 1999, by and
among Iron Mountain Records Management, Inc., First American
Records Management, Inc. and all of the stockholders of First
American Records Management, Inc. (portions of this exhibit
have been omitted pursuant to a request for confidential
treatment).
4
<PAGE>
Exhibit 10.1 First Amendment to Stock Purchase Agreement, dated as of
April 8, 1999, by and among Iron Mountain, Data Base, Inc.
and all of the stockholders of Data Base, Inc.
Exhibit 10.2 Amendment, Waiver and Joinder to Registration Rights
Agreement, dated as of April 8, 1999, by and among Iron
Mountain, the stockholders of Data Base, Inc. and certain
parties to Iron Mountain's Amended and Restated Registration
Rights Agreement.
Exhibit 10.3 Iron Mountain Incorporated 1995 Stock Incentive Plan, as
amended.
Exhibit 23.1 Consent of Moss Adams L.L.P. (Data Base, Inc. and Affiliate)
5
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Members
of Data Base, Inc. and Affiliate:
We have audited the accompanying combined balance sheets of Data Base, Inc. and
Affiliate at December 31, 1997 and 1998, and the related combined statements of
operations, stockholders' and members' equity and cash flows for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the companies' 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 combined financial position of Data Base, Inc. and
Affiliate at December 31, 1997 and 1998, and the results of their combined
operations and cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
/s/ Moss Adams LLP
Seattle, Washington
April 8, 1999
6
<PAGE>
DATA BASE, INC. AND AFFILIATE
COMBINED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
--------------- ---------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .......................................... $ 116,665 $ 747,812
Restricted cash .................................................... 700,000 --
Accounts receivable (less allowances of $55,500 and $55,837
as of 1997 and 1998, respectively) ................................ 4,066,999 3,797,336
Notes and other receivables from related parties ................... 1,006,978 155,283
Inventory .......................................................... 59,423 72,424
Prepaid expenses ................................................... 81,812 103,490
----------- ------------
Total Current Assets ............................................ 6,031,877 4,876,345
----------- ------------
Net Property, Plant and Equipment ................................... 19,869,255 21,933,779
----------- ------------
Other Assets:
Deposits and other assets .......................................... 304,353 299,989
Intangible assets, net ............................................. 2,345,418 4,594,961
----------- ------------
Total Other Assets .............................................. 2,649,771 4,894,950
----------- ------------
Total Assets .................................................... $28,550,903 $ 31,705,074
=========== ============
LIABILITIES AND STOCKHOLDERS'AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term obligations ........................ $ 3,348,476 $ 1,545,545
Notes payable to related parties ................................... -- 707,938
Demand notes and other current obligations ......................... 861,280 635,739
Accounts payable ................................................... 1,442,372 549,844
Construction costs payable ......................................... -- 1,185,470
Accrued compensation ............................................... 1,199,406 1,058,643
Other accrued liabilities .......................................... 269,852 113,258
Deferred revenue ................................................... 294,446 96,161
----------- ------------
Total Current Liabilities ....................................... 7,415,832 5,892,598
----------- ------------
Long-Term Obligations:
Notes and other payables, less current portion ..................... 16,272,754 19,227,177
Notes payable to related parties, less current portion ............. 1,325,000 --
----------- ------------
Total Long-term Obligations ..................................... 17,597,754 19,227,177
----------- ------------
Commitments and Contingencies (Notes 13 and 17)
Stockholders' and Members' Equity:
Common stock ....................................................... 8,550 8,550
Contributed capital ................................................ 1,520,657 1,520,657
Members' equity .................................................... (445,863) (1,150,439)
Retained earnings .................................................. 2,453,973 6,206,531
----------- ------------
Total Stockholders' and Members' Equity ......................... 3,537,317 6,585,299
----------- ------------
Total Liabilities and Stockholders' and Members' Equity ......... $28,550,903 $ 31,705,074
=========== ============
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
7
<PAGE>
DATA BASE, INC. AND AFFILIATE
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Storage ............................................... $19,059,667 $21,746,450 $24,907,140
Service and storage material sales .................... 1,729,161 3,195,462 1,682,146
----------- ----------- -----------
Total Revenues ...................................... 20,788,828 24,941,912 26,589,286
----------- ----------- -----------
Operating Expenses:
Cost of sales (excluding depreciation and amortization) 7,988,071 11,780,052 11,336,967
Selling, general and administrative ................... 8,459,489 8,017,124 6,554,557
Depreciation and amortization ......................... 1,951,693 3,732,601 3,705,727
----------- ----------- -----------
Total Operating Expenses ............................ 18,399,253 23,529,777 21,597,251
----------- ----------- -----------
Operating Income ....................................... 2,389,575 1,412,135 4,992,035
Interest Expense, Net .................................. 643,450 1,598,404 1,775,911
----------- ----------- -----------
Net Income (Loss) ...................................... $ 1,746,125 $ (186,269) $ 3,216,124
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
8
<PAGE>
DATA BASE, INC. AND AFFILIATE
COMBINED STATEMENTS OF STOCKHOLDERS' AND MEMBERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
Total
Stockholders'
Common Contributed Members' Retained and Members'
Stock Capital Equity Earnings Equity
------------ ------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 ............... $ 84,300 $1,174,907 $ -- $ 893,461 $ 2,152,668
Contributions from members .............. -- -- 334,876 -- 334,876
Distributions to members ................ -- -- (608,960) -- (608,960)
Distributions to stockholders ........... -- -- -- (1,043,292) (1,043,292)
Net income (loss) ....................... -- -- (361,590) 2,107,715 1,746,125
--------- ---------- ------------ ------------ ------------
Balance, December 31, 1996 ............... 84,300 1,174,907 (635,674) 1,957,884 2,581,417
Reclassification of contributed
capital resulting from
reorganization ......................... (75,750) 75,750 -- -- --
Contributions from members .............. -- -- 1,087,068 -- 1,087,068
Contributions from stockholders ......... -- 270,000 -- -- 270,000
Distributions to stockholders ........... -- -- -- (214,899) (214,899)
Net income (loss) ....................... -- -- (897,257) 710,988 (186,269)
--------- ---------- ------------ ------------ ------------
Balance, December 31, 1997 ............... 8,550 1,520,657 (445,863) 2,453,973 3,537,317
Contributions from members .............. -- -- 304,615 -- 304,615
Distributions to stockholders ........... -- -- -- (472,757) (472,757)
Net income (loss) ....................... -- -- (1,009,191) 4,225,315 3,216,124
--------- ---------- ------------ ------------ ------------
Balance, December 31, 1998 ............... $ 8,550 $1,520,657 $ (1,150,439) $ 6,206,531 $ 6,585,299
========= ========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
\
9
<PAGE>
DATA BASE, INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
--------------- ---------------- ---------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss) .......................................... $ 1,746,125 $ (186,269) $ 3,216,124
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization ............................. 1,951,693 3,732,601 3,705,727
Changes in Assets and Liabilities (exclusive of
acquisitions)
Accounts receivable ....................................... (439,563) (1,881,370) 444,228
Inventory ................................................. (65,275) 8,477 (13,001)
Prepaid expenses .......................................... 36,228 1,104 (14,567)
Deposits and other assets ................................. 68,722 (100,729) (11,005)
Accounts payable .......................................... (69,193) 932,210 (961,962)
Construction costs payable ................................ -- -- 1,185,470
Accrued liabilities ....................................... 312,665 368,799 (297,355)
Deferred revenue .......................................... 40,307 (74,548) (198,284)
------------ ------------- ------------
Cash Flows Provided by Operating Activities ............. 3,581,709 2,800,275 7,055,375
------------ ------------- ------------
Cash Flows from Investing Activities
Restricted cash ........................................... -- (700,000) 700,000
Acquisition of property, plant and equipment .............. (3,929,254) (7,813,404) (5,378,980)
Acquisition of File Protek, Inc. .......................... -- -- (1,960,000)
Acquisition of First Safe Deposit Corp. ................... -- (2,169,747) --
Acquisition of Fortress for Valuables ..................... -- (2,661,117) --
Acquisition of United Leasing Corporation ................. -- (54,602) --
Proceeds from sale of property, plant and equipment ....... 8,375 -- 76,150
Notes and other receivables from related parties, net ..... 35,271 (899,965) 851,696
------------ ------------- ------------
Cash Flows Used in Investing Activities ................. (3,885,608) (14,298,835) (5,711,134)
------------ ------------- ------------
Cash Flows from Financing Activities
Net borrowing (repayment) on line of credit ............... 1,250,000 (750,000) (500,000)
Proceeds from current and long-term obligations ........... 4,999,899 14,331,280 4,150,000
Payments on current and long-term obligations ............. (2,017,321) (10,704,412) (4,089,403)
Payment for early retirement of capital lease ............. -- -- (105,549)
Member contributions ...................................... 1,000 1,000,000 304,615
Member distributions ...................................... (608,960) -- --
Stockholder contributions ................................. -- 270,000 --
Stockholder distributions ................................. (1,043,292) (214,899) (472,757)
------------ ------------- ------------
Cash Flows Provided by (Used in) Financing
Activities ............................................ 2,581,326 3,931,969 (713,094)
------------ ------------- ------------
Increase (decrease) in Cash and Cash Equivalents ............ 2,277,427 (7,566,591) 631,147
Cash and Cash Equivalents, Beginning of Year ................ 5,405,829 7,683,256 116,665
------------ ------------- ------------
Cash and Cash Equivalents, End of Year ...................... $ 7,683,256 $ 116,665 $ 747,812
============ ============= ============
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
10
<PAGE>
DATA BASE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Summary of Accounting Policies
Basis of Presentation
The accompanying combined financial statements include the accounts of
Data Base, Inc. (DBI) and Affiliate (collectively, the Companies). The
affiliate is Data Base Real Estate Holdings, LLC (DBRHC), whose majority member
is also the majority stockholder of DBI. All material intercompany accounts and
transactions have been eliminated in combination.
For financial reporting purposes, all land and buildings owned (less
accumulated depreciation) by the majority member, net of related outstanding
mortgage notes payable, are presented as if contributed to DBRHC on January 1,
1996. Additionally, all revenues and expenses of DBRHC are accounted for in the
accompanying combined statement of operations.
Nature of the Business and Organization
DBI is a full service provider of offsite data recovery management
services including Data Protection Services (DPS), Disaster Recovery Services
(DRS), Tape Move Services (TMS), Electronic Vaulting Services (EVS), Data
Escrow Services (ESC) and other auxiliary services required to fully support
the core offerings. DBI provides these services in twelve locations throughout
the United States to Fortune 500 companies, large financial institutions and
numerous legal, health care, accounting, insurance, entertainment and
governmental organizations.
The Data Base Combined Group, which consisted of seven separate companies
under common ownership at December 31, 1996, merged into one company, DBI,
effective January 1, 1997. This transaction resulted in a decrease in common
stock from $84,300 to $8,550 and an increase in contributed capital of $75,750
at January 1, 1997. The Combined Group included the accounts of Data Base,
Inc., Data Base Co., Inc., Data Base of Virginia, Inc., Data Base of Northern
Virginia, Inc., Data Base of Chicago, Inc., Data Base of Ohio, Inc., and Data
Base of Pennsylvania, LLC.
DBRHC, a Washington limited liability company, was formed in October 1996
to hold land and buildings that are rented solely to DBI under long-term rental
agreements. DBRHC authorized 10,000 member units, which were issued for $100 in
total.
Members' equity in the accompanying combined balance sheets includes
DBRHC's results of operations net of eliminations, and contributions and
distributions. All other equity accounts include the activity for DBI.
Allocation of Net Profits and Losses of DBRHC
Net profits, net losses and cash distributions, as defined in the Limited
Liability Company Agreement (the Agreement), are to be allocated to the members
in accordance with their respective percentage interests. The net loss
allocated to each member is not to exceed the maximum amount of the net loss
that can be allocated without causing a member to have a deficit capital
account at the end of the fiscal year.
Special allocations, corrective allocations and other allocations, all as
defined in the Agreement, are also allocated to members in accordance with the
Agreement.
Cash Equivalents
For purposes of the statements of cash flows, the Companies consider all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
11
<PAGE>
DATA BASE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1998
1. Summary of Accounting Policies (continued)
Restricted Cash
At December 31, 1997, a $700,000 certificate of deposit was pledged as
collateral on outstanding notes payable related to buildings and land owned by
DBRHC.
Inventory
Inventories, which consist of disaster recovery carts held for resale, are
stated at the lower of cost, on a first-in, first-out basis, or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. The Companies provide
for depreciation on property, plant and equipment on a straight-line basis over
the estimated useful lives of such assets. The following is a listing of asset
types and their respective estimated useful lives in years.
<TABLE>
<S> <C>
Buildings .............................. 15-40
Leasehold improvements ................. 10
Equipment and racking .................. 5-7
Vehicles ............................... 5
Computer hardware and software ......... 5
Office furniture and fixtures .......... 7
</TABLE>
Maintenance and repairs are charged to operations as incurred. When
equipment is sold or otherwise disposed of, the asset and accumulated
depreciation are removed from the accounts and the resulting gain or loss is
included in the respective statement of operations.
Intangible Assets
Goodwill reflects the cost in excess of the 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, which is estimated to be twenty-five years. Amortization on
non-competition agreements is calculated using the straight-line method over
the five-year life of the agreements.
Impairment of Long-Lived Assets
The Companies assess the recoverability of goodwill, as well as other long
lived assets based upon expectations of future undiscounted cash flows in
accordance with the 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."
Software Costs
DBI develops software for internal use. The costs associated with the
development have been capitalized in accordance with each phase of development.
Upon substantial completion of each phase, capitalization ceases and the asset
is placed in service. The related costs are then amortized on a straight-line
basis over the estimated useful life of five years. In March 1998, the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Management believes that the effect of applying the new
statement is not material to the results of operations or financial position.
12
<PAGE>
DATA BASE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1998
1. Summary of Accounting Policies (continued)
DBI also develops software for sale to external customers and has
capitalized a portion of these costs in accordance with SFAS No. 86,
"Accounting for the Costs of Computer Software To Be Sold, Leased or Otherwise
Marketed." The related costs are then amortized on a straight-line basis over
the estimated useful life of five years. The company performs an annual review
of the internally developed software assets to determine the appropriate amount
to record as amortization expense.
Revenue Recognition
Revenues for DBI consist of storage revenues and service and storage
material sales revenues. Storage revenues consist of periodic charges related
to the storage of materials on a per unit basis. In certain circumstances,
based upon customer requirements, storage revenues include periodic charges
associated with normal recurring service activities. Service and storage
material sales revenues are comprised of charges for related service activities
and the sale of storage materials. Customers are generally billed on a monthly
basis on contractually agreed-upon terms.
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 revenue and amortized over
the applicable period. Advance payments cover periods ranging from four to
twelve months in duration. Most customers are billed in arrears.
Federal Income Tax
DBI has elected to be taxed as a Small Business Corporation pursuant to
subchapter S of the Internal Revenue Code. Under this election, DBI's
stockholders, rather than the corporation, are liable for federal and state
income taxes. Accordingly, there is no provision for income taxes in the
accompanying combined statements of operations.
DBRHC is a limited liability company and is treated as a partnership under
the Internal Revenue Code. Accordingly, the members of DBRHC are allocated
their proportionate share of the DBRHC's federal and state taxable income or
loss and there is no provision for income taxes in the accompanying combined
statements of operations.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Significant estimates used in preparing these statements include estimating the
useful lives of assets and intangibles that have a direct effect on net income.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1998
presentation. These changes had no impact on previously reported results of
operations or stockholders' and members' equity.
13
<PAGE>
DATA BASE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1998
2. Acquisitions
File Protek, Inc. (Portland, Oregon)
DBI purchased certain assets and assumed certain liabilities of this
company on December 31, 1998 for $3,077,187. The transaction was funded
utilizing $1,960,000 of available cash, $750,000 in notes payable to the seller
and $250,000 of additional short-term seller financing. Additionally, a working
capital adjustment of $117,187 is payable to the seller at December 31, 1998,
and is included in demand notes and other current obligations in the
accompanying combined balance sheet. The allocation of the purchase price is
detailed below:
<TABLE>
<S> <C>
Working capital .............................. $ 117,187
Tangible personal property ................... 500,000
Non-competition agreements ................... 100,000
Goodwill ..................................... 2,360,000
----------
$3,077,187
==========
</TABLE>
Concurrent with the purchase, DBI assumed an operating lease agreement on
a data protection facility. The data protection facility is leased from a third
party and the lease is in effect through September 30, 2000, requiring monthly
rental payments of $6,263.
First Safe Deposit Corp. (Raleigh, North Carolina)
DBI purchased certain assets of this company on January 31, 1997 for
$3,169,747. The acquisition included a media storage facility and certain
assets of a paper storage business. The transaction was funded utilizing
$336,385 of available cash, $1,000,000 in a note payable to the seller and
$1,833,362 of additional bank financing. The allocation of the purchase price
is detailed below:
<TABLE>
<S> <C>
Land ......................................... $ 75,000
Building ..................................... 608,362
Purchased working capital .................... 161,385
Tangible personal property ................... 1,050,000
Non-competition agreements ................... 100,000
Goodwill ..................................... 1,175,000
----------
$3,169,747
==========
</TABLE>
Concurrent with the purchase, DBI entered into an operating lease
agreement for the paper storage facility land and building, which requires
average annual rents of approximately $138,000 over a five-year term.
Fortress for Valuables (Milwaukee, Wisconsin)
DBI purchased certain assets of this company on February 28, 1997 for
$2,661,117. The transaction was funded utilizing $111,117 of available cash and
$2,550,000 of additional bank financing. The allocation of the purchase price
is detailed below:
<TABLE>
<S> <C>
Land ......................................... $ 325,000
Building ..................................... 675,000
Tangible personal property ................... 1,076,627
Non-competition agreements ................... 100,000
Goodwill ..................................... 484,490
----------
$2,661,117
==========
</TABLE>
14
<PAGE>
DATA BASE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1998
2. Acquisitions (continued)
Concurrent with the purchase, DBI assumed a capital lease on a related
facility, the Total Corporate Recovery Center (TCRC). DBI recorded the building
asset of $747,316 with $19,770 of accumulated amortization at December 31,
1997. Total liabilities assumed with the lease were $469,642.
United Leasing Corporation (Richmond, Virginia)
DBI purchased the assets of this company on May 30, 1997 for $54,602. The
transaction was funded utilizing available cash and the entire purchase price
was allocated to goodwill. Liabilities assumed in this transactions consisted
of deferred revenue only.
The business combinations discussed above have been accounted for under
the purchase method. Accordingly, assets and liabilities have been recorded at
their fair value at acquisition date. Operating results of the acquired
companies are included in the Companies' combined statements of operations from
the respective acquisition date.
3. Notes and Other Receivables from Related Parties
Notes and other receivables from related parties consist of the following
at December 31:
<TABLE>
<CAPTION>
1997 1998
---------- --------
<S> <C> <C>
Data Base Integrated Services Corporation ........... $ 118,795 $125,327
Stockholder ......................................... 850,000 --
Employee loans ...................................... 38,183 29,956
---------- --------
$1,006,978 $155,283
========== ========
</TABLE>
DBI has a receivable due from Data Base Integrated Services Corporation
(DBISC), an affiliate through common ownership, for services paid by DBI on
behalf of DBISC. The outstanding balance is unsecured, due on demand and
subject to monthly interest payments based on a 9% annual rate.
DBI had a receivable due from one of its stockholders totaling $850,000 at
December 31, 1997. The note was unsecured, due on demand and subject to monthly
interest payments based on a 9% annual rate. The note was repaid during 1998.
The remaining balance represents computer loans due from employees,
resulting from DBI's employee computer purchase program.
4. Intangible Assets
Intangible assets consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
------------ ----------
<S> <C> <C>
Non-competition agreements ........... $ 525,000 $ 375,000
Goodwill ............................. 2,941,934 4,546,778
------------ ----------
3,466,934 4,921,778
Accumulated amortization ............. (1,121,516) (326,817)
------------ ----------
$ 2,345,418 $4,594,961
============ ==========
</TABLE>
When intangible assets are fully amortized, the asset and accumulated
amortization are removed from the accounts.
Total amortization of intangibles charged to expense was $203,960,
$281,824 and $230,766 for the years ended December 31, 1996, 1997 and 1998,
respectively.
15
<PAGE>
DATA BASE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1998
5. Property, Plant and Equipment
Property, plant and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
------------- ------------
<S> <C> <C>
Buildings and land ....................... $ 10,878,204 $ 11,199,414
Leasehold improvements ................... 2,657,829 2,893,213
Equipment and racking .................... 8,139,979 6,797,192
Vehicles ................................. 2,726,737 2,670,975
Computer hardware and software ........... 5,206,468 5,992,851
Office furniture and fixtures ............ 1,244,311 1,022,239
Construction in progress ................. 7,197 1,198,644
------------- ------------
30,860,725 31,774,528
Accumulated depreciation and
amortization ............................. (10,991,470) (9,840,749)
------------- ------------
$ 19,869,255 $ 21,933,779
============= ============
</TABLE>
DBI expended approximately $1,756,000, $2,780,000 and $1,130,500 during
1996, 1997 and 1998, respectively, on the internal development of two software
applications.
One of the applications, SecureBase(SM), tracks the operational activity
associated with off site data recovery management. DBI capitalized $2,017,072
and $652,830 in 1997 and 1998, respectively, for costs associated with
SecureBase(SM) development. Cumulative capitalized expenditures for
SecureBase(SM) development through December 31, 1997 and 1998 are $2,503,249 and
$3,156,079, respectively and are included in computer hardware and software.
Management expects to spend an additional $1 to $2 million to complete all
phases of the SecureBase(SM) development effort.
The other application, SecureSync(TM), allows customers to interface with
the SecureBase(SM) application and view and update their off site data recovery
management information. DBI capitalized $145,514 and $194,311 in 1997 and 1998,
respectively, for costs associated with SecureSync(TM) development. Cumulative
capitalized expenditures for SecureSync(TM) development through December 31,
1997 and 1998 are $233,513 and $427,824, respectively and are included in
computer hardware and software. Management expects to spend an additional $1
million to complete all phases of the SecureSync(TM) development effort.
Construction costs payable of $1,185,470 at December 31, 1998 relate to
the construction in progress of the Companies' North Carolina facility.
Total depreciation and amortization of property, plant and equipment
charged to expense was $1,747,733, $3,450,777 and $3,474,961 for the years
ended December 31, 1996, 1997 and 1998, respectively.
Included in depreciation and amortization of property, plant and equipment
are losses on the disposition of property, plant and equipment of $99,198,
$1,124,465 and $95,757 for the years ended December 31, 1996, 1997 and 1998,
respectively.
Additionally, for the year ended December 31, 1998, DBI realized a gain of
$263,346 from the early retirement of debt associated with a capital lease
obligation. Total debt of $368,895 was relieved in exchange for cash of
$105,549. In conjunction with this transaction, DBI also realized a loss on the
disposition of the related building of $712,186. The total net loss of $448,840
is included in depreciation and amortization.
16
<PAGE>
DATA BASE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1998
6. Line of Credit
DBI maintains a revolving line of credit limited to $2,500,000, scheduled
to expire on December 1, 1999. The line of credit is secured by DBI's accounts
receivable, vehicles and equipment, general intangibles and is guaranteed by
the majority stockholder. The line bears interest annually at Seafirst Bank's
prime rate plus 0.5%, which was 8.5% and 7.75% at December 31, 1997 and 1998,
respectively. There were no outstanding advances on the line at December 31,
1998. At December 31, 1997, outstanding advances were $500,000. See Note 8
related to financial and restrictive covenants.
7. Long-Term Obligations
Long-term obligations consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
--------------- --------------
<S> <C> <C>
Note payable to bank (Note 8) ......................................... $ 8,500,000 $ 10,500,000
Notes payable to bank, due in 2007, payments total $61,208 plus
interest
at various rates, secured by deeds of trust on real property. (Note 8) 7,612,058 6,877,557
Subordinated notes payable (Note 9) ................................... 3,775,000 3,657,938
Lease payable, due August 1999, payments of $11,400 including
interest at 8.5%, secured by the TCRC building. ...................... 469,642 --
Note payable to bank, due October 2001, payments of $4,071 per
month including interest at prime plus 2%, secured by a deed of
trust on real property. (Note 8) ..................................... 455,305 445,165
Note payable to bank, due January 1998, payments of $91,666
including interest at prime plus 0.5%, unsecured. .................... 91,666 --
Note payable to bank, due June 2001, payments of $1,105 per month
including interest at 4.9%, secured by a vehicle. .................... 42,559 --
------------ ------------
Total Long-Term Obligations .......................................... 20,946,230 21,480,660
Less -- Current Portion .............................................. (3,348,476) (2,253,483)
------------ ------------
Long-Term Obligations, Net of Current Portion ......................... $ 17,597,754 $ 19,227,177
============ ============
</TABLE>
Aggregate maturities of long-term obligations are as follows:
<TABLE>
<CAPTION>
Years Ending
December 31,
- ------------
<S> <C>
1999 ......................... $ 2,253,483
2000 ......................... 4,918,620
2001 ......................... 4,284,500
2002 ......................... 6,084,500
2003 ......................... 734,500
Thereafter ................... 3,205,057
-----------
$21,480,660
===========
</TABLE>
8. Note Payable to Bank
DBI has a term note payable of $8,500,000 and $10,500,000 at December 31,
1997 and 1998, respectively. The note bears annual interest at 0.25% plus
Seafirst Bank's prime rate or 2.5% plus the 30-day LIBOR rate. At the end of
each month, DBI has the option to choose which interest rate is used for the
17
<PAGE>
DATA BASE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1998
8. Note Payable to Bank (continued)
following month. The interest rate was 8.125% at December 31, 1998. Principal
payments are due as follows:
<TABLE>
<CAPTION>
Monthly Sum of
Payment Payments
----------- --------------
<S> <C> <C>
July - December 1999 ....... $ 50,000 $ 300,000
January - December 2000..... 250,000 3,000,000
January - December 2001..... 275,000 3,300,000
January - November 2002..... 300,000 3,300,000
December, 2000 ............. 600,000 600,000
-----------
$10,500,000
===========
</TABLE>
On December 1, 2002, the entire unpaid balance of principal plus all
unpaid interest is due. The note is secured by bank accounts, accounts
receivable, equipment and general intangibles.
DBI's loan agreements with the bank for the line of credit and the note
payable to bank contain several covenants that include maintaining adequate
stockholders' equity as well as leverage and debt coverage ratios. The
borrowing agreements also contain provisions that place limits on capital
expenditures and stockholder distributions. At December 31, 1998, DBI was in
compliance with all loan covenants.
DBRHC has a series of notes payable related to the acquisition of certain
properties of $7,612,058 and $6,877,557 at December 31, 1997 and 1998,
respectively. The real estate for each property is held as collateral for each
respective loan. Under the terms of each agreement, these notes bear interest
at rates ranging from 2.75% to 3.25% over the annual adjusted index rate, as
defined in the agreements. The interest rates range from 8.45% to 8.77% and
7.36% to 8.67% at December 31, 1997 and 1998, respectively. These notes expire
at various dates in 2007.
DBRHC has a note payable related to the acquisition of a certain property
of $455,305 and $445,165 at December 31, 1997 and 1998, respectively. The real
estate for the property is held as collateral for the loan. Under the terms of
the agreement, this note bears interest at prime plus 2.0% and expires in
October 2001. DBRHC repaid the note in March 1999.
9. Subordinated Notes Payable
DBI has a series of notes payable to a stockholder totaling $1,325,000 and
$707,938 at December 31, 1997 and 1998, respectively. The notes bear interest
at 9.0%, mature on December 31, 1999, and are subordinated to the notes payable
to bank.
DBI has a series of notes payable to an unrelated individual totaling
$1,450,000 at December 31, 1997 and 1998. The notes bear interest at 10.5%,
mature on September 20, 2002, and are subordinated to the notes payable to
bank.
DBI has a note payable for $1,000,000 and $750,000 at December 31, 1997
and 1998, respectively, related to the acquisition of First Safe Deposit Corp.
The note bears interest at 9.5%. The note is due in two installments; $250,000
due February 1, 1999 and the remaining amount of $500,000 due February 1, 2000.
The note is subordinated to the notes payable to bank.
DBI has two notes payable at December 31, 1998 totaling $750,000 related
to the acquisition of File Protek, Inc. The notes bear interest at 8.3% and are
due in three equal installments of $250,000, payable on December 31, 1999, 2000
and 2001. The notes are subordinated to the notes payable to bank.
18
<PAGE>
DATA BASE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1998
10. Demand Notes and Other Current Obligations
DBI has a series of demand notes payable to unrelated third parties for
$215,000 and $206,500 at December 31, 1997 and 1998, respectively, with monthly
interest payments based on an annual rate of 10%. In addition, DBI has
short-term notes payable related to the acquisition of File Protek, Inc. in the
amount of $250,000 and a working capital settlement payable of $117,187 at
December 31, 1998.
DBRHC owes a stockholder $146,280 and $62,052 at December 31, 1997 and
1998, respectively. The obligation bears no interest and is due on demand.
11. Common Stock
On July 28, 1998, DBI amended its corporate bylaws and changed the par
value and authorized number of shares of common stock. The following details
apply to common stock at December 31:
<TABLE>
<CAPTION>
1997 1998
---------- ------------
<S> <C> <C>
Par value .............................. $ 1.00 $ 0.0855
Authorized voting shares ............... 50,000 1,000
Authorized non-voting shares ........... -- 499,000
Outstanding voting shares .............. 8,550 400
Outstanding non-voting shares .......... -- 99,600
</TABLE>
On July 28, 1998, the $1 par value common stock was retired and replaced
with 100,000 shares of $.0855 par value common stock. In August 1998, the
majority stockholder transferred 17,000 non-voting shares to four new
stockholders and retained ownership of 83,000 shares, consisting of 400 voting
shares and 82,600 non-voting shares.
12. Employee Retirement / Profit Sharing Plan
DBI maintains a qualified deferred compensation plan under section 401(k)
of the Internal Revenue Code. Under the plan, employees meeting certain
eligibility requirements may elect to defer up to 15% of their salary, subject
to Internal Revenue Service limits. DBI contributes a matching 50% of the first
6% of employee contributions based upon the participant's salary. Total
contributions made by DBI to the plan were $428,000, $393,901 and $494,495 for
the years ended December 31, 1996, 1997 and 1998, respectively.
13. Commitments
At December 31, 1997 and 1998, various facilities are leased from third
parties under operating leases expiring through 2002. Future rental commitments
under these operating leases are as follows:
<TABLE>
<CAPTION>
Years Ending
December 31,
- ----------------
<S> <C>
1999 ......... $ 519,531
2000 ......... 424,070
2001 ......... 297,677
2002 ......... 129,701
----------
$1,370,979
==========
</TABLE>
Rent expense for DBI paid to third parties was approximately $436,000,
$501,000 and $488,000 for the years ended December 31, 1996, 1997 and 1998,
respectively.
19
<PAGE>
DATA BASE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1998
Note 14. Significant Components of Combined Financial Statements and Related
Party Transactions
The significant components of the entities, including eliminations,
comprising the combined financial statements are as follows:
<TABLE>
<CAPTION>
Combined
DBI DBRHC Eliminations Amounts
-------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C>
1996
Total revenues ............................. $20,788,828 $ 829,368 $ (829,368) $20,788,828
Total operating expenses ................... 19,087,260 141,361 (829,368) 18,399,253
Interest expense, net ...................... 423,221 220,229 -- 643,450
----------- ----------- ------------ -----------
Net income ................................. $ 1,278,347 $ 467,778 $ -- $ 1,746,125
=========== =========== ============ ===========
1997
Property, plant and equipment, net ......... $11,118,307 $ 8,750,948 $ -- $19,869,255
Other assets ............................... 7,684,984 1,120,842 (124,178) 8,681,648
----------- ----------- ------------ -----------
Total assets ............................... $18,803,291 $ 9,871,790 $ (124,178) $28,550,903
=========== =========== ============ ===========
Debt obligations ........................... $13,718,044 $ 8,213,644 $ (124,178) $21,807,510
Other liabilities .......................... 3,153,133 52,943 -- 3,206,076
Stockholders' and members' equity .......... 1,932,114 1,605,203 -- 3,537,317
----------- ----------- ------------ -----------
Total liabilities and stockholders' and
members' equity ......................... $18,803,291 $ 9,871,790 $ (124,178) $28,550,903
=========== =========== ============ ===========
Total revenues ............................. $24,941,911 $ 1,221,699 $ (1,221,698) $24,941,912
Total operating expenses ................... 24,379,621 371,854 (1,221,698) 23,529,777
Interest expense, net ...................... 1,073,000 525,404 -- 1,598,404
----------- ----------- ------------ -----------
Net income (loss) .......................... $ (510,710) $ 324,441 $ -- $ (186,269)
=========== =========== ============ ===========
1998
Property, plant and equipment, net ......... $11,240,196 $10,693,583 $ -- $21,933,779
Other assets ............................... 9,566,833 244,763 (40,301) 9,771,295
----------- ----------- ------------ -----------
Total assets ............................... $20,807,029 $10,938,346 $ (40,301) $31,705,074
=========== =========== ============ ===========
Debt obligations ........................... $14,731,625 $ 7,425,075 $ (40,301) $22,116,399
Other liabilities .......................... 1,757,268 1,246,108 -- 3,003,376
Shareholders' and members' equity .......... 4,318,136 2,267,163 -- 6,585,299
----------- ----------- ------------ -----------
Total liabilities and stockholders' and
members' equity ......................... $20,807,029 $10,938,346 $ (40,301) $31,705,074
=========== =========== ============ ===========
Total revenues ............................. $26,589,288 $ 1,366,530 $ (1,366,532) $26,589,286
Total operating expenses ................... 22,561,715 402,068 (1,366,532) 21,597,251
Interest expense, net ...................... 1,168,790 607,121 -- 1,775,911
----------- ----------- ------------ -----------
Net income ................................. $ 2,858,783 $ 357,341 $ -- $ 3,216,124
=========== =========== ============ ===========
</TABLE>
All properties held by DBRHC are leased to DBI in the normal course of
business under long-term rental agreements. Total rent paid to DBRHC by DBI was
$829,368, $1,221,698 and $1,366,532 for the years ended December 31, 1996, 1997
and 1998, respectively. These amounts have been eliminated in the accompanying
statements of operations.
In the normal course of business, DBI funds capital expenditures for DBRHC
and records a corresponding receivable. Total amount owed to DBRHC by DBI was
$124,178 as of December 31, 1997. Total amount owed to DBI by DBRHC was $40,301
as of December 31, 1998. These amounts have been eliminated in the accompanying
combined balance sheets.
20
<PAGE>
DATA BASE, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1998
15. Supplemental Cash Flow Disclosures
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Cash paid for interest .............................................. $ 678,228 $1,686,091 $1,878,929
Interest capitalized on software .................................... -- 107,000 40,000
Non cash investing and financing activities consist of:
Notes payable exchanged for purchase of File Protek, Inc. ........... -- -- 1,117,187
Refinance of note payable ........................................... -- -- 6,350,000
Subordinated note payable exchanged for purchase of First Safe
Deposit Corp. ..................................................... -- 1,000,000 --
Long-term obligation exchanged for purchase of building ............. -- 547,316 --
Contribution of property, plant and equipment and other assets ...... 3,198,625 87,068 --
Contribution of long-term debt on property, plant and equipment 2,864,749 -- --
Contribution of equity in property, plant and equipment and
other assets ...................................................... 333,876 -- --
</TABLE>
16. Concentration of Credit Risk
Financial instruments which potentially subject the Companies to
concentrations of credit risk include deposits with financial institutions,
short-term investments, and accounts receivable. The Companies place their
deposits and investments with high quality financial institutions; however, at
times, deposits exceed the federally insured limits. DBI generally grants
credit to customers without requiring collateral or other security. DBI's
customers are located throughout the United States.
17. Subsequent Events
On April 8, 1999, Iron Mountain Incorporated (Iron Mountain) purchased all
of the issued and outstanding shares of DBI and all of the land and
improvements of DBRHC for total consideration of approximately $115 million,
which is comprised of approximately $69 million in cash and assumed
indebtedness, and 1,476,577 shares of Iron Mountain common stock.
In anticipation of a possible sale, merger, consolidation or other
business combination of the Companies, DBI established a change in control
severance plan for the benefit of eligible employees of DBI and a discretionary
change of control bonus plan. The severance plan provides for termination
benefits to be paid by the acquiring company to employees who are involuntarily
terminated or who voluntarily terminate their employment for good reason as
defined in the plan. Compensation to be paid under the severance plan is
generally based on a monthly base salary times three to eighteen months,
depending on the position held with the Companies. The change of control bonus
plan provides for a percentage of the enterprise value to be awarded to
employees on a discretionary basis. The amount of the change of control bonus
was approximately $4,786,000 and was paid in April 1999 prior to the closing of
the sale to Iron Mountain. No provision has been made in the combined financial
statements for the change in control severance plan or the discretionary change
of control bonus plan.
DBRHC entered into an agreement with a general contractor to build a new
facility in Cary, North Carolina. The facility was completed on February 1,
1999 at a total cost $1.8 million. DBI will operate the Research Triangle
District out of the new facility.
In January 1999, DBI repaid a $100,000 note to the former owners of File
Protek, Inc.
In February 1999, DBI repaid $250,000 of the note payable to the former
owners of First Safe Deposit Corp. The remaining balance on the note of
$500,000 is due in 2000. DBI entered into an agreement to lease a facility in
Westminster, Colorado from an unrelated third party. The operating lease, which
requires monthly rental payments of $1,879, commences February 15, 1999 and
will run through August 31, 2000.
21
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet has
been prepared based on the historical condensed consolidated balance sheet of
Iron Mountain and the historical condensed combined balance sheet of Data Base
and Affiliate, as of December 31, 1998 and the historical condensed combined
balance sheet of BDM as of October 31, 1998 and gives effect to the Data Base
and BDM acquisitions as if they had occurred as of December 31, 1998. The
following Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1998, gives effect to the acquisitions of BDM and
NUS (together with related real estate transactions, the "Previous
Acquisitions") and the Data Base acquisition, as if each had occurred as of
January 1, 1998. Pro Forma adjustments are described in the accompanying notes.
See "Overview" in the accompanying Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1998, also gives effect to the Equity Offering, and
the application of the net proceeds therefrom, as if the Equity Offering had
occurred as of January 1, 1998. Pursuant to certain SEC Rules and Regulations,
the Unaudited Pro Forma Condensed Consolidated Statement of Operations only
includes results of operations and pro forma adjustments for acquisitions
determined to be individually significant. Accordingly, 13 acquisitions
completed in 1998 and four acquisitions completed in 1999 are not included
herein. In addition, the Unaudited Pro Forma Condensed Consolidated Statement of
Operations does not include results of operations prior to the date of
acquisition, or pro forma adjustments, for an acquisition completed by Data Base
on December 31, 1998. See "Overview - Data Base Acquisition" in the accompanying
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations is
not necessarily indicative of the actual results of operations that would have
been reported had the Data Base acquisition, the Previous Acquisitions and the
Equity Offering been consummated as of January 1, 1998, nor does it purport to
indicate the results of future operations of Iron Mountain. 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 Data Base
acquisition and the Previous Acquisitions. In the opinion of management, all
adjustments necessary to present fairly such pro forma financial statements have
been made.
All of the acquisitions and related real estate transactions have been
accounted for using the purchase method of accounting.
22
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
(In thousands)
<TABLE>
<CAPTION>
Historical Pro Forma Historical Pro Forma
Iron Historical for BDM Data Iron
Mountain BDM (1) Adjustments Acquisition Base Adjustments Mountain
-------- ------- ----------- ----------- ---- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Current Assets $143,937 $13,570 $ 1,280 (A) $ 158,787 $ 4,876 $ -- $ 163,663
Property, Plant and
Equipment, net 266,743 31,988 -- 298,731 21,934 2,252 (G) 322,917
Goodwill, net 527,235 56,963 14,776 (B) 598,974 4,220 85,047 (H) 688,241
Other Long-term
Assets 29,470 -- -- 29,470 675 -- 30,145
-------- -------- -------- ---------- ------- ------- ----------
Total Assets $967,385 $102,521 $ 16,056 $1,085,962 $31,705 $87,299 $1,204,966
======== ======== ======== ========== ======= ======= ==========
Liabilities and
Stockholders'
Equity
Current Liabilities $143,472 $15,073 $ -- $ 158,545 $ 5,893 $(2,889) (I) 161,549
Long-term Debt, net
of Current Portion 454,447 15,109 47,330 (C) 516,886 19,227 50,773 (J)(K) 586,886
Deferred Rent 9,616 -- -- 9,616 -- -- 9,616
Deferred Income Taxes 12,043 837 -- 12,880 -- -- 12,880
Other Long-term
Liabilities 8,925 -- -- 8,925 -- -- 8,925
Minority Interest (2) -- -- 40,228 (D) 40,228 -- -- 40,228
Stockholders' Equity 338,882 71,502 (71,502) (E)(F) 338,882 6,585 39,415 (L)(M) 384,882
-------- -------- -------- ---------- ------- ------- ----------
Total Liabilities and
Stockholders' Equity $967,385 $102,521 $ 16,056 $1,085,962 $31,705 $87,299 $1,204,966
======== ======== ======== ========== ======= ======= ==========
</TABLE>
- --------------------------------------------------------------------------------
(1) Represents the historical condensed combined balance sheet of BDM as of
October 31, 1998 after conversion to U.S. generally accepted accounting
principles. See "Overview--BDM Acquisition" in the accompanying Notes.
(2) Minority interest represents 49.9 percent of the total equity of BDM after
giving pro forma effect to the issuance of capital stock to Iron Mountain in
exchange for cash and the net assets of ADS.
The accompanying Notes are an integral part of these pro forma financial
statements.
23
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Historical Previous Acquisitions For Pro Forma
Iron --------------------- Previous Historical Iron
Mountain NUS(1) BDM(2) Adjustments(5) Acquisitions Data Base(3) Adjustments Mountain
-------- ------ ------ -------------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Storage $230,702 $4,657 $16,258 $ -- $251,617 $24,907 $ -- $276,524
Service and
Storage Material
Sales 192,810 885 14,062 -- 207,757 1,682 -- 209,439
-------- ------ ------- ------- -------- ------- ------- --------
Total Revenues 423,512 5,542 30,320 -- 459,374 26,589 -- 485,963
Operating Expenses:
Cost of Sales
(Excluding
Depreciation) 220,980 2,116 16,511 -- 239,607 11,337 -- 250,944
Selling, General
and Administrative 105,025 1,121 5,580 -- 111,726 6,554 -- 118,280
Depreciation and
Amortization 49,152 713 3,863 405 (N) 54,133 3,706 2,910 (U) 60,749
-------- ------ ------- ------- -------- ------- ------- --------
Total Operating
Expenses 375,157 3,950 25,954 405 405,466 21,597 2,910 429,973
-------- ------ ------- ------- -------- ------- ------- --------
Operating Income 48,355 1,592 4,366 (405) 53,908 4,992 (2,910) 55,990
Interest Expense, net 45,756 282 1,533 1,256 (O)(R) 48,827 1,776 2,599 (V) 53,202
Other Income, net (4) 1,384 -- -- -- 1,384 -- -- 1,384
-------- ------ ------- ------- -------- ------- ------- --------
Income Before
Provision for
Income Taxes and
Minority Interest 3,983 1,310 2,833 (1,661) 6,465 3,216 (5,509) 4,172
Provision for
Income Taxes 6,949 544 1,504 (422) (P)(S) 8,575 -- (917) (W) 7,658
Minority Interest -- -- -- 653 (Q) 653 -- -- 653
-------- ------ ------- ------- -------- ------- ------- --------
Net Income (Loss) $ (2,966) $ 766 $ 1,329 $(1,892) $ (2,763) $ 3,216 $(4,592) $ (4,139)
======== ====== ======= ======= ======== ======= ======= ========
Net Income (Loss)
per Common Share -
Basic and Diluted $ (0.11) $ (0.10) $ (0.14)
======== ======== ========
Weighted Average
Common Shares
Outstanding 27,470 1,538 (T) 29,008 1,477 (X) 30,485
======== ======= ======== ======= ========
</TABLE>
- -------------------------
(1) Represents historical results of operations for NUS for the period prior to
acquisition by Iron Mountain. See "Overview--Previous Acquisitions" in the
accompanying Notes.
(2) Represents the historical condensed combined statement of operations for BDM
after conversion to U.S. generally accepted accounting principles. See
"Overview--Previous Acquisitions" in the accompanying Notes.
(3) Represents the historical condensed combined statement of operations for
Data Base and Affiliate for the year ended December 31, 1998.
(4) Other income, net includes a $1.7 million gain resulting from the settlement
of several insurance claims related to the March 1997 fires at Iron
Mountain's South Brunswick Township, New Jersey facilities.
(5) Includes pro forma adjustments for the Equity Offering and the application
of the net proceeds therefrom.
24
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Overview
Previous Acquisitions
In January 1998, Iron Mountain acquired Arcus Group, Inc. ("Arcus") for
$153.7 million, including $55.0 million in aggregate fair value of Common Stock
and options to acquire Common Stock and the balance in cash and assumed debt. In
July 1998, Iron Mountain acquired National Underground Storage, Inc. ("NUS") for
$30.1 million in cash and assumed debt.
In January 1999, Iron Mountain acquired a 50.1 percent interest in BDM for
total consideration of $49.8 million consisting of $47.3 million in cash and the
balance in the capital stock of ADS. Iron Mountain acquired shares of BDM from
Mentmore Abbey plc ("MA") and from Abbey Storage Limited, a wholly owned
subsidiary of MA. In addition, Iron Mountain acquired newly issued shares from
BDM in exchange for cash and the capital stock of ADS. Upon completion of the
transaction, Iron Mountain owned 50.1 percent of the outstanding capital stock
of BDM and MA owned the remaining 49.9 percent. Concurrent with these
transactions, BDM acquired the net assets of Abbey Records Management ("ARM")
for $5.7 million.
BDM has an April 30 fiscal year end. For consolidation purposes, Iron
Mountain has designated October 31 as the fiscal year end for BDM. Accordingly,
the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31,
1998 includes the condensed combined balance sheet of BDM as of October 31, 1998
and the Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1998 includes the condensed combined statement of
operations of BDM for the fiscal year ended October 31, 1998.
The financial statements of BDM have been prepared in accordance with U.S.
generally accepted accounting principles and have been translated into U.S.
dollars in accordance with Statement of Financial Accounting Standards No. 52,
Foreign Currency Translation. The functional currency of BDM is Pounds Sterling.
Accordingly, assets and liabilities have been translated into U.S. dollars at
the exchange rate on the balance sheet date. Revenues and expenses have been
translated into U.S. dollars at the average exchange rate during the period
translated. Gains and losses that result from translating assets and liabilities
into U.S. dollars are included in stockholders' equity as a cumulative
translation adjustment. The amount of the cumulative translation adjustment as
of October 31, 1998 included in stockholders' equity on the accompanying
Unaudited Condensed Consolidated Balance Sheet was $2.1 million.
Data Base Acquisition
In April 1999, Iron Mountain acquired Data Base and certain related real
estate for total consideration, including estimated transaction costs, of $116
million. This amount consisted of $70 million in cash and assumed debt and
1,476,577 shares of its Common Stock with a fair value of $46 million. The
acquisition has been accounted for as a purchase.
We agreed to repurchase all or a portion of the 1,476,577 shares issued,
in connection with the Data Base acquisition, from the former shareholders of
Data Base with a portion of the proceeds from a proposed equity offering. The
repurchase is contingent upon the completion of the equity offering. The
repurchase price of those shares is equal to the offering price per share less
25
<PAGE>
underwriters' discounts and commissions. The Pro Forma Financial Statements do
not include any adjustments for a proposed equity offering nor the potential
repurchase of these shares.
Balance Sheet (amounts in thousands)
(1) Purchase Price Allocation
The purchase price of the Data Base acquisition has been allocated to the
acquired assets and liabilities based upon their estimated fair values. It is
not practicable at this time to estimate the fair value of every asset acquired
and liability assumed in the Data Base acquisition; accordingly, the net book
value of such assets and liabilities has been used as an estimate of fair value
for pro forma purposes. Any excess purchase price has been allocated to
goodwill. The purchase price allocation is preliminary and subject to adjustment
based on the final determination of the fair value of the net assets acquired.
<TABLE>
<S> <C>
Purchase Price:
Cash Paid $70,000
Fair Value of Common Stock 46,000
--------
Total Purchase Price $116,000
========
Allocation of Purchase Price:
Current Assets $ 4,876
Property, Plant and Equipment 24,186
Goodwill 89,267
Other Long-term Assets 675
Current Liabilities (3,004)
--------
Total Allocation of Purchase Price $116,000
========
</TABLE>
26
<PAGE>
(2) Pro Forma Balance Sheet Adjustments
The pro forma adjustments to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of December 31, 1998 consist of the following:
<TABLE>
<CAPTION>
Pro Forma
Adjustments
-----------
<S> <C>
BDM Acquisition Adjustments
(A) To record cash received by BDM for newly issued
shares of stock net of cash paid by BDM for
the net assets of ARM $ 1,280
(B) To record increase in goodwill equal to the 14,776
excess of purchase price over fair value of
net assets acquired, including BDM's
acquisition of ARM.
(C) To record additional debt incurred to finance
the acquisition 47,330
(D) To record the minority interest in the net
assets of BDM 40,228
(E) To record equity issued by BDM in exchange for cash
and the net assets of ADS 9,116
(F) To reverse the equity of BDM that was not
acquired (80,618)
Data Base Acquisition Adjustments
(G) To record the fair value of real estate acquired $ 2,252
(H) To record increase in goodwill equal to the
excess of purchase price over fair value of
net assets acquired 85,047
(I) To reverse the current portion of debt retired or
not assumed in connection with the Data Base
acquisition (2,889)
(J) To reverse long-term debt retired or not assumed in
connection with the Data Base acquisition (19,227)
(K) To record additional debt incurred to finance the
Data Base acquisition 70,000
(L) To reverse the equity of Data Base that was not (6,585)
acquired
(M) To record the fair value of equity issued in connection
with the Data Base acquisition $ 46,000
</TABLE>
27
<PAGE>
Statement of Operations (amounts in thousands)
(3) Pro Forma Statement of Operations Adjustments
The pro forma adjustments to the Unaudited Pro Forma Condensed
Consolidated Statement of Operations for the Year Ended December 31, 1998
consist of the following:
<TABLE>
<CAPTION>
Pro Forma
Adjustments
-----------
<S> <C>
Previous Acquisition Adjustments:
(N) To reflect increase in depreciation expense based on the
fair value of the assets acquired and the remaining
useful lives and the amortization of goodwill $ 405
(O) To reverse interest expense on retired debt and to record
interest expense on the additional debt incurred to
finance the Previous Acquisitions 3,244
(P) To adjust the provision for income taxes to a 40% rate on
pro forma U.S. income before nondeductible goodwill
amortization (1,217)
(Q) To record minority interest in the net income of BDM
after giving pro forma effect to the net income of
ADS for the year ended December 31, 1998. $ 653
Equity Offering Adjustments:
(R) To reverse interest expense on Iron Mountain indebtedness
outstanding under the Credit Agreement assumed to be
retired with a portion of the net proceeds from the
Equity Offering $ (1,988)
(S) To adjust the provision for income taxes to a 40% rate
on pro forma income before nondeductible goodwill
amortization $ 795
(T) To adjust pro forma weighted average common shares
outstanding as if the Equity Offering had occurred as
of January 1, 1998 1,538
Data Base Acquisition Adjustments:
(U) To record the amortization of goodwill $ 2,910
(V) To record interest expense on the additional debt
incurred to finance the Data Base acquisition 2,599
(W) To adjust the provision for income taxes to a 40% rate
on pro forma U.S. income before nondeductible goodwill
amortization (917)
28
<PAGE>
(X) To adjust pro forma weighted average common shares
outstanding to reflect the common shares issued in
connection with the Data Base acquisition 1,477
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IRON MOUNTAIN INCORPORATED
--------------------------
(Registrant)
April 16, 1999 By: /s/ Jean A. Bua
- -------------- ---------------------------------------
(date) Jean A. Bua
Vice President and Corporate Controller
(Principal Accounting Officer)
29
EXHIBIT 2.2
**Confidential portions have been omitted pursuant to a request for
confidential treatment and have been filed separately with
the Securities and Exchange Commission (the "Commission").**
FIRST AMERICAN RECORDS MANAGEMENT, INC.
STOCK PURCHASE AGREEMENT
BY AND AMONG
FIRST AMERICAN RECORDS MANAGEMENT, INC.,
THE SHAREHOLDERS OF FIRST AMERICAN RECORDS MANAGEMENT, INC.
AND
IRON MOUNTAIN RECORDS MANAGEMENT, INC.
DATED
APRIL 1, 1999
<PAGE>
TABLE OF CONTENTS
1. Certain Definitions....................................page 1
1.1. "Agreement"
1.2. "Assets"
1.3. "Benefit Arrangement"
1.4. "Business"
1.5. "Closing"
1.6. "Closing Date"
1.7. "Code"
1.8. "Company"
1.9. "Company's Employees"
1.10. "Environmental Law"
1.11. "ERISA"
1.12. "ERISA Affiliate"
1.13. "Escrow Agent"
1.14. "Escrow Agreement"
1.15. "Escrow Indemnity Funds"
1.16. "Escrow Indemnity Period"
1.17. "Excluded Assets"
1.18. "Financial Statements"
1.19. "Fiscal Year"
1.20. "GAAP"
1.21. "Hazardous Material"
1.22. "Indemnified Claim"
1.23. "Indemnified Party"
1.24. "Indemnifying Party"
1.25. "Intangible Properties"
1.26. "Leases"
1.27. "Legal Requirement"
1.28. "Lien"
1.29. "Losses"
1.30. "Measured Current Assets"
1.31. "Measured Current Liabilities"
1.32. "Notice of Claim"
1.33. "Party"
1.34. "Permits"
1.35. "Permitted Encumbrances"
1.36. "Person"
1.37. "Plan"
1.38. "Properties"
1.39. "Purchase Price"
1.40. "Purchaser Indemnified Parties"
(i)
<PAGE>
1.41. "Qualified Plan"
1.42. "Real Property"
1.43. "Seller Indemnified Parties"
1.44. "Seller Representative"
1.45. "Sellers"
1.46. "Sellers' knowledge"
1.47. "Separate Counsel"
1.48. "Shares"
1.49. "Shareholders"
1.50. "Special Claim"
1.51. "Tangible Properties"
1.52. "Tax Claim"
1.53. "Termination Date"
1.54. "Third Party Claim"
2. Terms of Sale and Payment..............................page 5
2.1. Purchase of Shares.
2.2. Purchase Price.
2.3. Adjustments to Base Price.
2.4. Delivery of Shares.
2.5. Further Assurances.
3. Representations of the Sellers Regarding the Shares....page 6
3.1. Title to Shares.
3.2. Authority.
3.3. No Conflicts.
4. Representations and Warranties of the Sellers
(excluding the Shareholders) Regarding the Company.....page 7
4.1. Organization.
4.2. Authority and Enforceability.
4.3. Capitalization.
4.4. No Breach or Violation.
4.5. Title to Assets.
4.6. Retirement Benefit Plans.
4.7. Financial Statements.
4.8. Absence of Specified Changes.
4.9. Tax Returns and Audits.
4.10. Real Property.
4.11. Hazardous Material.
4.12. Inventory.
4.13. Other Tangible Personal Property.
(ii)
<PAGE>
4.14. Accounts Receivable.
4.15. Contracts.
4.16. Tradenames, Trademarks and Copyrights.
4.17. Intellectual Property.
4.18. Customers.
4.19. Employment Contracts and Benefits.
4.20. Insurance Policies.
4.21. Liabilities.
4.22. Compliance with Laws.
4.23. Litigation.
4.24. Full Disclosure.
4.25. Brokers.
4.26. Operational Matters.
4.27. Related Transactions.
4.28. Bank Accounts, Etc.
4.29. Corporate Records.
5. Purchaser's Representations and Warranties.............page 17
5.1. Organization.
5.2. Authority and Enforceability.
5.3. No Breach or Violation.
5.4. Sufficient Funds.
5.5. Brokers.
5.6. Investment Representation.
6. Pre-Closing Actions....................................page 18
6.1. The Company's Obligations.
6.2. The Purchaser's Obligations.
6.3. Notification of Certain Matters.
6.4. Public Announcements.
6.5. Termination of 401(k).
6.6. Transfer of Excluded Assets.
7. Conditions to Closing..................................page 21
7.1. Purchaser's Conditions to Closing.
7.2. Sellers' Conditions to Closing.
8. Closing................................................page 23
8.1. Time and Place.
8.2. Deliveries at Closing.
(iii)
<PAGE>
9. Post-Closing Obligations...............................page 24
9.1. Indemnification.
9.2. Survival of Representations; Claims for
Indemnification.
9.3. Exclusive Remedy.
10. Termination and Abandonment............................page 27
10.1. Methods of Termination.
10.2. Procedure Upon Termination.
11. General Provisions.....................................page 28
11.1. Notices.
11.2. Governing Law.
11.3. Expenses.
11.4. Headings.
11.5. Modification and Waiver.
11.6. Counterparts/Fax Signatures.
11.7. Variations of Pronouns.
11.8. Rights of Parties.
11.9. Binding Effect; Assignment.
11.10. Arbitration.
11.11. Attorneys' Fees.
11.12. Severability.
11.13. Interpretation of Agreement.
11.14. Specific Performance.
11.15. Farm.com.
The following exhibits and schedules have been omitted and will be
supplementally filed with the Commission upon request:
Exhibits
Exhibit 7.1(l)A Form of Noncompetition Agreement of William Jalbert
and Gordon Clark
Exhibit 7.1(l)B Form of Noncompetition Agreement of Kenneth Saxon and
Thomas Bird
Exhibit 8.2.1(e) Form of Legal Opinion of Counsel for Seller
Exhibit 8.2.2(d) Form of Legal Opinion of Counsel for Purchaser
Schedules
Schedule 1.21 Excluded Assets
Schedule 2.2 Allocation of Purchase Price and Escrow Indemnity
Funds Among Sellers
Schedule 3.1 Agreements to which the Shares Subject
Schedule 4.1 Subsidiaries
(iv)
<PAGE>
Schedule 4.3 Capitalization
Schedule 4.4 Breach or Violation
Schedule 4.5 Permitted Encumbrances; Condition of Properties
Schedule 4.6 ERISA Plans
Schedule 4.6(a)(vi) Claims Against Plans
Schedule 4.6(a)(viii) Contributions to Plans
Schedule 4.6(a)(x) Accumulated Plan Liabilities
Schedule 4.9 Tax Returns and Audits
Schedule 4.9(d) Affiliated Group Membership
Schedule 4.10 Real Property; Leases
Schedule 4.11 Environmental Reports
Schedule 4.14 Accounts Receivable
Schedule 4.15 Material Contracts and Permits
Schedule 4.16 Tradenames, Trademarks and Copyrights
Schedule 4.17 Intellectual Property
Schedule 4.18 Customers
Schedule 4.19 Employees; Employment Contracts and Benefits; Labor
Disputes
Schedule 4.20 Insurance Policies
Schedule 4.22 Compliance with Laws
Schedule 4.23 Litigation
Schedule 4.26 Operational Matters
Schedule 4.27 Related Transactions
Schedule 4.28 Bank Accounts
Schedule 6.14 Exceptions to Ordinary Course of Business
(v)
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is dated this 1st day of
April, 1999, by and among First American Records Management, Inc., a Delaware
corporation (the "Company"), the shareholders of the Company which are listed on
the signature pages hereto (collectively, "Sellers"), and Iron Mountain Records
Management, Inc., a Delaware corporation ("Purchaser").
R E C I T A L S
A. The Company is a privately-owned company that is engaged in the business
of records storage and management, and also provides consulting services
regarding the same. The Sellers own all of the issued and outstanding shares of
capital stock of the Company.
B. The parties desire for Purchaser to acquire ownership of the Company
through the purchase of 100% of the outstanding shares of capital stock of the
Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Certain Definitions. For purposes of this Agreement (including the
Schedules attached hereto), the following capitalized terms used herein shall
have the respective meanings set forth below:
1.1. "Agreement" shall mean this Agreement, including the
Exhibits and Schedules attached hereto and any amendments in accordance with
Section 11.5.
1.2. "Assets" shall mean the Company's right, title and
interest in any and all Properties owned by the Company immediately prior to the
Closing, excluding, however, the Excluded Assets.
1.3. "Benefit Arrangement" means any material benefit
arrangement that is not a Plan, including (i) any employment or consulting
agreement, (ii) any arrangement providing for insurance coverage or workers'
compensation benefits, (iii) any incentive bonus or deferred bonus arrangement,
(iv) any arrangement providing termination allowance, severance pay, salary
continuation for disability, or other leave of absence, supplemental
unemployment benefits, lay-off, reduction in force or similar benefits, (v) any
stock option or equity compensation plan, (vi) any deferred compensation plan,
(vii) any compensation policy or practice, (viii) any educational assistance
arrangements or policies, (ix) any plan governed by Section 125 of the Code and
(x) any change of control arrangements or policies.
1.4. "Business" means the Company's business of records
storage and management and related consulting services, as conducted on the date
of this Agreement and on the Closing Date.
1.5. "Closing" shall have the meaning set forth in Section
8.1.
<PAGE>
1.6. "Closing Date" shall have the meaning set forth in
Section 8.1.
1.7. "Code" shall mean the Internal Revenue Code of 1986, as
amended, together with any and all rules and regulations promulgated thereunder,
as amended.
1.8. "Company" means First American Records Management, Inc.
1.9. "Company's Employees" means the employees of the Company
as of the date of this Agreement and on the Closing Date.
1.10. "Environmental Law" shall mean any Legal Requirement
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 and 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, mining or reclamation or mined land,
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
laws shall include without limitation the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous
Material Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act
(42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section
651 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
Section 136 et seq.), and the Surface Mining Control and Reclamation Act of 1977
(30 U.S.C. Section 1201 et seq.) and any analogous federal, state, local or
foreign Legal Requirements, and the rules and regulations promulgated
thereunder, as from time to time in effect on or prior to the Closing Date.
1.11. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.12. "ERISA Affiliate" means any Person that is or has been
in the five year period ending with the Closing Date treated as a single
employer with the Company under Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA.
1.13. "Escrow Agent" shall mean an escrow agent mutually
acceptable to the Purchaser and the Sellers.
1.14. "Escrow Agreement" shall have the meaning set forth in
Section 7.1(k).
1.15. "Escrow Indemnity Funds" shall mean an amount equal to
**The confidential portion has been so omitted pursuant to a request for
confidential treatment and has
-2-
<PAGE>
been filed separately with the Commission.**, to be withheld from the Purchase
Price delivered to Sellers on the Closing Date, together with any interest and
earnings which accrue thereon.
1.16. "Escrow Indemnity Period" shall mean a period of **The
confidential portion has been so omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.** after the Closing
Date.
1.17. "Excluded Assets" shall mean the property listed on
Schedule 1.21.
1.18. "Financial Statements" means the Company's audited
balance sheet and income and cash flow statements as of and for the fiscal years
ended December 31, 1997 and December 31, 1998, and unaudited monthly balance
sheet and income and cash flow statement for the two month period ended February
28, 1999.
1.19. "Fiscal Year" shall mean the Company's fiscal year
commencing January 1 and ending December 31 of each year.
1.20. "GAAP" means generally accepted accounting principles as
in effect from time to time in the United States of America applied on a basis
consistent with the Company's past practice.
1.21. "Hazardous Material" means any dangerous, hazardous,
toxic, prohibited or controlled substance, material, or waste (including,
without limitation, gasoline, diesel fuel or other petroleum products) that is
regulated by law, regulation, order, bylaw or permit of any federal, state,
provincial or local government authority relating to the environment, health,
occupational health and safety, product liability or transportation of dangerous
goods.
1.22. "Indemnified Claim" shall have the meaning set forth in
Section 9.1.4(a).
1.23. "Indemnified Party" shall have the meaning set forth in
Section 9.1.4(a).
1.24. "Indemnifying Party" shall have the meaning set forth in
Section 9.1.4(a).
1.25. "Intangible Properties" shall mean contract rights,
designs, know-how, copyrights, trademarks, service marks, trade names,
proprietary methodologies, processes, specifications, patents, software and the
like.
1.26. "Leases" shall mean any and all leases, instruments,
contracts and other agreements pursuant to which the Company leases Real
Property or Tangible Properties.
1.27. "Legal Requirement" shall mean the common law and all
statutes, regulations, ordinances, rules and other laws promulgated by a
governmental authority.
1.28. "Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), security interest,
-3-
<PAGE>
adverse claim or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including any
conditional sale or other title retention agreement. "Lien" includes
reservations, exceptions, easements, leases and other restrictions and
encumbrances affecting Real Property.
1.29. "Losses" shall have the meaning set forth in Section
9.1.1.
1.30. "Measured Current Assets" shall mean, with respect to
the Company as of the date of measurement, the following current assets: **The
confidential portion has been so omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.**
1.31. "Measured Current Liabilities" shall mean, with respect
to the Company as of the date of measurement, the following current liabilities:
**The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Commission.**
1.32. "Notice of Claim" shall have the meaning set forth in
Section 9.1.4(a).
1.33. "Party" shall, unless the context otherwise requires,
refer to Purchaser, on the one hand, and the Company and Sellers, on the other
hand.
1.34. "Permits" shall mean any and all permits,
authorizations, approvals, registrations, certificates of completion or legal
status, orders or other approvals or licenses granted by any federal, state or
local administrative or governmental authority, bureau or agency under any Legal
Requirement.
1.35. "Permitted Encumbrances" shall mean (a) Liens for taxes,
assessments and governmental charges due and being contested in good faith by
appropriate proceedings; (b) servitudes, easements, restrictions, rights-of-way,
encroachments and other similar rights in real property or any interest therein,
provided the same are not of such nature alone or together as to adversely
interfere with or affect in any material respect the use of the property subject
thereto or materially affect its value; (c) Liens that are not material and
constitute mechanics', carriers', workers' or like liens incurred in the
ordinary course of business; (d) the conditions of all Permits which relate to
the Assets or the Business, and (e) all other Liens and exceptions to title to
the Assets described in Schedule 4.5.
1.36. "Person" shall mean any individual, corporation, limited
liability company, general partnership, limited partnership, joint venture,
association, trust, organization, business entity, government (or political
subdivision thereof) or governmental agency.
1.37. "Plan" means an employee benefit plan as defined in
Section 3(3) of ERISA.
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1.38. "Properties" shall mean Tangible Properties and
Intangible Properties.
1.39. "Purchase Price" shall have the meaning set forth in
Section 2.2.
1.40. "Purchaser Indemnified Parties" shall have the meaning
set forth in Section 9.1.1.
1.41. "Qualified Plan" means a Plan maintained by the Company
or an ERISA Affiliate that complies or is intended to comply with Section 401 of
the Code.
1.42. "Real Property" means the real property owned or leased
by the Company listed or described in Schedule 4.10.
1.43. "Seller Indemnified Parties" shall have the meaning set
forth in Section 9.1.3.
1.44. "Seller Representative" shall have the meaning set forth
in Section 9.1.2(c).
1.45. "Sellers" means the Persons listed on the signature page
under "Sellers", provided, however, that for purposes of the representations
made in Section 3.1, "Sellers" shall not include the Shareholders.
1.46. "Sellers' knowledge" means the actual knowledge of the
Sellers after reasonable inquiry of Messrs. Thomas W. Bird, Gordon R. Clark,
William T. Jalbert, Milanka Radosavljevic and I. Kenneth Saxon.
1.47. "Separate Counsel" shall have the meaning set forth in
Section 9.1.5(b).
1.48. "Shares" means, collectively, the 254,742 issued and
outstanding shares of common stock of the Company owned of record and
beneficially by Sellers.
1.49. "Shareholders" means The Boston Foundation, Inc. and El
Adobe Corporation.
1.50. "Special Claim" shall have the meaning set forth in
Section 9.1.2(a).
1.51. "Tangible Properties" shall mean any and all tangible
properties and assets of the Company including equipment, inventory, furniture,
fixtures, books and records, and supplies.
1.52. "Tax Claim" shall have the meaning set forth in Section
9.1.2(a).
1.53. "Termination Date" shall have the meaning set forth in
Section 10.1.2.
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1.54. "Third Party Claim" shall have the meaning set forth in
Section 9.1.5(a).
2. Terms of Sale and Payment.
2.1. Purchase of Shares. Subject to the terms and conditions
of this Agreement, each Seller, severally, agrees to sell, assign, transfer and
deliver to Purchaser at the Closing, and Purchaser agrees to purchase from each
Seller at the Closing, that number of Shares as are held by the respective
Seller as set forth in Schedule 2.2; provided, however, that Purchaser shall not
be required to purchase any Shares unless all Shares are transferred to
Purchaser, free and clear of any and all covenants, conditions, restrictions,
voting trust agreements, Liens, charges, encumbrances, options and adverse
claims or rights whatsoever, at the Closing Date.
2.2. Purchase Price. The aggregate purchase price to be paid
by the Purchaser to Sellers for the Shares shall be Forty Two Million Dollars
($42,000,000) minus the amounts set forth in Section 2.3 (the "Purchase Price").
Purchaser shall pay the Purchase Price (as adjusted), minus the Escrow Indemnity
Funds, at the Closing by wire transfer of immediately available funds to a Doty
Sundheim & Gilmore Trust Account, Sellers hereby acknowledge and agree that such
payment shall be deemed to be a payment of such Purchase Price by Purchaser to
the Sellers, prorated among the Sellers as set forth in Schedule 2.2 attached to
this Agreement. Sellers shall cause Doty Sundheim & Gilmore to provide Purchaser
with wire transfer instructions not later than two (2) business days prior to
the Closing Date.
2.3. Adjustments to Base Price. The Purchase Price shall be
determined by subtracting the following from $42,000,000:
(a) all indebtedness of the Company as of the Closing
Date (including both long-term and short-term portions), and all interest
accrued thereon and prepayment penalties or fees payable if such debt is
paid-in-full on the Closing Date; provided, that the indebtedness payable to
State Street Bank shall be paid by Company at the Closing utilizing funds
provided to Company by Purchaser.
(b) all obligations owed by the Company under capital
leases as of the Closing Date;
(c) all amounts payable by the Company under stock
appreciation rights agreements as of the Closing Date based on the value of the
Company as of the Closing Date; provided, that such amounts shall be paid by
Company at the Closing or promptly thereafter utilizing funds provided to
Company by Purchaser;
(d) all amounts payable by the Company under
management incentive plans as of the Closing Date based on the value of the
Company as of the Closing Date; provided, that such amounts shall be paid by
Company at the Closing or promptly thereafter utilizing funds provided to
Company by Purchaser;
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(e) all other amounts payable by the Company as
special bonuses to employees as a result of the transactions contemplated by
this Agreement; provided, that such amounts shall be paid by Company at the
Closing or promptly thereafter utilizing funds provided to Company by Purchaser;
(f) $50,000 to be paid to **The confidential portion
has been so omitted pursuant to a request for confidential treatment and has
been filed separately with the Commission.** as additional purchase price for
the assets acquired by the Company on or about **The confidential portion has
been so omitted pursuant to a request for confidential treatment and has been
filed separately with the Commission.** provided, that such amount shall be paid
by Company at the Closing or promptly thereafter utilizing funds provided to
Company by Purchaser;
(g) amounts payable to **The confidential portion
has been so omitted pursuant to a request for confidential treatment and has
been filed separately with the Commission.** in connection with a noncompete
agreement;
(h) the amount, if any, by which the difference
between Measured Current Assets and Measured Current Liabilities as of the
Closing Date is less than the difference between Measured Current Assets and
Measured Current Liabilities as of December 31, 1998.
All determinations of amounts pursuant to this Section 2.3 shall be made in
accordance with GAAP applied on a basis consistent with the audited financial
statements of the Company for the year ended December 31, 1998.
2.4. Delivery of Shares. At the Closing, Sellers shall deliver
to the Purchaser or such Person that Purchaser may designate, free and clear of
any Lien or option, equity, restriction or adverse claim of any kind or nature,
certificates representing all of the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank and with all stock transfers
stamped and affixed if any are required.
2.5. Further Assurances. In addition to the actions, documents
and instruments specifically required to be taken or delivered hereby, Sellers,
the Company, and Purchaser, whether before or after the Closing Date, shall
execute and deliver such other instruments or such other actions as a party, or
its counsel, may reasonably request in order to complete the transactions
contemplated by this Agreement.
3. Representations of the Sellers Regarding the Shares. Each Seller
severally represents and warrants to the Purchaser as follows:
3.1. Title to Shares. Such Seller will deliver to Purchaser at
the Closing good and marketable title to the Shares which are to be transferred
to the Purchaser by such Seller pursuant hereto, free and clear of any and all
covenants, conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever. The Bird
Revocable Trust dated June 6, 1991 hereby represents and warrants that The
Boston Foundation, Inc. will deliver to Purchaser at the Closing good and
marketable title to the Shares which are to be transferred to the Purchaser by
such Seller pursuant hereto, free and clear of any and all covenants,
conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever. I. Kenneth Saxon
hereby
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represents and warrants that El Adobe Corporation will deliver to Purchaser at
the Closing good and marketable title to the Shares which are to be transferred
to the Purchaser by such Seller pursuant hereto, free and clear of any and all
covenants, conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever. The Shares are
currently subject to the agreements set forth on Schedule 3.1 which will be
terminated prior to Closing.
3.2. Authority. Such Seller has the full right, power and
authority to enter into this Agreement and to transfer, convey and sell to the
Purchaser at the Closing the Shares to be sold by such Seller hereunder. The
execution and delivery of this Agreement and each other agreement and document
to be executed and delivered in connection herewith, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary trust, limited liability company or corporate, as
the case may be, proceedings on the part of such Seller. This Agreement and each
other agreement to be executed and delivered in connection herewith constitutes
or will constitute the valid and legally binding obligation of such Seller,
enforceable against such Seller in accordance with the terms hereof or thereof,
subject as to enforceability to bankruptcy, insolvency, reorganization and other
similar laws and judicial decisions of general applicability relating to or
affecting creditors' rights generally and subject to the availability of
equitable remedies and the application of equitable principles, including the
possible unavailability of specific performance or injunctive relief, regardless
of whether such enforceability is considered at law or in equity.
3.3. No Conflicts. The execution, delivery and performance of
this Agreement and each other agreement and document to be executed and
delivered in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, do not and will not (i) violate any provision
of such Seller's agreement and declaration of trust, certificate of
incorporation and bylaws or operating agreement and certificate of formation (in
each case, to the extent applicable) or (ii) violate or breach any provision of,
or be an event that is (or with the giving of notice or the passage of time will
result in) a violation or breach of, or result in the acceleration of or entitle
any Person to accelerate (whether after the giving of notice or lapse of time or
both) any obligation under, or result in the imposition of any Lien or other
restriction upon the Shares pursuant to, any agreement, contract, instrument or
Legal Requirement to which such Seller is a party or by which it or its assets
are bound.
4. Representations and Warranties of the Sellers (excluding the
Shareholders) Regarding the Company. Sellers (excluding the Shareholders) hereby
make the following representations and warranties to Purchaser regarding Company
which shall, for purposes of Sections 4.6, 4.9, 4.10(a), 4.11 and 4.19, include
Company and all of Company's predecessors which have been merged into or
similarly subsumed by Company:
4.1. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, has the corporate power and authority to carry on the business
presently conducted by it and to undertake the activities contemplated by this
Agreement. The Company is qualified to transact business and is in good standing
in each jurisdiction in which the failure to be so qualified would have a
material adverse
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<PAGE>
effect on the Company. Except as set forth on Schedule 4.1, the Company is not,
and within the last four (4) years was not, a subsidiary of any Person, and does
not have any subsidiaries and is not the owner of the capital stock or other
equity interests in any Person.
4.2. Authority and Enforceability. The Company has the
corporate power and authority to execute, deliver and perform this Agreement and
each other agreement and document to be executed and delivered in connection
herewith. The execution and delivery of this Agreement and each other agreement
and document to be executed and delivered in connection herewith, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate proceedings on the part of the
Company. This Agreement, and each other agreement and document to be executed
and delivered in connection herewith, constitutes or will constitute the valid
and legally binding obligation of the Company, enforceable against the Company
in accordance with the terms hereof or thereof, subject as to enforceability to
bankruptcy, insolvency, reorganization and other similar laws and judicial
decisions of general applicability relating to or affecting creditors' rights
generally and subject to the availability of equitable remedies and the
application of equitable principles, including the possible unavailability of
specific performance or injunctive relief, regardless of whether such
enforceability is considered at law or in equity.
4.3. Capitalization. The authorized capital stock of the
Company consists of 1,000,000 shares of common stock, par value $0.001 per
share. The Shares constitute all of the issued and outstanding capital stock of
the Company. The Shares have been duly authorized and validly issued and are
fully paid and non-assessable and were not issued in violation of any preemptive
right or federal or state securities laws. Except as provided in Schedule 4.3,
none of the Company or any Seller is party to or bound by, and there are not
outstanding, any options, warrants, puts, calls, voting agreements, contracts,
or commitments of any character relating to (including, without limitation, any
such instrument which calls for the issuance of) any issued or unissued stock or
any other equity security issued or to be issued by the Company.
4.4. No Breach or Violation. Except as set forth in Schedule
4.4, neither the execution and delivery by the Company of this Agreement or any
other agreement and document to be executed and delivered in connection
herewith, nor the consummation of the transactions contemplated hereby or
thereby, will (a) violate or conflict with the Certificate of Incorporation or
Bylaws of the Company; (b) violate or breach any provision of, or be an event
that is (or with the giving of notice or the passage of time will result in) a
violation or breach of, or result in the acceleration of or entitle any Person
to accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or result in the imposition of any Lien or other restriction
(other than restrictions arising under federal or state securities laws) upon
the Shares or any of the Assets pursuant to, any instrument, contract, lease or
other agreement by which the Company or any of the Assets is bound; (c) violate
or breach any Legal Requirement to which the Company is subject or any order,
judgment, award or decree of any court, arbitrator or government agency against
or binding upon the Company or its assets or (d) require the consent of any
Person.
4.5. Title to Assets. The Company has good and marketable
title to all the
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Assets and to all other assets, tangible and intangible, reflected on the most
recent balance sheet forming part of the Financial Statements, or held by the
Company for use in the 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 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 other than the Permitted Encumbrances set
forth in Schedule 4.5. Except as set forth on Schedule 4.5, the Real Property
leased by the Company and the Tangible Properties owned or leased by the Company
are in good operating condition and repair, ordinary wear and tear excepted.
4.6. Retirement Benefit Plans.
(a) Except as provided in Schedule 4.6, neither the
Company nor any ERISA Affiliate contributes to any Plan or Benefit Arrangement
or has contributed to or sponsored any Plan or Benefit Arrangement in the
five-year period ending with the Closing Date. As to all Plans and Benefit
Arrangements listed in Schedule 4.6:
(i) all such Plans and Benefit Arrangements
comply and have been administered in all material respects in form and in
operation in compliance with all applicable Legal Requirements, all required
returns (including without limitation information returns) have been prepared in
accordance with all applicable Legal Requirements and have been timely filed in
accordance with applicable Legal Requirements with respect to any such Plan or
Benefit Arrangement, and neither the Company nor any ERISA Affiliate has
received any outstanding written notice from any governmental authority
(including, without limitation, the Pension Benefit Guaranty Corporation)
questioning or challenging such compliance;
(ii) all Qualified Plans maintained or
previously maintained by the Company or any ERISA Affiliate comply and complied
in form and in operation with all applicable requirements of the Code and ERISA,
a favorable determination letter has been received from the Internal Revenue
Service with respect to each such Plan or the sponsor of the Plan is entitled to
rely on a favorable opinion letter issued to the prototype sponsor by the
Internal Revenue Service with respect to each such Plan, and no event has
occurred that will or could reasonably be expected to give rise to
disqualification of any such Plan or to a tax under Section 511 of the Code;
(iii) none of the assets of any Qualified
Plans are invested in securities of the Company or an ERISA Affiliate or
employer real property and each asset may be liquidated or terminated without
the imposition of any redemption or surrender charge or comparable liability;
(iv) there are no non-exempt "prohibited
transactions" (as described in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Qualified Plan and neither the Company nor any of its ERISA
Affiliates has otherwise engaged in any prohibited transaction;
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<PAGE>
(v) there have been no acts or omissions by
the Company or any ERISA Affiliate that have given rise or could 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 or any ERISA Affiliate may be liable;
(vi) there are no claims (other than routine
claims for benefits) pending or, to the Sellers' knowledge, threatened involving
any Plan or the assets of any Plan, except as set forth on Schedule 4.6(a)(vi);
(vii) no Qualified 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, no steps have been taken to terminate any such Plan, no material
liability to the Pension Benefit Guaranty Corporation has been or is expected by
the Company or any ERISA Affiliate to be incurred by the Company or any ERISA
Affiliate with respect to any Qualified Plan, and there has been no event or
condition that presents a material risk of termination of any Qualified Plan by
the Pension Benefit Guaranty Corporation;
(viii) to the extent that the most recent
balance sheet forming part of the Financial Statements does not include a pro
rata amount of the contributions that 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 Schedule 4.6(a)(viii);
(ix) neither the Company nor any ERISA
Affiliate nor any of their respective directors, officers, employees or any
other fiduciary has committed any breach of fiduciary responsibility imposed by
ERISA that could reasonably be expected to subject the Company or any ERISA
Affiliate or any of their respective directors, officers or employees to
liability under ERISA;
(x) except as set forth in Schedule
4.6(a)(x), 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 years, and
other than pursuant to the provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or any equivalent state statute, which
provisions have been complied with in all material respects, neither the Company
nor any ERISA Affiliate maintains 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 ERISA Affiliates;
(xi) the Company has made available to
Purchaser copies of the Federal Form 5500 series and accountant's opinion, if
applicable, for each Plan or Benefit Arrangement (and the most recent actuarial
valuation reports for each Plan, if any, that is subject to Title IV of ERISA),
for the three plan years preceding the Closing Date and all information provided
by the Company or any ERISA Affiliate to any actuary in connection with the
preparation of any such actuarial valuation report was true, correct and
complete in all material respects; and
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(xii) the Company has delivered to Purchaser
correct and complete copies of all Plans and Benefit Arrangements and, where
applicable, each of the following documents with respect to such Plans or
Benefit Arrangements: (i) any amendments; (ii) any related trust documents;
(iii) any documents governing the investment and management of the Plan or the
Benefit Arrangement, or the assets thereof, including, without limitation, any
documents relating to fees incurred by the sponsor or participants and
beneficiaries; (iv) the most recent summary plan descriptions and summaries of
material modifications; and (v) 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) Neither the Company nor any ERISA Affiliate is or
ever has been a party to any multiemployer plan, within the meaning of Section
400(a)(3) of ERISA, or made contributions to any such plan.
(c) No employee is entitled to, nor shall any
employee accrue or receive, additional benefits, services or accelerated rights
to payment of benefits, whether pursuant to any Plan, Benefit Arrangement or
otherwise, including the right to receive any parachute payment as defined in
Section 280G of the Code, or become entitled to severance, termination allowance
or other similar payments as a result of this Agreement.
4.7. Financial Statements. The Company has delivered to
Purchaser the Financial Statements, which financial statements present fairly,
in all material respects, the financial position and results of operations of
the Company as of the dates and for the periods specified therein. All the
financial statements delivered to Purchaser have been prepared from and are in
accordance with, the books and records of the Company and in accordance with
GAAP consistently followed by the Company historically, subject (in the case of
interim reports) to normal year-end adjustments, and except the unaudited
Financial Statements do not contain all footnotes required by GAAP.
4.8. Absence of Specified Changes. Since December 31, 1998,
the Company has operated its business in the ordinary course, consistent with
past practice. Without intending to limit the generality of the foregoing, since
such date, there has not been any:
(a) capital expenditure(s) by the Company exceeding
**The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Commission.** in
the aggregate, nor has there been any commitment on the part of the Company 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;
(b) material adverse change in the financial
condition, liabilities, assets, or business of the Company;
(c) change in accounting methods or practices
(including, without limitation, any change in depreciation or amortization
policies or rates) of the Company;
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(d) increase in the salary or other compensation
payable or to become payable by the Company to any of the Company's directors or
employees or commitment or obligation of any kind for the payment, by the
Company of a bonus or other additional salary or compensation to any such
person, except in the ordinary course of the Company's Business and consistent
with its past practices;
(e) sale or transfer of any Asset, except for fair
value in the ordinary course of business;
(f) amendment or termination of any Permit, contract,
agreement or license to which the Company is a party or is bound, except in the
ordinary course of business;
(g) loan by the Company to any Person in the
principal amount in excess of $5,000, (or in the aggregate in excess of $25,000)
or guaranty by the Company of any loan;
(h) mortgage, pledge, or other encumbrance of, or the
grant of a lien on, any Asset;
(i) commencement of any litigation, arbitration or
any governmental proceeding, against or investigation of the Company, the Assets
or the Business;
(j) discharge or satisfaction of any Lien or any
payment of any obligation or liability (absolute or contingent) other than
current liabilities or obligations under contracts existing in the ordinary
course of business, consistent with past practice;
(k) material damage, destruction or loss (whether or
not covered by insurance) or any acquisition or taking of property by any
governmental authority, or any amendment, termination or lapse of any insurance
policies;
(l) waiver of any rights of material value without
fair and adequate consideration;
(m) issuance or agreement to issue any notes, bonds
or other debt securities or any capital stock or other equity securities or any
securities convertible, exchangeable or exercisable into any capital stock or
other equity securities;
(n) (i) declaration or payment of any dividend on or
in respect of any shares of any class of capital stock of the Company (other
than a dividend or distribution of the Excluded Assets), (ii) purchase,
redemption or other retirement of any shares of any class of capital stock of
the Company, or (iii) any other distribution on or in respect of any shares of
any class of capital stock of the Company;
(o) entrance into any transaction with any affiliate
of the Company,
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(p) strike, work stoppage or notice of any claim of
wrongful discharge;
(q) acceleration of collection of accounts receivable
as compared with past practice; or
(r) agreement by the Company to do any of the
foregoing actions described in this Section 4.8.
4.9. Tax Returns and Audits.
(a) Within the time and in the manner prescribed by
applicable Legal Requirements, the Company has filed all federal, state, and
local tax returns required by applicable Legal Requirements and has paid all
taxes, estimates and penalties payable. All such tax returns were true, correct
and complete in all material respects. Except as set forth on Schedule 4.9, (i)
the Company has not executed any waivers of the statutes of limitations as to
the assessment or collection of any tax, (ii) to the Sellers' knowledge, no
audits of any tax return of the Company are pending and (iii) the Company has
not received notice of any audit of any tax return of the Company or any dispute
as to taxes payable by the Company. The Company has in all material respects
duly and timely withheld from salaries, wages and other compensation of its
employees and paid over to the appropriate tax authorities all amounts required
to be so withheld and paid over for all periods not barred by applicable
statutes of limitations.
(b) The Company has not filed a consent pursuant to
Section 341(f) of the Code or agreed to have Section 341(f)(2) apply to any
disposition of a Subsection (f) asset; the Company has not executed or entered
into a closing agreement pursuant to Section 7121 of the Code or any similar
provision of state or local law; the Company is not required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of
state or local law by reason of a change in accounting method; and no assets of
the Company are properly required to be treated as being owned by another person
under the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954.
(c) Federal and state income tax returns of the
Company have been examined by the IRS, or the periods covered by such tax
returns have been closed by applicable statutes of limitations, for all periods
through December 31, 1994, except to the extent such tax returns may be examined
for the purposes of determining net operating loss or credit carryforwards to a
year not so closed.
(d) Except as set forth in Schedule 4.9(d), the
Company has not been a member of any "affiliated group" (as defined in Section
1504 of the Code) since January 1, 1992.
(e) The Company is not currently, has not been within
the last five (5) years, and does not anticipate becoming a "United States real
property holding corporation" within the meaning of Section 897(c) of the Code.
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4.10. Real Property.
(a) The Company does not own, and has never owned,
the legal or any beneficial interest in any Real Property.
(b) Schedule 4.10 lists and describes briefly all
real property leased or subleased to the Company. The Company has delivered to
the Buyer correct and complete copies (as amended to date) of the leases and
subleases listed in Schedule 4.10. With respect to each lease and sublease
listed in Schedule 4.10:
(i) the lease or sublease is a legal, valid,
binding, enforceable obligation of the Company, and in full force and effect in
all material respects;
(ii) the Company is not in default, and to
the Sellers' knowledge the lessor or sublessor is not in material breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a material breach or default or permit termination, modification, or
acceleration thereunder;
(iii) no party to the lease or sublease has
repudiated any material provision thereof;
(iv) there are no material disputes, oral
agreements, or forbearance programs in effect as to the lease or sublease; and
(v) the Company has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in
the leasehold or subleasehold.
4.11. Hazardous Material.
(a) The Company is, and at all times during the last
five (5) years has been, in compliance in all material respects with all
applicable Environmental Laws.
(b) The Company (a) has not been notified that it is
potentially liable, (b) has not received any written request for information or
other correspondence concerning any site or facility and (c) 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 or provincial law.
(c) The Company has obtained all material Permits and
made all material filings which are required by Environmental Laws for the
ownership of the Company's property, facilities and assets and the operation of
the Business, and there are no pending or, to the Sellers' knowledge, threatened
investigations or proceedings with respect to such Permits.
(d) Neither the Company nor, to the Sellers'
knowledge, any other Person has spilled, disposed of, discharged, buried or
released any Hazardous Materials into,
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upon, from, over or about the Real Property or any other properties now or, to
the Sellers' knowledge formerly, owned, leased, operated or used by the Company
or into or upon ground or surface water on any such property (i) which would
require or reasonably be expected to require remediation or investigation by the
Company; (ii) violate any Environmental Law, including a failure to report; or
(iii) constitute grounds for a cost recovery claim by any governmental
authority.
(e) The Company has not assumed or agreed to any
obligation under any of its Leases of real property or otherwise to cleanup or
take responsibility for any Hazardous Material which exists on such property
other than as a result of the Company's operating and occupying such property.
(f) Schedule 4.11 lists all site assessments, audits
and other investigation reports which have been conducted by or on behalf of the
Company with respect to environmental matters at any of its properties or
facilities.
(g) To the Sellers' knowledge (i) there are no above
or under ground storage tanks located at any property currently owned, leased,
operated or used by the Company; and (ii) no friable asbestos containing
materials or equipment containing polychlorinated biphenyls exist on any
property currently owned, leased, operated or used by the Company.
4.12. Inventory. The inventory listed in the Financial
Statements is usable in the ordinary course of business. Except for sales made
in the ordinary course of business since the date of the Financial Statements,
all inventory is the property of the Company.
4.13. Other Tangible Personal Property. The Financial
Statements accurately describe all depreciable Tangible Property owned by or
used by the Company. The Tangible Property forming part of the Assets constitute
all such tangible personal property necessary for the conduct of the Company's
Business as now conducted.
4.14. Accounts Receivable. Schedule 4.14 contains a complete
and accurate list of the Company's accounts receivable as of December 31, 1998,
together with an accurate aging of these accounts. The accounts receivable
described in Schedule 4.14, and all accounts receivable created thereafter,
arose from valid sales in the ordinary course of business.
4.15. Contracts. Schedule 4.15 contains a complete and
accurate list of all of the Company's material contracts and Permits, whether
oral or written, and there is no material default or event that, with notice or
lapse of time or both, would constitute a default by the Company or to Sellers'
knowledge, any other party thereto. True, complete and correct copies of each of
the material contracts and Permits have been made available to or furnished by
the Company to Purchaser (or true, complete and correct descriptions thereof
have been set forth in Schedule 4.15, if any such material contract is oral).
All of the material contracts and Permits are valid, binding and legally
enforceable obligations of the Company and, to Sellers' knowledge, of each other
party thereto, and the Company is validly and lawfully operating its business
and owning its property under each of the material contracts and Permits which,
to Sellers'
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knowledge, are all Permits required to conduct the Company's Business as now
conducted. The Company has not received any notice that any party intends to
cancel or terminate any of these agreements. For purposes of this Section 4.15,
"material" means (a) contracts involving the payment or receipt by the Company
of more than **The confidential portion has been so omitted pursuant to a
request for confidential treatment and has been filed separately with the
Commission.** per year or **The confidential portion has been so omitted
pursuant to a request for confidential treatment and has been filed separately
with the Commission.** in the aggregate, and (b) permits necessary to the
conduct of the Business as currently conducted, (c) each note, mortgage,
indenture, guaranty, other obligation, agreement or other instrument for or
relating to any lending or borrowing (including assumed debt) relating to any of
the Company's properties or assets; (d) nondisclosure or confidentiality
contracts (other than those entered into in the ordinary course of business with
customers, suppliers and employees), (e) joint venture or similar contracts or
agreements; (f) each assignment, license, indemnification or other agreement
with respect to any Intangible Property, (g) powers of attorney or other similar
contracts or grants of agency, or (h) contracts or agreements prohibiting the
Company from engaging in any business or competing anywhere in the world.
4.16. Tradenames, Trademarks and Copyrights. Schedule 4.16 is
an accurate and complete list of all tradenames, trademarks, service marks, and
copyrights owned by the Company or in which the Company has rights or licenses.
The Company has not received notice of any infringement or alleged infringement
by others of any such tradename, trademark, service mark, or copyright. The
Company has not received notice alleging that it is infringing on any tradename,
trademark, service mark, or copyright belonging to any Person.
4.17. Intellectual Property. Schedule 4.17 is a true and
complete list of all computer software programs, patents and all applications
for patents owned by the Company or in which the Company has any rights or
licenses. The patents are valid. The Company has not received notice of
interference actions or other judicial, arbitration, or other adversary
proceedings concerning the patents or applications for patents described in
Schedule 4.17. All computer programs (other than "off-the-shelf") are used
pursuant to valid licenses with the Licensor thereof.
4.18. Customers. Schedule 4.18 contains a true and complete
list of the Company's twenty (20) largest (by revenue) customers during the year
ended December 31, 1998. Except as set forth on Schedule 4.18, the Company has
not received written notice that any of these customers intend to cease, or
materially decrease the rate of or change the terms of, doing business with the
Company. Except as set forth on Schedule 4.18, to the Sellers' knowledge, the
Company has not received written notice that any such customer is soliciting
bids for services similar to those performed by the Company.
4.19. Employment Contracts and Benefits. Schedule 4.19 is a
complete and accurate list of the Company's employees and their (i) date of
hire; (ii) salary; (iii) age; and (iv) title. Except as described in Schedule
4.19, the Company has no written employment contracts, pensions, bonus, profit
sharing, stock option or other agreements or arrangements providing for employee
compensation or benefits to which the Company is a party or bound. None of the
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employees of the Company is now, or during the past five (5) years has been,
represented by any labor union or other employee collective bargaining
organization which is a party to a collective bargaining agreement with the
Company, or are now, or during the past five (5) years have been, parties to any
labor or other collective bargaining agreement with the Company. Except as set
forth on Schedule 4.19, there are currently no, and during the last five (5)
years there have been no, labor disputes existing, or to the Sellers' knowledge,
threatened involving strikes, work stoppages, slowdowns, picketing, or any other
interference with work or production. No charges or proceedings with respect to
the Company before the National Labor Relations Board, or similar agency, exist,
or to the Sellers' knowledge, are threatened. 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 Schedule 4.19.
4.20. Insurance Policies. Schedule 4.20 contains a list of all
insurance policies held by the Company and the amounts of coverage therefor.
Such policies are in the respective principal amounts set forth in Schedule
4.20. The Company is not in default with respect to payment of premiums on any
such policy or, to Sellers' knowledge, with respect to any other provision of
such policy, and, to Sellers' knowledge, no claim is pending under any such
policy.
4.21. Liabilities. The balance sheet as of December 31, 1998
included in the Financial Statements has been prepared in accordance with GAAP,
and since such date the Company has not incurred any 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 in the
aggregate, have a material adverse effect on the Company. As of December 31,
1998 the Company had no obligations or liabilities, accrued or unaccrued,
contingent or otherwise, except (i) as disclosed on the balance sheet as of such
date included in the Financial Statements, and **The confidential portion has
been so omitted pursuant to a request for confidential treatment and has been
filed separately with the Commission.**
4.22. Compliance with Laws. Except as disclosed on Schedule
4.22, the Company is, and to Sellers' knowledge has been, in compliance in all
material respect with, and is not, and to Sellers' knowledge has not been, in
violation in any material respect of, any and all applicable Legal Requirements
and any and all judgments, orders, injunctions, decrees, stipulations or other
awards applicable thereto.
4.23. Litigation. Except as set forth in Schedule 4.23, there
are no suits, arbitrations, legal, administrative, or other proceedings, or
governmental investigations pending, or to Sellers' knowledge threatened,
against or affecting the Company or its Business, Assets, or the Shares. The
Company is not presently engaged in any legal action to recover monies due or
damages sustained by the Company.
4.24. Full Disclosure. No representation, warranty or
statement made in this Agreement, any agreement, certificate, statement or
document referred to in this Agreement (including, without limitation, the
Schedules hereto) contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in order to
make the
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statements contained therein not misleading. Purchaser agrees and acknowledges
that, except as otherwise expressly provided in this Agreement, Purchaser is a
person experienced in businesses like that of the Company and acquisition
transactions of the type contemplated in this Agreement, and has entered into
this Agreement with the intention of making and relying upon its own
investigation of the physical, environmental and economic condition of the
Company, the Business and the Assets (subject, however, to Purchaser's ability
to rely on the representations and warranties set forth herein). Purchaser
further acknowledges that it has not received from Sellers or the Company any
accounting, tax, legal or other advice with respect to this transaction and is
relying solely upon the advice of its own accounting, tax, legal and other
advisors.
4.25. Brokers. No brokers, finders or investment bankers have
been retained by Sellers in connection with this Agreement or the transactions
contemplated by this Agreement. The Beacon Group Capital Services, LLC has been
retained as investment banker for the Company. The Sellers shall solely be
responsible for any fees, commissions or other payments that may be due to The
Beacon Group Capital Services, LLC by the Company, the Sellers or any of their
respective affiliates in connection with the transactions contemplated by this
Agreement (unless an adjustment has been made to the Purchase Price in
accordance with the terms hereof).
4.26. Operational Matters.
(a) Except as set forth in Schedule 4.26, all items
received and stored by the Company on behalf of customers are held in storage by
the Company (except for items withdrawn or destroyed at the customer's request),
and are locatable without extraordinary effort through the Company's inventory
software system. The Company's invoices to customers do not charge customers for
storage of nonexistent items or services not performed in any material respect.
(b) Schedule 4.26 identifies which of the Company's
customer contracts contain a limitation of liability other than an amount not
greater than the cost of replacing the lost medium (and not reproduction or
restoration of content). Schedule 4.26 also lists those customers for which the
Company has no signed contract, and those customers for which the Company has
only a purchase order from the customer.
(c) Substantially all items in storage have been
logged into the Company's inventory software system.
(d) Except as set forth in Schedule 4.26, the
Company's invoices to its customers are accurate in all material respects; the
Company invoices for storage monthly in advance, but does not invoice for any
services until the services have been performed.
(e) Except as set forth in the Schedule 4.26, since
January 1, 1996 no materials stored with the Company have been damaged
(including damage by water) while in the Company's custody.
(f) Materials received by the Company from customers
are registered
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in the Company's computer system and shelved on the date of receipt if magnetic
media, or within **The confidential portion has been so omitted pursuant to a
request for confidential treatment and has been filed separately with the
Commission.** after receipt if the materials are paper media (except in cases of
unusual volume).
(g) The Company has sufficient racked and unfilled
shelving locations to accommodate all cartons or magnetic media in the Company's
custody, plus all cartons or magnetic media returned to customers on temporary
retrieval.
4.27. Related Transactions. Schedule 4.27 sets forth a true,
correct and complete description of any contract, agreement, lease or other
transaction, whether now existing or existing during the period covered by the
Financial Statements, between the Company and any Seller or affiliate of a
Seller or the Company (other than reasonable compensation for services as
officers, directors and employees and reimbursement for out-of-pocket expenses
reasonably incurred in support of the 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.
4.28. Bank Accounts, Etc. Schedule 4.28 contains a true,
accurate 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 valid and subsisting powers of attorney from the
Company and a summary statement as to the terms thereof. The Company will not
make or permit to be made any change affecting any account or safe deposit box
with any bank, trust company, savings and loan association, brokerage firm or
safe deposit box or in the names of the Persons authorized to draw thereon, to
have access thereto or to authorize transactions therein or in such powers of
attorney, or open any additional accounts or boxes or grant any additional
powers of attorney, without in each case first notifying Purchaser in writing.
4.29. Corporate Records. The copies of the charter documents
and all amendments thereto of the Company that have been delivered to Purchaser
are true, correct and complete copies thereof, as in effect on the date hereof.
The minute books of the Company, copies of which have been made available to
Purchaser, contain accurate minutes of all actions taken at all meetings of, and
accurate consents to all actions taken without meetings by, the Board of
Directors (and any committees thereof) and the stockholders of the Company.
5. Purchaser's Representations and Warranties. Purchaser hereby makes the
following representations and warranties to Sellers:
5.1. Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of Delaware. Purchaser is
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on
Purchaser.
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<PAGE>
5.2. Authority and Enforceability. Purchaser has the corporate
power and authority, to execute, deliver, and perform this Agreement and each
other agreement and document to be executed and delivered in connection
herewith. The execution and delivery of this Agreement and each other agreement
and document to be executed and delivered in connection herewith, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate proceedings on the part of the
Purchaser. This Agreement, and each other agreement and document to be executed
and delivered in connection herewith, constitutes or will constitute the valid
and legally binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with the terms hereof or thereof, subject as to
enforceability to bankruptcy, insolvency, reorganization and other similar laws
and judicial decisions of general applicability relating to or affecting
creditors' rights generally and subject to the availability of equitable
remedies and the application of equitable principles, including the possible
unavailability of specific performance or injunctive relief, regardless of
whether such enforceability is considered at law or in equity.
5.3. No Breach or Violation. Neither the execution and
delivery by the Purchaser of this Agreement or any other agreement and document
to be executed and delivered in connection herewith, nor the consummation of the
transactions contemplated hereby or thereby, will (a) violate or conflict with
the Certificate of Incorporation or Bylaws of the Purchaser; (b) violate or
breach any provision of, or be an event that is (or with the giving of notice or
the passage of time will result in) a violation or breach of any instrument,
contract, lease or other agreement by which the Purchaser is bound; (c) violate
or breach any Legal Requirement to which the Purchaser is subject or any order,
judgment, award or decree of any court, arbitrator or government agency against
or binding upon the Purchaser or (d) require the consent of any Person.
5.4. Sufficient Funds. Purchaser has sufficient funds
available and will have sufficient funds at the Closing to consummate the
transactions contemplated by this Agreement, including, without limitation, to
pay the Purchase Price in full.
5.5. Brokers. No brokers, finders or investment bankers have
been retained by Purchaser in connection with this Agreement or the transactions
contemplated by this Agreement.
5.6. Investment Representation. The Purchaser is acquiring the
Shares from the Sellers for its own account for investment and not with a view
to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the same; and, the Purchaser has no
present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition of the Shares.
6. Pre-Closing Actions. Prior to the Closing, the parties shall do the
following:
6.1. The Company's Obligations. The Company shall, and Sellers
shall cause the Company to, take the following action from the date of this
Agreement to the Closing Date:
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(a) Purchaser's Access to Premises and Information.
Purchaser and its counsel, accountants, and other representatives shall be
entitled to have full access, upon reasonable notice, to all of the Company's
books, accounts, records, contracts, and documents provided that the Purchaser
and its representatives shall not enter any Company property or contact any
Company employee without the prior consent of the Sellers' Representative, which
consent shall not be unreasonably withheld. All investigations conducted by the
Purchaser and its representatives shall be conducted so as to minimize
disruption of the Company's business. The Company shall furnish to Purchaser and
its representatives all data and information concerning the Business, finances
and properties of the Company that may be reasonably requested by Purchaser.
Purchaser shall be entitled, at its cost and expense, to make copies of such
books, accounts, records, contracts and documents as it shall reasonably
request. No investigation pursuant to this Section 6.1.1 or otherwise shall
affect any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto. The Company shall
reasonably cooperate with the Purchaser so that the Purchaser, with the consent
of requisite parties, may conduct such environmental site assessments at the
Real Property as Purchaser desires (including, without limitation, subsurface
sampling).
(b) Conduct of Business in Normal Course. The Company
shall: (i) carry on its business in the ordinary course; and (ii) maintain its
books and records in accordance with its past practices.
(c) Preservation of Business. The Company shall use
reasonable efforts to preserve its business organization intact and preserve its
present relationships with the suppliers, employees, lessors, licensors,
lenders, customers, and others having business relationships with it.
(d) Employees and Compensation. Except in the
ordinary course of business consistent with past practice or as is set forth in
Schedule 6.1.4, the Company shall not do any of the following acts: (i) grant
any increase in salaries payable or to become payable to, or pay any bonus to,
any director, officer, employee, sales agent, or representative of the Company;
(ii) increase benefits payable to any director, officer, employee, sales agent,
or representative under any bonus or benefit plan or other contract or
commitment except pursuant to the provisions of such plan, contract or
commitment; (iii) enter into any new employment, severance, consulting or other
compensation agreement with any employee (other than at-will employment
arrangements with new employees in accordance with past practice); or (iv)
commit itself to any pension, profit sharing, deferred compensation, group
insurance, severance pay, retirement or other employee benefit plan, fund or
similar arrangement in addition to those in effect on the date hereof, or amend
or commit itself to amend any of such plans, funds or similar arrangements in
existence on the date hereof.
(e) Controlled Acts. Except as otherwise permitted or
contemplated by this Agreement, the Company, without the prior written consent
of the Purchaser, will not do, or agree to do, any of the following acts:
(i) enter into any contract, commitment, or
transaction except
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in the ordinary course of its business;
(ii) make any capital expenditures or
commitments therefor in excess of **The confidential portion has been so omitted
pursuant to a request for confidential treatment and has been filed separately
with the Commission.** for any single item or **The confidential portion has
been so omitted pursuant to a request for confidential treatment and has been
filed separately with the Commission.** in the aggregate, or enter into any
leases of capital equipment or property or commitments therefor under which the
annual aggregate lease charges are in excess of **The confidential portion has
been so omitted pursuant to a request for confidential treatment and has been
filed separately with the Commission.**;
(iii) change the name or change the nature
of the business of the Company as currently conducted;
(iv) authorize the merger or consolidation
of the Company or the sale of all or substantially all of its assets;
(v) change its accounting methods or
practices or make any change in depreciation or amortization policies or rates
adopted by it;
(vi) amend its certificate of incorporation
or bylaws or terminate its corporate existence;
(vii) make any payment or commitment to pay
any severance or termination pay to any of its officers, directors, employees,
consultants or agents;
(viii) guarantee any debt, obligation or
liability; or
(ix) pay any dividends or distributions to
stockholders other than bonuses to employees which may include payments in
satisfaction of stock appreciation rights.
(x) accelerate the collection of accounts
receivable as compared with the Company's practice prior to December 31, 1998;
or
(xi) make any bonus payments to employees,
other than as contemplated by this Agreement or in the ordinary course of
business consistent with past practices.
(f) Waiver of Claims. The Company shall not
compromise any material right or claim other than in the ordinary course of
business.
(g) Reasonable Efforts. The Company and the Sellers
shall use all reasonable efforts to take all action necessary to consummate the
transactions contemplated by
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this Agreement (including, without limitation, satisfaction of the conditions
specified in Section 7).
(h) Consents. The Company and the Sellers shall use
all reasonable efforts to obtain all permits, authorizations, consents and
approvals from third parties necessary to consummate the transactions
contemplated by this Agreement, provided, however, that neither the Company or
any Seller shall be required to expend material sums of money or grant any
material financial or other accommodation (other than as contemplated hereby).
6.2. The Purchaser's Obligations. The Purchaser shall take the
following actions from the date of this Agreement to the Closing Date:
(a) Reasonable Efforts. Purchaser shall use
reasonable efforts to take all action necessary to consummate the transactions
contemplated by this Agreement (including, without limitation, satisfaction of
the conditions specified in Section 7).
(b) Consents. Purchaser shall use reasonable efforts
to obtain all permits, authorizations, consents and approvals from third parties
necessary to consummate the transactions contemplated by this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, in
connection with or as a condition to receiving the consent or approval of any
governmental entity, third party or otherwise, Purchaser shall not be required
(i) to divest, abandon, license or take similar action with respect to any
assets (tangible or intangible) of it or any of its affiliates (including,
without limitation, the Company after consummation of the transactions
contemplated hereby), and (ii) to expend material sums of money or grant any
material financial or other accommodation (other than as contemplated hereby).
(c) Information to be Held in Confidence. Purchaser
shall, and shall cause its officers, directors, shareholders, employees, agents
and representatives to, keep confidential information received from the Company
and the Sellers regarding the Business, finances and properties of the Company
(the "Company's Confidential Information") in accordance with the terms of the
Confidentiality Agreement dated November 24, 1998 (the "Confidentiality
Agreement") between Purchaser and the Company, the terms of which are hereby
incorporated by reference and made a part hereof. Purchaser acknowledges and
agrees that the Confidentiality Agreement and each party's reports and
obligations thereunder shall survive the termination of this Agreement.
6.3. 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 reasonably expected 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 Schedules hereto, or (iii) any failure of such Party 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 6.3
shall not limit or otherwise affect the remedies available hereunder to
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the party receiving such notice.
6.4. 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 or the transactions contemplated hereby and shall not at any
time 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 Sellers and the Company acknowledge
and agree that Purchaser may, without the prior consent of the Company, issue
such press releases or make such public statements as may be required by
applicable law or the rules and regulations of any exchange or quotation system
on which Purchaser's or any of its affiliates' securities are listed, in which
case, to the extent practicable, Purchaser will consult with, and exercise in
good faith, all reasonable business efforts to agree with the Company regarding
the nature, extent and form of such press release or public statement, and, in
any event, with prior notice to the Company.
6.5. Termination of 401(k). At least one day prior to the
Closing Date, the Company and each ERISA Affiliate shall take all actions
necessary to terminate each Qualified Plan. If a Qualified Plan is terminated in
accordance with this Section 6.5, benefit accruals, including contributions of
salary reduction contributions, if any, shall cease. The Company and each ERISA
Affiliate agrees to take no action to merge any of its Qualified Plans, transfer
the assets of any of its Qualified Plans, or terminate any of its Qualified
Plans, except as otherwise provided in this Section 6.5, following the execution
of this Agreement without the consent of Purchaser.
6.6. Transfer of Excluded Assets. Prior to Closing, the
Company and the Sellers shall execute and deliver all documents reasonably
requested by the Sellers to transfer for no consideration all right, title and
interest in the Excluded Assets to the appropriate Seller.
7. Conditions to Closing. The following conditions shall apply:
7.1. Purchaser's Conditions to Closing. Purchaser's obligation
to purchase the Shares are subject to the satisfaction, or waiver, of all the
conditions set forth below on or before the Closing Date:
(a) Accuracy of Representations and Warranties. All
representations and warranties by Sellers and the Company shall be true on and
as of the Closing Date as if they were made on and as of such date;
(b) Performance. The Company and Sellers shall have
performed, satisfied, and complied with all covenants, agreements, and
conditions required to be performed under this Agreement on or before the
Closing Date;
(c) No Material Adverse Change. During the period
from December 31, 1998 through the Closing Date, there shall not have been any
material adverse change in the
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financial condition, the results of operations (including cash flows), assets or
business of the Company, and the Company shall not have sustained any material
loss or damage that materially adversely affects the Company's Business;
(d) Litigation. No action, suit or proceeding before
any court or governmental body or authority, pertaining to the transactions
contemplated by this Agreement, shall have been filed and not dismissed on or
before the Closing Date;
(e) Approval of Documentation. The form and substance
of all certificates, instruments, opinions, and other documents delivered to
Purchaser under this Agreement shall be satisfactory in all reasonable respects
to Purchaser and its counsel.
(f) Documents. The Sellers and the Company shall have
delivered the closing documents described in Section 8.2.1.
(g) Compliance with Governmental Authorities. All
authorizations, consents, waivers, orders or approvals required to be obtained,
and all filings, submissions, registrations, notices or declarations required to
be made, by the Sellers or the Company prior to the transfer of the Shares shall
have been obtained from, and made with, all required governmental authorities.
(h) No Injunction. At the Closing Date, there shall
be no Legal Requirement, judgment, order, injunction, decree, stipulation or
award of any nature of any governmental authority that restrains, prohibits or
enjoins or seeks to restrain, prohibit or enjoin, the consummation of the
transactions contemplated hereby.
(i) Resignations. Each of the officers and directors
of the Company and each trustee under any employee benefit 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, at the request of
Purchaser, from positions as an employee of the Company) and as a trustee for
each such plan.
(j) Related Party Transactions. Except for such
contracts, agreements and undertakings as to which Purchaser has notified the
Company that it wants to retain, which contracts shall be effective as of the
Closing Date, all contracts, agreements and undertakings between the Company and
any affiliate thereof shall have been satisfied and discharged as of the Closing
Date with no further liability to the Company.
(k) Escrow Agreement. The Seller Representative (as
defined below) and the Escrow Agent shall have executed and delivered an Escrow
Agreement in form and substance reasonably satisfactory to Sellers and Purchaser
to hold the Escrow Indemnity Funds contemplated hereby (the "Escrow Agreement").
(l) Noncompetition Agreements. William Jalbert and
Gordon Clark shall each have entered into Noncompetition Agreements
substantially in the form of Exhibit
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7.1(l)A attached hereto, and Kenneth Saxon and Thomas Bird shall each have
entered into Noncompetition Agreements substantially in the form of Exhibit
7.1(l)B attached hereto.
(m) The agreements referred to on Schedule 3.1 shall
have been terminated.
7.2. Sellers' Conditions to Closing. Sellers' obligation to
sell and transfer the Shares to Purchaser is subject to the satisfaction, or
waiver, of the following conditions on or before the Closing Date:
(a) Accuracy of Representations and Warranties. All
representations and warranties by Purchaser shall be true on and as of the
Closing Date as if they were made on and as of such date;
(b) Performance. Purchaser shall have performed,
satisfied and complied with all covenants and agreements and satisfied all
conditions required to be performed under this Agreement on or before the
Closing;
(c) Litigation. No action, suit or proceeding before
any court or governmental body or authority pertaining to the transactions
contemplated by this Agreement shall have been filed and not dismissed on or
before the Closing Date.
(d) Approval of Documentation. The form and substance
of all certificates, instruments, opinions, and other documents delivered to
Sellers under this Agreement shall be satisfactory in all reasonable respects to
Sellers and their counsel.
(e) Documents. Purchaser shall have delivered the
documents described in Section 8.2.2.
(f) Compliance with Governmental Authorities. All
other authorizations, consents, waivers, orders or approvals required to be
obtained, and all filings, submissions, registrations, notices or declarations
required to be made, by the Purchaser prior to the transfer of the Shares shall
have been obtained from, and made with, all required governmental authorities.
(g) No Injunction. At the Closing Date, there shall
be no Legal Requirement, judgment, order, injunction, decree, stipulation or
award of any nature of any governmental authority that restrains, prohibits or
enjoins or seeks to restrain, prohibit or enjoin, the consummation of the
transactions contemplated hereby.
(h) Escrow Agreement. The Purchaser and the Escrow
Agent shall have executed and delivered the Escrow Agreement.
8. Closing.
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8.1. Time and Place. Subject to the satisfaction or waiver of
the conditions set forth in Section 7 hereof, the transfer of the Shares by
Sellers to Purchaser (the "Closing") shall take place at the law offices of Doty
Sundheim & Gilmore, 420 Florence Street, Palo Alto, CA 94301 at 9:00 a.m. local
time on April 1, 1999, or at such other time and place as the parties may agree
in writing (the "Closing Date").
8.2. Deliveries at Closing. The following items shall be
delivered at the Closing:
(a) Sellers. Sellers shall deliver, or cause to be
delivered, to Purchaser the following in form and content reasonably
satisfactory to Purchaser's counsel:
(i) Stock certificates in the name of each
Seller, evidencing the Shares, duly endorsed by each Seller (or with duly
endorsed in blank separate stock powers);
(ii) A closing certificate executed by
Sellers certifying the accuracy of Sellers' representations and warranties and
compliance with Sellers' covenants;
(iii) A certificate certifying (i) the
incumbency of the Company's officers, (ii) the resolutions of the Company's
Board of Directors authorizing the execution, delivery and performance of this
Agreement, and (iii) the Company's organizational documents;
(iv) A closing certificate executed by the
Company's president certifying the accuracy of the Company's representations and
warranties and compliance with the Company's covenants;
(v) The legal opinion of counsel for Company
and for each Seller, dated as of the Closing Date, in the form attached
collectively hereto as Exhibit 8.2.1(e);
(vi) Copies of any required consents; and
(vii) Such other documents and instruments
as Purchaser may reasonably request in order to effect the purpose of this
Agreement;
(b) Purchaser. Purchaser shall deliver or cause to be
delivered to Sellers and the Company the following in form and content
reasonably satisfactory to Sellers' counsel:
(i) Confirmation from Purchaser's bank of
the wire transfers of the Purchase Price;
(ii) A certificate certifying (i) the
incumbency of Purchaser's officers, (ii) the resolutions of Purchaser's Board of
Directors authorizing the execution, delivery and performance of this Agreement,
and (iii) Purchaser's organizational documents;
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(iii) A closing certificate executed by a
duly authorized officer of Purchaser certifying the accuracy of Purchaser's
representations and warranties and compliance with the Company's covenants;
(iv) The legal opinion of Purchaser's
counsel, in the form attached hereto as Exhibit 8.2.2(d);
(v) Copies of any required consents; and
(vi) Such other documents and instruments as
Sellers or the Company may reasonably request in order to effect the purpose of
this Agreement.
9. Post-Closing Obligations.
9.1. Indemnification.
(a) Indemnification by Sellers. Subject to this
Section 9, Sellers shall indemnify, hold harmless and defend Purchaser, Iron
Mountain Incorporated, their respective affiliates, each of their respective
directors, officers, employees, shareholders, representatives and agents, and
each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Purchaser Indemnified Parties") against and in respect of
any and all claims, actions, demands, liabilities, damages, losses, costs,
expenses and deficiencies (including interest, penalties, reasonable attorneys'
fees and expenses and litigation expenses), including, but not limited to, those
incurred to enforce the terms of this Agreement (such claims, demands,
liabilities, losses, costs, expenses and deficiencies are referred to
collectively as "Losses") arising out of or in connection with or based upon (i)
the inaccuracy of any representation or warranty made by Sellers in this
Agreement (including in any Schedule or Exhibit hereto) or in any certificate
delivered pursuant to this Agreement, (ii) any breach of any covenant or
agreement of Sellers or the Company contained herein, or (iii) any claims of any
brokers or finders claiming by, through or under Sellers or the Company (other
than claims for which an adjustment has been made to the Purchase Price). Losses
subject to this Section 9 shall specifically include Losses related to the theft
of personal property from the Company's facility located at 1950 South Vermont,
Los Angeles, California as disclosed in Schedule 4.23.
(b) Limitation on Indemnification.
(i) Purchaser's rights to indemnification
shall be subject to the following limitations: (i) Purchaser shall not be
entitled to recover its Losses in respect of a breach of a representation or
warranty unless and until the aggregate amount of Losses for all breaches of
representations and warranties exceeds **The confidential portion has been so
omitted pursuant to a request for confidential treatment and has been filed
separately with the Commission.**; (ii) in no event shall the aggregate amount
to be paid to Purchaser exceed **The confidential portion has been so omitted
pursuant to a request for confidential treatment and has been filed separately
with the Commission.**
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(provided that the limitations in this clause (ii)) shall not apply to a claim
made in respect of the breach of the representations and warranties set forth in
Sections 3.1, 3.2, 3.3 and 4.3 or a claim based upon fraud (each, a "Special
Claim"), and shall not apply to a claim made in respect of the breach of the
representations and warranties set forth in Section 4.9 (a "Tax Claim")); and
(iii) the amount of indemnity payable shall be calculated after giving effect to
the actual tax effect realized by Purchaser from the indemnity payment
(including any tax benefits obtained by way of exclusion from income, deduction,
credit or refund). Notwithstanding any other provision of this Agreement, under
no circumstances shall the total liability of a Shareholder for any and all
indemnification claims including, without limitation, Special Claims and Tax
Claims, exceed such Shareholder's percentage of **The confidential portion has
been so omitted pursuant to a request for confidential treatment and has been
filed separately with the Commission.**
(ii) **The confidential portion has been so
omitted pursuant to a request for confidential treatment and has been filed
separately with the Commission.** Any claims of Purchaser for indemnification to
be satisfied out of the Escrow Indemnity Funds shall be made in accordance with
the terms of the Escrow Agreement. In the event there are no Unresolved Claims
(as defined below) at 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 Seller Representative for the benefit of
each Seller in accordance with their proportionate interests, calculated in
accordance with the percentage of the Escrow Indemnity Funds allocated to
Sellers as set forth on Schedule 2.2. In the event one or more Unresolved Claims
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 Purchaser to cover the fees,
expenses and other costs (including reasonable counsel fees and expenses) which
will be required to resolve such Unresolved Claims shall be retained as part of
the Escrow Indemnity Funds and the balance thereof, if any, shall be distributed
to the Seller Representative for the benefit of the Sellers in accordance with
their proportionate interests. Upon the resolution of all such Unresolved 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 Seller
Representative for the benefit of the Sellers in accordance with their
proportionate interests.
(c) Each Seller hereby appoints Thomas W. Bird (the
"Seller Representative"), with full and unqualified power to delegate (with the
approval of Purchaser, which shall not be unreasonably withheld) to one or more
Persons the authority granted to such Person hereunder to act as his, her or its
agent and attorney-in-fact, with full power of substitution, to execute the
Escrow Agreement and to take all actions called for by this Section 9 and the
Escrow Agreement on his, her or its behalf, in accordance with the terms of this
Section 9 and the Escrow Agreement.
(d) The term "Unresolved Claims" shall mean any claim
or request made pursuant to this Agreement against the Escrow Indemnity Funds,
until such time as such claim or request has been paid in full or otherwise
fully settled, compromised or adjusted by Purchaser, the Seller Representative
and the Escrow Agent or by a final decision of an arbitrator or arbitration
panel appointed pursuant to Section 11.10 of this Agreement or a final order of
a court of competent jurisdiction resolving such claim, from which no appeal is
or can be taken.
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(e) Indemnification by Purchaser. Purchaser shall
indemnify, hold harmless and defend Sellers and their respective officers,
directors, shareholders, employees, agents, representatives, successors, heirs
and assigns (the "Seller Indemnified Parties") (as the context so requires)
against and in respect of any and all Losses arising out of or in connection
with or based upon the inaccuracy of any representation or warranty or breach of
any covenant or agreement made by Purchaser in this Agreement (including in any
Schedule or Exhibit hereto) or in any certificate delivered pursuant to this
Agreement.
(f) Non-Third Party Claims. The following shall apply
to claims between the parties that do not involve a third party:
(i) The party entitled to indemnification
hereunder (in such capacity, the "Indemnified Party") shall give written notice
(a "Notice of Claim") to Purchaser (in the case of a claim for indemnification
by a Seller Indemnified Party) or the Seller Representative (in the case of a
claim for indemnification by a Purchaser Indemnified Party) (in such capacity,
the "Indemnifying Party") within a reasonable period of time after becoming
aware of any Losses that the Indemnified Party shall have determined have given
rise to, or could reasonably be expected to give rise to, a claim for
indemnification hereunder (each, an "Indemnifiable Claim"), and shall provide to
the Indemnifying Party as soon as practicable thereafter all information and
documentation reasonably necessary to support and verify such claim; provided,
that the right of the Indemnified Party to indemnification shall be reduced in
the event of its failure to give timely notice only if and to the extent the
Indemnifying Party is prejudiced thereby. The Indemnifying Party shall be given
reasonable access to all books and records in the possession or under the
control of the Indemnified Party which the Indemnifying Party reasonably
determines to be related to such claim.
(ii) Any liability for indemnification under
this Section 9.1.4 shall be paid by the Indemnifying Party within fifteen (15)
days after its receipt of a Notice of Claim in immediately available funds in
U.S. dollars; provided that if a contest notice is given to the Indemnified
Party by the Indemnifying Party within such fifteen-day period, such payment
shall not be required until the dispute is resolved, and either party may at any
time thereafter commence a legal proceeding in accordance with this Agreement to
resolve the contested assertion of an Indemnifiable Claim. Any liability for
indemnification under this Section 9.1.4 shall be paid by the Indemnifying Party
in immediately available funds in U.S. dollars within fifteen (15) days after
such liability is finally determined. Liability for an Indemnifiable Claim
hereunder shall be deemed to be "finally determined" for purposes of this
Section 9.1.4 when the parties to such action have so determined by mutual
agreement or when a final non-appealable order of a court having competent
jurisdiction shall have been entered.
(g) Matters Involving Third Parties. The following
shall apply to claims asserted against a party by a third party:
(i) If any third party shall commence an
action against any Indemnified Party with respect to any matter which may give
rise to an Indemnifiable Claim against any Indemnifying Party (a "Third Party
Claim"), the Indemnified Party shall give to the
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Indemnifying Party, as soon as practicable, a Notice of Claim thereof; provided
that the right of the Indemnified Party to indemnification shall be reduced in
the event of its failure to give timely notice only if and to the extent the
Indemnifying Party is prejudiced thereby.
(ii) The Indemnifying Party shall have the
right to defend the Indemnified Party against the Third Party Claim with counsel
of its choice (subject to the reasonable approval of Purchaser) if the
Indemnifying Party shall notify the Indemnified Party in writing (within the
fifteen (15) day period after its receipt of a Notice of Claim specifying the
Third Party Claim) that it will indemnify the Indemnified Party from and against
any Losses the Indemnified Party may suffer arising out of the Third Party
Claim, provided, however, if the amount in dispute in respect of such Third
Party Claim exceeds the amount of Escrow Indemnity Funds not subject to
Unresolved Claims, the party which has the right to control such Third Party
Claim shall be the Sellers unless the amount of Escrow Indemnity Funds not
subject to Unresolved Claims is less than 50% of such Third Party Claim, in
which event Purchaser shall have the right to control the defense of such claim.
Neither party shall have the right to settle any such Claim without the consent
of the other party, which consent shall not be unreasonably withheld. If the
Indemnifying Party does not so notify the Indemnified Party or, after such
notification, does not in fact defend the Third Party Claim, the Indemnified
Party may defend, compromise or settle the Third Party Claim, preserving its
rights to indemnification hereunder, including without limitation for the cost
of such defense. Notwithstanding the foregoing, an Indemnified Party shall have
the right to employ one law firm as counsel, together with a separate local law
firm in each applicable jurisdiction ("Separate Counsel"), to represent such
Indemnified Party in any action or group of related actions (which firm or firms
shall be reasonably acceptable to the Indemnifying Party) if the Indemnified
Party has been advised by counsel that either there is a reasonable likelihood
of a conflict of interest between such Indemnified Party and such Indemnifying
Party in respect of such claim, or there may be defenses available to such
Indemnified Party which are different from or in addition to those available to
such Indemnifying Party and the representation of both parties by the same
counsel would be inappropriate, and in that event (i) the reasonable fees and
expenses of such Separate Counsel shall be considered Losses, and (ii) each of
such Indemnifying Party and such Indemnified Party shall have the right to
conduct its own defense in respect of such claim.
(iii) If the Indemnifying Party is
conducting the defense of the Third Party Claim in accordance with Section
9.1.5(b) above, then: (i) the Indemnified Party may retain separate counsel, at
its sole cost and expenses, and participate in the defense of the Third Party
Claim, provided that the Indemnifying Party shall have the right to conduct the
defense of and, subject to this Section 9.1.5(c), settle such Third Party Claim;
(ii) the Indemnified Party shall not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party; (iii) the Indemnified Party
shall fully cooperate with the Indemnifying Party in the investigation and
defense of such Third Party Claim, including without limitation, providing
required information and documents and access to all employees of the
Indemnified Party with knowledge of issues relevant to the claim or litigation
(and such activities required to discharge this obligation to cooperate shall be
considered part of the Losses); and, (iv) the Indemnifying Party shall not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party
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Claim without the prior written consent of the Indemnified Party, which consent
shall not be unreasonably withheld or delayed, unless such settlement (i)
includes a general release of the Indemnified Party from such Third Party Claim;
(ii) does not require any action or payment on the part of the Indemnified
Party; and (iii) does not include the imposition of any injunctive relief or
other equitable remedies against the Indemnified Party. Notwithstanding any
other provision of this Section 9.1.5, if an Indemnified Party withholds its
consent to a settlement or elects to continue the defense of any claim where but
for such action the Indemnifying Party could have settled such claim solely for
the payment of money by the Indemnifying Party as specified in the written
request for consent to the settlement delivered to the Indemnified Party, the
Indemnifying Party shall indemnify the Indemnified Party only up to a maximum of
the bona fide settlement offer for which the Indemnifying Party could have
settled such claim.
9.2. Survival of Representations; Claims for Indemnification.
All representations and warranties made by the Sellers and the Purchaser in this
Agreement, or in any instrument or document furnished in connection with this
Agreement or the transactions contemplated hereby, shall survive the Closing and
any investigation at any time made by or on behalf of the Indemnified Party
until the expiration of the Escrow Indemnity Period, other than (i) any claim
made in respect of the breach of the representations and warranties set forth in
Section 3.1, 3.2 and 3.3 or Section 4.3, which shall survive indefinitely and
(ii) any claim made in respect of the breach of the representations and
warranties set forth in Section 4.9 which shall survive **The confidential
portion has been so omitted pursuant to a request for confidential treatment and
has been filed separately with the Commission.** after the Closing Date. All
such representations and warranties shall expire on the last day of the Escrow
Indemnity Period, except for claims, if any, (i) asserted in writing prior to
such last day of the Escrow Indemnity Period and identified as a claim for
indemnification pursuant to this Section 9, (ii) made in respect of the breach
of the representations and warranties set forth in Section 3.1, 3.2 and 3.3 or
Section 4.3, or (iii) made in respect of the breach of the representations and
warranties set forth in Section 4.9 which shall survive **The confidential
portion has been so omitted pursuant to a request for confidential treatment and
has been filed separately with the Commission.** after the Closing Date.
9.3. Exclusive Remedy. All claims made after the Closing in
connection with this Agreement and the transactions contemplated hereby shall be
made under, and subject to the limitations set forth in, this Section 9, which,
from and after the Closing Date, shall be the exclusive remedy for any party
hereto for any breach of this Agreement or other claim arising hereunder or in
connection with the transactions contemplated hereby (other than a claim for
breach of the Noncompetition Agreements), and all other parties hereby
irrevocably waive the right to assert any other remedy.
10. Termination and Abandonment.
10.1. Methods of Termination. This Agreement may be terminated
and the transactions herein contemplated may be abandoned at any time:
(a) by written agreement of Purchaser and a
majority-in-interest of the
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Sellers;
(b) by written notice by either Purchaser or a
majority-in-interest of the Sellers if such party or parties is not in breach
hereunder and (i) the other party/parties fails to cure a breach of any of
its/their obligations hereunder within **The confidential portion has been so
omitted pursuant to a request for confidential treatment and has been filed
separately with the Commission.** after receipt of a Notice from the other
party/parties specifying the nature of such breach, (ii) any of the other
party's representations or warranties shall have become and continue to be
untrue in any material respect, unless such untruth is capable of being cured by
and will not prevent or delay consummation of the transactions contemplated
hereby by or beyond April 30, 1999 (the "Termination Date") and (iii) this
Agreement is not consummated on or before the Termination Date, including
extensions; or
(c) by written notice by either Purchaser or a
majority-in-interest of the Sellers if this Agreement is not consummated on or
before the Termination Date, including extensions, due to any law, regulation or
act of any applicable regulatory body not arising from a breach by the
terminating party/parties of any of its/their obligations hereunder.
10.2. Procedure Upon Termination. In the event of termination
and abandonment pursuant to Section 10.1.1 or 10.1.3 hereof, this Agreement
shall terminate and shall be abandoned, without further action by any of the
parties hereto. If this Agreement is terminated as provided herein:
(a) each party will upon request redeliver all
documents and other materials of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same;
(b) no party hereto shall have any liability or
further obligation to any other party to this Agreement; provided, that the
obligations of the parties pursuant to Section 6.2.3 of this Agreement shall
survive termination; and
(c) each party shall bear its own expenses.
If this Agreement is terminated pursuant to Section 10.1.2, the parties
hereto shall have available to them all remedies affordable to them by
applicable law.
11. General Provisions.
11.1. Notices. All notices, consents, approvals, requests,
demands, and other communications under this Agreement shall be in writing and
shall be deemed to have been duly given to a party on the date of delivery if
personally delivered to the party to whom notice is to be given, or on the fifth
(5th) business day after mailing if mailed by first class mail, registered or
certified, postage prepaid, at the address set forth below or on the date of
service if delivered by facsimile to the respective facsimile number set forth
below which facsimile is confirmed by answer back or on the next business day
following timely delivery for overnight delivery to a recognized national
courier, charges prepaid, addressed to the respective address set forth below.
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Any party may change its address for purposes of this Section by giving the
other parties written notice of the new address in the manner set forth above.
Addresses for notice purposes are as follows:
If to Sellers: To the respective Seller at the address
set forth for such Seller in the
signature block of this Agreement
With a copy to: Doty Sundheim & Gilmore
420 Florence Street, Suite 200
Palo Alto, CA 94301
Attn.: Stanley E. Doty, Esq.
Tel. No. (650) 327-0100
Facsimile No. (650) 327-0101
and to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn.: Peter B. Tarr, Esq.
Tel. No. (617) 526-6639
Facsimile No. (617) 526-5000
If to Purchaser: Iron Mountain Records Management, Inc.
745 Atlantic Avenue
Boston, MA 02111
Attn.: Mr. Donald Richards
Tel. No. (617) 535-4858
Facsimile No. (617) 350-7881
With a copy to: Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attn.: William J. Curry, Esq.
Tel. No. (617) 338-2976
Facsimile No. (617) 338-2880
11.2. Governing Law. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of California, without regard to
its conflict of laws doctrine.
11.3. Expenses. Subject to the provisions of Section 10, each of the
parties shall pay all costs and expenses incurred or to be incurred by it in the
negotiation and preparation of this Agreement and in closing and carrying out
the transactions contemplated by this Agreement.
11.4. Headings. The subject headings of the Sections, paragraphs and
subsections of this Agreement are included for purposes of convenience only, and
shall not affect the
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construction or interpretation of any of the provisions
hereof.
11.5. Modification and Waiver. This Agreement, the Noncompetition
Agreements, the Escrow Agreement and the Confidentiality Agreement constitute
the entire agreement between the Parties pertaining to the subject matter hereof
and supersede all prior and contemporaneous agreements, representations, and
understandings of the Parties. If the provisions of any Schedule or Exhibit to
this Agreement are inconsistent with the provisions of this Agreement, the
provisions of this Agreement shall prevail. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by all
the Parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver.
11.6. Counterparts/Fax Signatures. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The parties
expressly agree that signatures by facsimile shall be deemed valid and
enforceable so long as original signatures are received within three (3) days
after receipt of delivery of the facsimile signature.
11.7. Variations of Pronouns. Whenever required by the context hereof,
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
11.8. Rights of Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and permitted assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third parties to any
party to this Agreement, nor shall any provision give any third parties any
right of subrogation or action over against any party to this Agreement.
11.9. Binding Effect; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, assigns, heirs and legal representatives (as the context so
requires), provided, however, that in the event of an assignment hereunder, the
assigning party shall remain liable for his or its obligations hereunder.
11.10. Arbitration. Except as provided in Section 10.2, any dispute
between the parties arising out of this Agreement shall be submitted to final
and binding arbitration in the San Jose, California, under the Commercial
Arbitration Rules of the American Arbitration Association then in effect, upon
written notification and demand of either party therefor. The following
provisions shall be applicable to any such proceeding:
(a) In the demand for arbitration, the American
Arbitration Association shall be requested to submit a list of prospective
arbitrators consisting of persons experienced in matters involving business
contracts. In any arbitration pursuant to this Section, the award shall be
rendered by a single arbitrator appointed jointly by the parties, or if the
parties can not agree to a single arbitrator within thirty (30) days after the
commencement of the
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arbitration proceeding, by an arbitrator appointed by the American Arbitration
Association. For purposes of this Section, "commencement of the arbitration
proceeding" shall be deemed to be the date on which a written demand for
arbitration is received by the American Arbitration Association from one (1) of
the parties.
(b) The provision of California Code of Civil
Procedure Section 1283.05 and the laws of the State of California and
incorporated herein and shall be applicable to the arbitration.
(c) In making the award, the arbitrator shall award
recovery of costs and expenses of the arbitration and reasonable attorney's fees
to the prevailing party.
(d) Any award may be entered as a judgement in any
court of competent jurisdiction. Should judicial proceedings be commenced to
enforce or carry out this provision or any arbitration award, the prevailing
party in such proceedings shall be entitled to reasonable attorney's fees and
costs in addition to other relief.
(e) Either party shall have the right, prior to
receiving an arbitration award, to obtain preliminary relief from a court of
competent jurisdiction to: (i) avoid injury or prejudice to that party; (ii) or
to protect the rights of any party; or (iii) to maintain the status quo as it
existed immediately prior to the dispute.
(f) The parties hereby agree that service of any
notices in the course of such arbitration shall be sufficient if given as
provided in the notices Section of this Agreement.
11.11. Attorneys' Fees. If any legal action or any arbitration
or other proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default, or misrepresentation in connection with
any of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
such parties may be entitled. The prevailing party will be determined by the
court or arbitrator, as the case may be.
11.12. Severability. In the event that any provision of this
Agreement, or the application of such provision to any person or set of
circumstances, shall be determined to be invalid, unlawful or unenforceable to
any extent, the remainder of this Agreement, and the application of such
provision to persons or circumstances other than those as to which it is
determined to be invalid, unlawful or unenforceable, shall not be affected and
shall continue to be enforceable to the fullest extent permitted by law.
11.13. Interpretation of Agreement. Each party hereto
acknowledges that it has participated in the drafting of this Agreement and the
other documents and instruments delivered in connection herewith, and any
applicable rules of construction to the effect that ambiguities are to be
resolved against the drafting party shall not be applied in connection with the
construction
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<PAGE>
or interpretation hereof or thereof.
11.14. Specific Performance. The parties hereto each
acknowledge that, in view of the uniqueness of the subject matter hereof, the
parties hereto would not have an adequate remedy at law for money damages in the
event that this Agreement were not performed in accordance with its terms, and
therefore agree that the parties hereto shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which the
parties hereto may be entitled at law or in equity.
11.15. Farm.com. The Purchaser agrees to cease using the
domain name farm.com on or before the second anniversary of the Closing and
agrees to execute and deliver any and all documents reasonably requested by
Messrs. Bird and Saxon to transfer to them all right, title and interest
therein.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it
on the day and year first above written.
THE COMPANY:
First American Records Management, Inc.
By: /s/ I. Kenneth Saxon
I. Kenneth Saxon
Its: President
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<PAGE>
SELLERS:
/s/ I. Kenneth Saxon
I. Kenneth Saxon, individually
831 Summit Road
Santa Barbara, CA 93108
Tel. No. (805) 844-9223
Facsimile No. (805) 884-0553
The Bird Revocable Trust dated June 6, 1991
By:/s/ Thomas W. Bird
Thomas W. Bird, Trustee
By:/s/ Tracey S. Bird
Tracey S. Bird, Trustee
63 Indian Pipe Lane
Concord, MA 01742
Tel. No. (978) 371-7111
Facsimile No. (978) 371-3222
First American Title Insurance Company
114 East Fifth Street
Santa Ana, CA 92702
Tel. No. (800) 854-3643
Facsimile No. (714) 647-2242
By:/s/ Craig I. DeRoy
Craig I. DeRoy
Its: Vice President
Housatonic Investors, LLC
111 Newbury Street, Suite 500
Boston, MA 02116-3131
Tel. No. (617) 267-4545
Facsimile No. (617) 536-8535
By: Housatonic Partners, LLC,
its managing member
By:/s/ William Thorndike, Jr.
William Thorndike, Jr.
Its: Managing Member
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<PAGE>
/s/ William Jalbert
William Jalbert, individually
3218 Washington Street
San Francisco, CA 94115
Tel. No. (415) 928-1137
Facsimile No. __________________
/s/ Gordon Clark
Gordon Clark, individually
810 Murphy Drive
San Mateo, CA 94402
Tel. No. (650) 349-6135
Facsimile No. __________________
The Boston Foundation, Inc.
One Boston Place, 24th Floor
Boston, MA 02108
Tel. No. (617) 723-7415
Facsimile No. (617) 589-3616
By: /s/ Anna Faith Jones
Its: President and Chief Executive Officer
El Adobe Corporation
c/o Santa Barbara Foundation
15 East Carrillo Street
Santa Barbara, CA 93101-2780
Tel. No. (805) 963-1873
Facsimile No. (805) 966-2345
By:/s/ William A. Fry
Its: President
PURCHASER:
Iron Mountain Records Management, Inc.
By:/s/ Donald P. Richards
Its: Vice President
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<PAGE>
SPOUSAL CONSENT
The undersigned certifies as follows:
1. I am the spouse of Gordon Clark.
2. I understand and approve the provisions of the Stock Purchase
Agreement by and among First American Records Management, Inc. ("Company"), the
stockholders of Company (including my spouse) and Iron Mountain Records
Management, Inc., to which this Consent is attached. Capitalized terms shall
have the meanings set forth in the Stock Purchase Agreement.
3. I agree to be bound by and accept the provisions of the Stock
Purchase Agreement, as it may be amended from time to time insofar as those
provisions may affect any interest I may have in the Company, whether the
interest is community property or otherwise.
4. My spouse shall have full power of management of the Shares being
sold by my spouse pursuant to this Stock Purchase Agreement, including any
portion of those interests that are our community property; and my spouse has
the full right, without my further approval, to exercise my spouse's voting
rights as a shareholder in the Company, and to sell, transfer, encumber, and
deal in any manner with such shares.
Executed March 31, 1999.
/s/ Lauren Clark
[Name]
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<PAGE>
SPOUSAL CONSENT
The undersigned certifies as follows:
1. I am the spouse of I. Kenneth Saxon.
2. I understand and approve the provisions of the Stock Purchase
Agreement by and among First American Records Management, Inc. ("Company"), the
stockholders of Company (including my spouse) and Iron Mountain Records
Management, Inc., to which this Consent is attached. Capitalized terms shall
have the meanings set forth in the Stock Purchase Agreement.
3. I agree to be bound by and accept the provisions of the Stock
Purchase Agreement, as it may be amended from time to time insofar as those
provisions may affect any interest I may have in the Company, whether the
interest is community property or otherwise.
4. My spouse shall have full power of management of the Shares being
sold by my spouse pursuant to this Stock Purchase Agreement, including any
portion of those interests that are our community property; and my spouse has
the full right, without my further approval, to exercise my spouse's voting
rights as a shareholder in the Company, and to sell, transfer, encumber, and
deal in any manner with such shares.
Executed March 30, 1999.
/s/ Josephine Brickner Saxon
[Name]
-3-
EXHIBIT 10.1
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement, dated as of April 8,
1999 (the "Amendment"), is by and among Iron Mountain Incorporated, a Delaware
corporation ("Purchaser"); Data Base, Inc., a Washington corporation (the
"Company"); John J. Luger; Donna M. Luger; Mary Ann Montandon, George F. Luger
and Lisa Luger Frey, as co-trustees of the Lisa Luger Frey GST Trust; Mary Ann
Montandon, George F. Luger and Tanya Luger Paszkeicz, as co-trustees of the
Tanya Luger Paszkeicz GST Trust; Mary Ann Montandon, George F. Luger and John J.
Luger, Jr., as co-trustees of the John J. Luger, Jr. GST Trust; and Mary Ann
Montandon and George F. Luger, as co-trustees of the Justin T. Luger GST Trust
(each a "Seller" and collectively, "Sellers").
W I T N E S S E T H :
WHEREAS, Purchaser, the Company and Sellers are parties to that Stock
Purchase Agreement, dated as of February 28, 1999 (the "Original Agreement");
WHEREAS, Purchaser is contemplating an underwritten public offering of
shares of its common stock, par value $.01 per share ("Purchaser Common Stock"),
pursuant to its Registration Statement on Form S-3 (No. 333-44185) (the
"Universal Shelf");
WHEREAS, Sellers desire liquidity with respect to the Iron Mountain
Common Stock (this and other capitalized terms used in this Amendment without
definition are used with the meanings ascribed to such terms in the Original
Agreement) and Purchaser is willing to apply a portion of the net proceeds from
the public offering to repurchase shares of Iron Mountain Common Stock held by
Sellers (subject to the terms and conditions set forth herein); and
WHEREAS, Purchaser, the Company and Sellers wish to amend the Original
Agreement as set forth in this Amendment;
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:
Section 1 Repurchase of Shares.
1.1 Repurchase of Shares. Purchaser hereby agrees that if
Purchaser consummates an underwritten public offering of Purchaser
Common Stock under the Universal Shelf on or before May 23, 1999 (the
"Offering"), it shall purchase from each Seller, and each Seller hereby
agrees to sell to Purchaser, on the terms and conditions contained
herein, all or such portion of the Iron Mountain Common Stock held by
such Seller as Purchaser and such Seller may agree, free and clear of
all Liens. The per share purchase price to be paid to Sellers for the
Iron Mountain Common Stock shall be equal to the public offering price
per share with respect to the Offering, less underwriting discounts and
commissions; provided, however, that each Seller, prior to being
obligated to sell shares of Iron Mountain Common Stock under this
Amendment, shall have the right to designate the net price per share
such Seller is willing to accept for his or its Iron Mountain Common
Stock. Such agreement shall be reflected in a letter agreement between
such Seller and Purchaser (the "Letter Agreement") entered into by them
not less than two (2) business days prior to the execution of the
Underwriting Agreement to be entered into in connection with the
Offering (the "Underwriting Agreement"). The Parties acknowledge that
Purchaser has the right to apply the net proceeds of the Offering as it
in its sole discretion may determine and that, consistent with an
underwritten offering as to which Sellers had piggyback registration
rights, Purchaser will only be required to apply the net proceeds of
the Offering to purchase shares of Iron Mountain Common Stock from
Sellers after it has applied the net proceeds to Purchaser's other
intended uses. Accordingly, if the managing underwriters of the
Offering deliver a written opinion to Sellers that marketing
considerations (including, without limitation, pricing) require a
limitation on Purchaser Common Stock to be sold
<PAGE>
-2-
in the Offering, then, subject to the advice of said managing
underwriter or underwriters as to the size and composition of the
Offering, such limitation will be imposed on one or more Sellers, and
Purchaser shall not be required to purchase Iron Mountain Common Stock
from such Seller or Sellers as a result of such limitation.
1.2 No Obligation to Proceed with Offering. Notwithstanding
anything to the contrary in this Amendment, Purchaser shall not in any
way be obligated to consummate the Offering and it may, at any time
prior to the closing thereof, determine not to offer shares of
Purchaser Common Stock pursuant to the Universal Shelf without
liability to any Seller. Purchaser shall give Sellers prompt written
notice of its election not to proceed with the Offering.
1.3 Replacement of Escrow Shares. If as a result of the
transactions contemplated hereby, shares of Iron Mountain Common Stock
constituting all or part of the Escrow Indemnity Funds are sold by a
Seller to Purchaser hereunder, at the Stock Repurchase Closing (as
defined in Section 2.1 below) such Seller shall contribute to the
Escrow Indemnity Funds cash in an amount (the "Cash Payment") equal to
the product of (a) the public offering price in the Offering and (b)
the shares of Iron Mountain Common Stock being purchased by Purchaser
from such Seller that constitute Escrow Indemnity Funds. To facilitate
such contribution, Purchaser shall pay the Cash Payment to the Escrow
Agent by wire transfer from a portion of the purchase price otherwise
payable to such Seller under Section 1.1 (the "Repurchase Price").
Section 2 Closing.
2.1 Time and Place of Closing. The closing of the purchase and
sale described in Section 1.1 (the "Stock Repurchase Closing") shall
occur at the offices of Sullivan & Worcester LLP, One Post Office
Square, Boston, Massachusetts, on the day that is one (1) business day
after the closing under the Underwriting Agreement or, if later, at
such time as Purchaser may purchase the Iron Mountain Common Stock in
compliance with Regulation M promulgated under the Securities Exchange
Act of 1934, as amended (the "Stock Repurchase Closing Date").
2.2 Obligations To Be Performed at Closing. At the Stock
Repurchase Closing, (a) Sellers shall deliver to Purchaser stock
certificate(s) representing the Iron Mountain Common Stock to be
purchased by Purchaser hereunder, duly endorsed in blank or accompanied
by stock powers or other duly executed instruments of transfer, as may
be necessary to effect the transfer of good and marketable title to
such shares to Purchaser, free and clear of all Liens, and (b)
Purchaser shall pay to such Seller the Repurchase Price (subject to
reduction, if any, as contemplated by Section 1.3 hereof) by wire
transfer to a bank account designated by such Seller in immediately
available funds. To the extent only a portion of the Iron Mountain
Common Stock represented by a certificate is to be purchased by
Purchaser, at the Stock Repurchase Closing Purchaser shall also deliver
to such Seller a certificate representing the portion of the shares not
acquired.
Section 3 Representations and Warranties of Sellers. To induce
Purchaser to enter into and perform this Amendment, Sellers represent and
warrant to Purchaser as follows:
3.1 Due Authorization and Execution. Each Seller has all
requisite power and authority to own the Iron Mountain Common Stock, to
execute and deliver this Amendment and to perform its obligations
hereunder and consummate the transactions contemplated hereby. This
Amendment has been duly authorized, executed and delivered by each
Seller and is a legal, valid and binding obligation of such Seller,
enforceable against such Seller in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally and
except as the availability of equitable remedies may be limited by
equitable principles of general applicability.
<PAGE>
-3-
3.2 No Approvals or Notices Required; No Conflicts With
Material Contracts. The execution, delivery and performance of this
Amendment by each Seller, and the consummation of the transactions
contemplated hereby, will not (a) conflict with or constitute a default
or violation (with or without the giving of notice or lapse of time, or
both) of any Governmental Regulation, or of any Permit, authorization,
status, concession, franchise, license, statute, law, ordinance, rule
or regulation applicable to any Seller, (b) require any consent,
approval or authorization of, or declaration, filing or registration
with any Governmental Entity (except for consents, approvals or
authorizations of, or declarations, filings or registrations required
under federal and state securities laws), (c) result in a material
default under or violation of (with or without the giving of notice or
lapse of time, or both), acceleration or termination (with or without
the giving of notice or lapse of time or both) of, or give rise to an
acceleration of any material obligation or to the loss of a material
benefit under, any contract or other restriction, encumbrance,
obligation or liability affecting Seller, (d) conflict with or result
in a breach of or constitute a default or violation under any provision
of any applicable trust agreement of Seller, or (e) result in or permit
the creation or imposition of any Lien upon any Iron Mountain Common
Stock.
3.3 Absence of Legal Proceedings. No litigation, investigation
or administrative proceeding (including, without limitation, any
arbitration proceeding) is pending or (to Sellers' Knowledge)
threatened in writing against any Seller which seeks to enjoin,
restrain, condition or prevent consummation by Sellers of this
Amendment or the transactions contemplated herein.
3.4 Brokerage. No Seller has retained any broker or finder in
connection with the transactions contemplated by this Amendment.
3.5 Title to Shares. At the Stock Repurchase Closing, each
Seller will have good and marketable title to the shares of Iron
Mountain Common Stock to be sold to Purchaser hereunder, free and clear
of all Liens, except for Liens (i) arising in connection with this
Amendment or from the terms of the Escrow Agreement or (ii) arising
from applicable securities laws.
Section 4 Representations and Warranties of Purchaser. To induce
Sellers to enter into and perform this Amendment, Purchaser represents and
warrants to Sellers as follows:
4.1 Due Authorization and Execution. Purchaser is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, is duly qualified to do business and
is in good standing in all other jurisdictions where its failure to
qualify to do business would result in a Material Adverse Change in
Purchaser. Purchaser has all requisite power and authority to own or
hold under lease its properties and to conduct its business, to execute
and deliver this Amendment and to perform its obligations hereunder and
consummate the transactions contemplated hereby. This Amendment has
been duly authorized, executed and delivered by Purchaser and is a
legal, valid and binding obligation of Purchaser, enforceable against
it in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and except as the
availability of equitable remedies may be limited by equitable
principles of general applicability.
4.2 No Approvals or Notices Required; No Conflicts With
Material Contracts. Except as listed in Schedule 4.2, the execution,
delivery and performance of this Amendment by Purchaser, and the
consummation of the transactions contemplated hereby, will not (a)
conflict with or constitute a default or violation (with or without the
giving of notice or lapse of time, or both) of any Governmental
Regulation, or of any Permit, authorization, status, concession,
franchise, license, statute, law, ordinance, rule or regulation
applicable to any Seller, (b) require any consent, approval or
authorization of, or declaration, filing or registration with any
Governmental Entity (except for consents, approvals or authorizations
of, or declarations, filings or registrations required under
<PAGE>
-4-
federal and state securities laws), (c) result in a material default
under or violation of (with or without the giving of notice or lapse of
time, or both), acceleration or termination (with or without the giving
of notice or lapse of time or both) of, or give rise to an acceleration
of any material obligation or to the loss of a material benefit under,
any contract or other restriction, encumbrance, obligation or liability
affecting Purchaser, or (d) conflict with or result in a breach of or
constitute a default or violation under any provision of the
Certificate of Incorporation or bylaws of Purchaser.
4.3 Absence of Legal Proceedings. No litigation, investigation
or administrative proceeding (including, without limitation, any
arbitration proceeding) is pending or (to Purchaser's Knowledge)
threatened in writing against Purchaser which seeks to enjoin,
restrain, condition or prevent consummation by Purchaser of this
Amendment or the transactions contemplated herein.
4.4 Brokerage. Other than the underwriters retained in
connection with the Offering, the Company has not retained any broker
or finder in connection with the transactions contemplated by this
Amendment. Purchaser shall be responsible for all fees, discounts and
commissions payable to such underwriters.
Section 5 Purchaser Conditions. The obligations of Purchaser to perform
and observe the covenants, agreements and conditions of this Amendment to be
performed and observed by it at the Stock Repurchase Closing shall be subject to
the satisfaction of the following conditions at or before the Stock Repurchase
Closing, any one or more of which may be waived by Purchaser and the
non-fulfillment of any of which will permit Purchaser, at its sole option, to
terminate this Agreement:
5.1 Accuracy of Representations and Warranties; Compliance
with Covenants. All representations and warranties of Sellers contained
in this Amendment shall be true in all material respects on and as of
the Stock Repurchase Closing Date with the same force and effect as if
again made on and as of such date. Sellers shall have performed in all
material respects all obligations and agreements and complied in all
material respects with all covenants and conditions contained in this
Amendment to be performed and complied with by them on or prior to the
Stock Repurchase Closing Date. At the Stock Repurchase Closing Sellers
shall have delivered a certificate confirming the matters set forth in
this Section 5.1.
5.2 Legal Proceedings; Filings. No Governmental Regulation
shall be in effect which enjoins, restrains, conditions or prohibits,
or seeks damages or other relief in connection with, consummation of
this Amendment or the transactions contemplated herein, and no
litigation, investigation or administrative proceeding (other than
action initiated or threatened by Purchaser) shall be pending or
threatened in writing which would enjoin, restrain, condition or
prevent, or seeks damages or other relief in connection with,
consummation of this Amendment or the transactions contemplated herein.
All filings required by applicable law to be made by Sellers with or to
any Governmental Entity in connection with the transactions
contemplated by this Agreement shall have been made and any waiting
period thereunder shall have lapsed.
5.3 Offering. The Offering shall have been consummated and not
less than two (2) days prior to execution of the Underwriting
Agreement, one or more Sellers and Purchaser shall have entered into
the Letter Agreement, which shall set forth the price or, if
applicable, range of prices that Seller is willing to consummate such
purchase and sale.
5.4 Consents. Purchaser shall have received the consent
identified on Exhibit 4.2 hereto.
Section 6 Seller Conditions. The obligations of each Seller to perform
and observe the covenants, agreements and conditions of this Amendment to be
performed and observed by he or it at the
<PAGE>
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Stock Repurchase Closing shall be subject to the satisfaction of the following
conditions at or before the Stock Repurchase Closing, any one or more of which
may be expressly waived in writing by such Seller and the non-fulfillment of any
of which will permit such Seller, at his or its sole option, to terminate this
Amendment:
6.1 Accuracy of Representations and Warranties; Compliance
with Covenants. All representations and warranties of Purchaser
contained in this Amendment shall be true in all material respects on
and as of the Stock Repurchase Closing Date with the same force and
effect as if again made on and as of such date. Purchaser shall have
performed in all material respects all obligations and agreements and
complied in all material respects with all covenants and conditions
contained in this Amendment to be performed and complied with by it on
or prior to the Stock Repurchase Closing Date. At the Stock Repurchase
Closing Purchaser shall have delivered a certificate confirming the
matters set forth in this Section 6.1.
6.2 Legal Proceedings; Filings. No Governmental Regulation
shall be in effect which enjoins, restrains, conditions or prohibits,
or seeks damages or other relief in connection with, consummation of
this Amendment or the transactions contemplated herein, and no
litigation, investigation or administrative proceeding (other than
action initiated or threatened by any Seller) shall be pending or
threatened in writing which would enjoin, restrain, condition or
prevent, or seeks damages or other relief in connection with,
consummation of this Amendment or the transactions contemplated herein.
All filings required by applicable law to be made by Purchaser with or
to any Governmental Entity in connection with the transactions
contemplated by this Agreement shall have been made and any waiting
period thereunder shall have lapsed.
Section 7 Agreements Relating to Registration Rights Agreement, Shelf
Registration Statement and Securities Laws Matters.
7.1 Waiver of Rights. Notwithstanding anything to the contrary
in the Original Agreement or the Joinder, each Seller agrees that in
the event Purchaser acquires from Sellers at least ninety percent (90%)
of the Iron Mountain Common Stock issued pursuant to the Original
Agreement (as contemplated Section 1.1 of this Amendment), (a) Sellers
shall have no right to request Purchaser to register the shares of Iron
Mountain Common Stock pursuant to Section 1(b) of the Registration
Rights Agreement and Paragraph 3 of the Joinder, and (b) Purchaser
shall have no obligation to file a Shelf Registration Statement on
behalf of Sellers in accordance with Section 10.4 of the Original
Agreement.
7.2 Shelf Registration Statement. Notwithstanding Section 10.4
of the Original Agreement, Purchaser's obligation to prepare and file
the Shelf Registration Statement shall be suspended until as soon as
reasonably possible following the earlier to occur of (a) May 23, 1999
or (b) Purchaser's determination not to proceed with the Offering as
notified in writing to Sellers in accordance with Section 1.2.
7.3 Certain Activities. Sellers will not (and will cause their
respective affiliates not to) take, directly or indirectly, any action
which is designed to or which constitutes or which might reasonably be
expected to cause or result in the stabilization or manipulation of the
price of any security of Purchaser to facilitate the sale or resale of
the Purchaser Common Stock to be sold in the Offering, and neither
Sellers nor any of their affiliated purchasers (as defined in Rule 100
of Regulation M under the Securities Exchange Act of 1934, as amended)
will take any action prohibited by Regulation M.
Section 8 Closing Date. Notwithstanding anything to the contrary, for
purposes of the definition of ERISA Affiliate, Sections 9.4(b) and 11 of the
Original Agreement and for accounting purposes,
<PAGE>
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the Closing Date under the Original Agreement shall be deemed to be April 1,
1999. For all other purposes (including, without limitation, the definition of
Escrow Indemnity Period and Indebtedness and Sections 3, 9.3, 9.4 and 12 of the
Original Agreement), the Closing Date under the Original Agreement shall be
deemed to be April 8, 1999, and the Closing will be deemed to take place at
12:01 a.m. (local time) on such date.
Section 9 Other Amendments.
9.1 Definitions. The following definition is added to the
Original Agreement:
"First Amendment" means the First Amendment to Stock
Purchase Agreement, dated as of April 8, 1999, by and among
the Company, Purchaser and Sellers.
9.2 Section 7.10. Section 7.10 of the Original Agreement is
hereby amended by (i) deleting the word "and" between the word "Act,"
and "(ii)" in the ninth line of such Section and (ii) inserting the
following words after "Company" and before the comma appearing in the
tenth line of such Section: ", and (iii) for consents, approvals or
authorizations of, or declarations, filings or registrations required
under federal and state securities laws in connection with the Shelf
Registration Statement and the transactions contemplated thereby".
9.3 Section 8.3. Section 8.3 of the Original Agreement is
hereby amended by (i) deleting the word "and" between the word "Act,"
and "(ii)" in the seventh line of such Section and (ii) inserting the
following words after "Purchaser" and before the comma appearing in the
ninth line of such Section: ", and (iii) for consents, approvals or
authorizations of, or declarations, filings or registrations required
under federal and state securities laws in connection with the Shelf
Registration Statement and the transactions contemplated thereby".
9.4 Section 12.1(a). Section 12.1(a) of the Agreement is
hereby amended by adding the words "the First Amendment or the Letter
Agreement (as defined in the First Amendment)" between the words
"Agreement," and "or" in the eleventh line of such Section.
9.5 Section 12.1(b). Section 12.1(b) of the Agreement is
hereby amended by adding the words "the First Amendment or the Letter
Agreement" between the words "Agreement," and "or" in the seventh line
of such Section.
9.6 Section 12.3(a). Section 12.3(a) of the Agreement is
hereby amended by adding the words "or in Section 3.5 of the First
Amendment" after the words "Sections 7.9(a), (b) or (c)" and before the
comma in the eighth line of such Section.
9.7 Section 12.3(c). Section 12.3(c) of the Agreement is
hereby amended by adding the words "or in Section 3.5 of the First
Amendment" after the words "Sections 7.9(a), (b) or (c)" and before the
comma in the seventh line of such Section.
Section 10 Termination. This Amendment (other than Sections 8 and 9
hereof) may be terminated at any time prior to Stock Repurchase Closing by
Purchaser or Sellers. Upon any termination of this Amendment, there shall be no
liability on the part of any Party; provided, however, that such termination
shall not affect the liability of any Party for the breach of any provision of
this Amendment. Notwithstanding any such termination, the Original Agreement
shall continue in full force and effect.
<PAGE>
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Section 11 Miscellaneous Provisions.
11.1 Incorporation of Provisions. Sections 14.2 through and
including Section 14.14 of the Original Agreement are hereby
incorporated by reference herein, mutatis mutandis,with the same force
and effect as if set forth herein.
11.2 Original Agreement Still in Effect. All other terms and
conditions of the Original Agreement not specifically addressed by this
Amendment shall remain unchanged and shall continue in full force and
effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
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IN WITNESS WHEREOF, each of the parties hereto had caused this
Amendment to be duly executed and delivered as of the day and year first above
written.
IRON MOUNTAIN INCORPORATED
By: /s/
Name: Donald P. Richards
Title: Vice President
DATA BASE, INC.
By: /s/
Name: John J. Luger
Title: CEO and President
/s/
John J. Luger
/s/
Donna M. Luger
Mary Ann Montandon, George F. Luger and Lisa
Luger Frey, as co-trustees of the LISA LUGER
FREY GST TRUST
By: /s/
Mary Ann Montandon, Trustee
By: /s/
George F. Luger, Trustee
By: /s/
Lisa Luger Frey, Trustee
<PAGE>
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Mary Ann Montandon, George F. Luger and Tanya
Luger Paszkeicz, as co-trustees of the TANYA
LUGER PASZKEICZ GST TRUST
By: /s/
Mary Ann Montandon, Trustee
By: /s/
George F. Luger, Trustee
By: /s/
Tanya Luger Paszkeicz, Trustee
Mary Ann Montandon, George F. Luger and John J.
Luger, Jr., as co-trustees of the JOHN J.
LUGER, JR. GST TRUST
By: /s/
Mary Ann Montandon, Trustee
By: /s/
George F. Luger, Trustee
By: /s/
John J. Luger, Jr., Trustee
Mary Ann Montandon and George F. Luger, as
co-trustees of the JUSTIN T. LUGER GST TRUST
By: /s/
Mary Ann Montandon, Trustee
By: /s/
George F. Luger, Trustee
<PAGE>
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Schedule 4.2
1. Purchaser will require the consent of its lenders under its Second
Amended and Restated Credit Agreement, dated as of December 31, 1997, among
Purchaser, the lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent, as amended and in effect on the date hereof.
EXHIBIT 10.2
AMENDMENT, WAIVER AND JOINDER
TO REGISTRATION RIGHTS AGREEMENT
This Amendment, Waiver and Joinder to Registration Rights Agreement
(this "Agreement") is made and entered into as of April 8, 1999 by and among
Iron Mountain Incorporated, a Delaware corporation (the "Company"), John J.
Luger, Donna M. Luger, Mary Ann Montandon, George F. Luger and Lisa Luger Frey,
as co-trustees of the Lisa Luger Frey GST Trust, Mary Ann Montandon, George F.
Luger and Tanya Luger Paszkeicz, as co-trustees of the Tanya Luger Paszkeicz GST
Trust, Mary Ann Montandon, George F. Luger and John J. Luger, Jr., as
co-trustees of the John J. Luger, Jr. GST Trust, and Mary Ann Montandon and
George F. Luger, as co-trustees of the Justin T. Luger GST Trust (collectively,
the "Sellers"), and each of the stockholders party to the Registration Rights
Agreement (as defined below) signatory hereto (the "Existing Stockholders").
WHEREAS, the Company and certain of its Stockholders are parties to
that certain Amended and Restated Registration Rights Agreement, dated as of
June 12, 1997, as heretofore supplemented (the "Registration Rights Agreement");
WHEREAS, in accordance with the terms of the Registration Rights
Agreement, the Company and the Sellers desire to admit the Sellers as a
Stockholder (this and other capitalized terms used herein without definition are
used with the meanings given to such terms in the Registration Rights Agreement)
under the Registration Rights Agreement;
WHEREAS, the Company, the Sellers and Data Base, Inc. are party to that
certain Stock Purchase Agreement, dated as of February 28, 1999 (the "Stock
Purchase Agreement"), pursuant to which the Company has agreed to file a
registration statement (the "Resale Registration Statement") under the
Securities Act and Rule 415 promulgated thereunder pursuant to which the Sellers
may sell shares of Common Stock to be issued to the Sellers under the Stock
Purchase Agreement ("Acquisition Shares"); and
WHEREAS, the Company has informed the Existing Stockholders that it is
contemplating an underwritten public offering of shares of its Common Stock
pursuant to its Registration Statement on Form S-3 (No. 333-44185) (the
"Universal Shelf"), and that it may use a portion of the net proceeds of such
offering to fund the repurchase of all or a portion of the Acquisition Shares,
in addition to or in lieu of filing the Resale Registration Statement;
NOW, THEREFORE, in consideration of the recitals, the mutual covenants
and agreements herein contained, and other valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, do hereby covenant and agree as follows:
1. The Stock Purchase Agreement shall be an "Equity Agreement" for
purposes of the Registration Rights Agreement. Notwithstanding the foregoing,
only the Acquisition Shares to be issued to the Sellers thereunder shall be
"Registrable Securities" for purposes of the Registration Rights Agreement.
2. Each Seller hereby (i) joins in and becomes party to the
Registration Rights Agreement as a Stockholder, (ii) agrees to be bound by and
to perform all obligations of a
<PAGE>
Stockholder under the Registration Rights Agreement, and (iii) agrees that such
Seller shall not assign such Seller's rights under the Registration Rights
Agreement other than as expressly permitted by Section 9(a) to the contrary
therein. For the avoidance of doubt, the Sellers collectively shall be
considered a "Significant Stockholder" for purposes of the Registration Rights
Agreement.
3. Pursuant to Section 1(b) of the Registration Rights Agreement, the
Sellers as a Significant Stockholder shall have the right to demand that the
Company effect registration of all or part of the Registrable Securities held by
the Sellers pursuant to said Section 1(b) on one occasion; provided, however,
that such demand may not be made until the first anniversary of the closing
under the Stock Purchase Agreement unless the Company has not consummated a
public offering (the "Primary Offering") on or before the date which is 270 days
after the closing in respect of which either (i) the Sellers have piggyback
registration rights under Section 1(a) of the Registration Rights Agreement or
(ii) (a) the Company offers to the Sellers to apply a portion of the net
proceeds from the Primary Offering to acquire the Acquisition Shares (at a
purchase price equal to the public offering price less underwriting discounts
and commissions) and (b) the Company repurchases not less than seventy-five
percent (75%) of the Acquisition Shares that the Sellers have agreed to sell to
the Company at the public offering price less underwriting discounts and
commissions, in which case the Sellers shall be entitled to exercise such demand
on or after the 271st day following such closing.
4. Notwithstanding anything in the Registration Rights Agreement, the
rights of the Sellers under the Registration Rights Agreement will terminate on
the sixth anniversary of the date hereof.
5. Section 8 of the Registration Rights Agreement is hereby amended by
adding the following definitions to be inserted in alphabetical order in such
section:
"Data Base Agreement" shall mean that certain Stock Purchase Agreement
dated as of February 28, 1999 among the Company, the Luger Stockholders and Data
Base, Inc.
"Luger Stockholders" shall mean John J. Luger, Donna M. Luger, Mary Ann
Montandon, George F. Luger and Lisa Luger Frey, as co-trustees of the Lisa Luger
GST Trust, Mary Ann Montandon, George F. Luger and Tanya Luger Paszkeicz, as
co-trustees of the Tanya Luger Paszkeicz GST Trust, Mary Ann Montandon, George
F. Luger and John J. Luger, Jr., as co-trustees of the John J. Luger, Jr. GST
Trust, and Mary Ann Montandon and George F. Luger, as co-trustees of the Justin
T. Luger GST Trust.
"Shelf Registration Statement" shall mean a registration statement
under the Securities Act to register a maximum aggregate offering amount of the
Company's securities, including the Common Stock, to be offered by the Company
from time to time on a delayed basis, including without limitation its
Registration Statement on Form S-3 (No. 333-44185) .
6. Section 1(a) of the Registration Rights Agreement is hereby amended
by adding the following sentence as the last sentence in clause (iii) of Section
1(a): "Notwithstanding the preceding sentence, until the earlier to occur of (i)
the first anniversary of the closing under the Data Base Agreement, (ii) the
consummation, after the closing under the Data Base Agreement, of a public
offering of Common Stock by the Company in respect of which Stockholders had an
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<PAGE>
opportunity to include Registrable Securities pursuant to this Section 1(a) or
(iii) the consummation, after the closing under the Data Base Agreement, of a
public offering of Common Stock by the Company effected pursuant to a Shelf
Registration Statement in respect of which the Company shall have offered to
apply a portion of the net proceeds of which to acquire from the Luger
Stockholders the Registrable Securities held by the Luger Stockholders at a
purchase price equal to the public offering price less underwriting discounts
and commissions (it being understood that (w) the Company shall be entitled to
sell all shares of Common Stock it desires for its account prior to selling
shares of Common Stock to satisfy its offer to repurchase Registrable Securities
from the Luger Stockholders, (x) if the Luger Stockholders accept such offer,
the Company shall use its reasonable best efforts to sell a sufficient quantity
of Common Stock in such offering to provide for the shares of Common Stock it
intended to sell for its own account as well as to repurchase such Registrable
Shares from the Luger Stockholders, subject, however, to downsizing the offering
upon receipt from the underwriters of an opinion of the type referenced to in
the immediately preceding sentence, (y) notwithstanding such offer and
acceptance or agreement to use reasonable best efforts, the Company shall not be
required to consummate such offering and it may, at any time prior to the
closing of such offering, determine not to offer the securities to which the
Shelf Registration Statement relates without liability to the Luger Stockholders
and (z) if the Company, due to any such downsizing, is unable to acquire at
least 75% of the Registrable Securities that the Luger Stockholders agreed to
sell to the Company at the public offering price less underwriting discounts and
commissions, then this clause (iii) shall not be deemed to have been satisfied
until the Company shall have consummated an additional offering under a Shelf
Registration Statement that satisfies the conditions set forth in this clause
(iii) and this parenthetical, other than clause (z) of this parenthetical), in
the event of any limitation on the number of shares of Common Stock to be
imposed on Stockholders, the number of shares of Common Stock to be included in
such offering by Stockholders shall be included in the following order: (i)
first, the Registrable Securities held by the Luger Stockholders and (ii)
second, pro rata among the holders of Registrable Securities, other than the
Luger Stockholders based on the value (based upon the proposed public offering
price) of the respective numbers or amount of Registrable Securities as to which
registration has been requested by such Stockholders."
7. Section 5(a)(i) is hereby amended and restated in its entirety to
read as follows:
"(i) shall continue until the later to occur of the following:
(A) such time as Sullivan & Worcester LLP or other counsel for the
Company knowledgeable in securities law matters and reasonably
acceptable to such Stockholder has delivered a written opinion to the
Company and such Stockholder (or group of related Stockholders) to the
effect that such Stockholder has no further obligation to comply with
the registration requirements of the Securities Act or to deliver a
prospectus meeting the requirements of Section 10(a)(3) of the
Securities Act in connection with further sales by such Stockholder of
Registrable Securities, and (B) such Stockholder owns less than 3% of
the outstanding Common Stock and is able to sell all of the Registrable
Securities owned by him pursuant to the provisions of Rule 144 under
the Securities Act in a three-month period (but, notwithstanding the
foregoing, in no event will the Company's obligations with respect to
rights of registration of the Luger Stockholders and each Stockholder
who is a party to this Agreement on the date of this Amendment,
terminate as a result of this clause (i) until the third anniversary of
the date such Stockholder or group of related Stockholders became party
to this Agreement); and"
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<PAGE>
8. Each of the Existing Stockholders hereby consents, on behalf of all
Stockholders, to the Resale Registration Statement and waives, on behalf of all
Stockholders, any right it or he may have under the Registration Rights
Agreement to include Registrable Securities in the Resale Registration
Statement.
9. Each of the Existing Stockholders hereby waives, on behalf of all
Stockholders, any right it or he may have under the Registration Rights
Agreement to include Registrable Securities in any offering or offerings of
Common Stock to be effected by the Company pursuant to the Universal Shelf so
long as the Company offers to acquire from the Luger Stockholders all or any
portion of Registrable Securities held by them as contemplated by clause (iii)
of the sentence being added to the Registration Rights Agreement in accordance
with Paragraph 6 hereof.
10. The provisions of Paragraph 9 hereof shall be effective upon the
date first written above. The provisions of Paragraphs 1 through and including 8
hereof shall be effective upon the closing under the Stock Purchase Agreement.
11. Except to the extent specifically amended and supplemented hereby,
the provisions of the Registration Rights Agreement shall remain unmodified. The
Registration Rights Agreement, as amended and supplemented hereby, is confirmed
as being in full force and effect. This Agreement may be executed in any number
of counterparts, which together shall constitute one instrument, shall be
governed by and construed in accordance with the laws (other than the conflict
of laws rules) of the Commonwealth of Massachusetts and shall bind and inure to
the benefit of the parties hereto and their respective permitted successors and
assigns.
[remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
IRON MOUNTAIN INCORPORATED
By: /s/ C. Richard Reese
Name:
Title:
SCHOONER CAPITAL CORPORATION
By: /s/ Vincent J. Ryan
Name: Vincent J. Ryan
/s/ Vincent J. Ryan
Vincent J. Ryan
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<PAGE>
/s/ C. Richard Reese
C. Richard Reese
/s/ Eugene B. Doggett
Eugene B. Doggett
/s/ B. Thomas Golisano
B. Thomas Golisano
/s/ Kent P. Dauten
Kent P. Dauten
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<PAGE>
/s/ John J. Luger
John J. Luger
Mary Ann Montandon, George F. Luger and Lisa
Luger Frey, as co-trustees of the LISA LUGER
FREY GST TRUST
By: /s/ Mary Ann Montandon
Mary Ann Montandon, Trustee
By: /s/ George F. Luger
George F. Luger, Trustee
By: /s/ Lisa Luger Frey
Lisa Luger Frey, Trustee
Mary Ann Montandon, George F. Luger and Tanya
Luger Paszkeicz, as co-trustees of the TANYA
LUGER PASZKEICZ GST TRUST
By: /s/ Mary Ann Montandon
Mary Ann Montandon, Trustee
By: /s/ George F. Luger
George F. Luger, Trustee
By: /s/ Tanya Luger Paszkeicz
Tanya Luger Paszkeicz, Trustee
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<PAGE>
Mary Ann Montandon, George F. Luger and John
J. Luger, Jr., as co-trustees of the JOHN J.
LUGER, JR. GST TRUST
By: /s/ Mary Ann Montandon
Mary Ann Montandon, Trustee
By: /s/ George F. Luger
George F. Luger, Trustee
By: /s/ John J. Luger, Jr.
John J. Luger, Jr., Trustee
Mary Ann Montandon and George F. Luger, as
co-trustees of the JUSTIN T. LUGER GST TRUST
By: /s/ Mary Ann Montandon
Mary Ann Montandon, Trustee
By: /s/ George F. Luger
George F. Luger, Trustee
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EXHIBIT 10.3
IRON MOUNTAIN INCORPORATED(1)
1995 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this 1995 Stock Incentive Plan (the "Plan") is to
encourage key employees, directors, and consultants of Iron Mountain
Incorporated (the "Company") and its Subsidiaries (as hereinafter defined) to
continue their association with the Company, by providing favorable
opportunities for them to participate in the ownership of the Company and in its
future growth through the granting of awards ("Awards") of stock, stock options,
and other rights to compensation in amounts determined by the value of the
Company's stock. The term "Subsidiary" as used in the Plan means a corporation
of which the Company owns, directly or indirectly through an unbroken chain of
ownership, fifty percent (50%) or more of the total combined voting power of all
classes of stock.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors of the
Company (the "Board") or, in the discretion of the Board, a committee or
subcommittee of the Board (the "Committee"), appointed by the Board and composed
of at least two (2) members of the Board. In the event that a vacancy on the
Committee occurs on account of the resignation of a member or the removal of a
member by vote of the Board, a successor member shall be appointed by vote of
the Board. All references in the Plan to the "Committee" shall be understood to
refer to the Committee or the Board, whoever shall administer the Plan.
For so long as Section 16 of the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act"), is applicable to the Company,
each member of the Committee shall be a "non-employee director" or the
equivalent within the meaning of Rule 16b-3 under the Exchange Act, and, for so
long as Section 162(m) of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"), is applicable to the Company, an "outside director"
within the meaning of Section 162 of the Code and the regulations thereunder.
The Committee shall select those persons to receive Awards under the Plan
("Participants") and determine the terms and conditions of all Awards.
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(1) As amended through May 28, 1998.
<PAGE>
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The Committee shall select one of its members as Chairman and shall
hold meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum, and acts of the Committee at which a quorum
is present, or acts reduced to or approved in writing by all the members of the
Committee, shall be the valid acts of the Committee. The Committee shall have
the authority to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan. All questions of
interpretation and application of such rules and regulations, of the Plan and of
options granted thereunder (the "Options"), and of Common Stock transferred
subject to restrictions under the Plan ("Restricted Stock"), and stock
appreciation rights granted under the Plan ("SARs") (collectively, "Other
Rights") shall be subject to the determination of the Committee, which shall be
final and binding.
With respect to persons subject to Section 16 of the Exchange Act
("Insiders"), transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successor under the Exchange Act. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed to be modified so as to be in compliance with such
Rule, or, if such modification is not possible, it shall be deemed to be null
and void, to the extent permitted by law and deemed advisable by the Committee.
The Plan shall be administered in such a manner as to permit those
Options granted hereunder and specially designated under Section 5 to qualify as
incentive stock options as described in Section 422 of the Code.
3. STOCK SUBJECT TO THE PLAN
The total number of shares of stock which may be subject to Options
and Other Rights under the Plan shall be 3,000,000(2) of the Company's
outstanding Class A Common Stock, $0.01 par value per share, from either
authorized but unissued shares or treasury shares. For purposes of the
limitation set forth in the preceding sentence, options granted under the Iron
Mountain Information Services, Inc. Stock Option Plan and outstanding on the
effective date of this Plan shall be treated as Options. The number of shares
stated in this Section 3 shall be subject to adjustment in accordance with the
provisions of Section 11. Shares of Restricted Stock that fail to vest, and
shares of Common Stock subject to an Option that is neither fully exercised
prior to its expiration or other termination nor terminated by reason of the
exercise of an SAR related to the Option, shall again become available for grant
under the terms of the Plan.
The total amount of the Common Stock with respect to which Options
and Other Rights may be granted to any single employee under the Plan shall not
exceed in the aggregate 350,000 shares.
The Company intends that the Plan shall apply to "common stock"
proposed to be issued as a result of the Company's recapitalization in
connection with an offering of "common stock" proposed to be registered under
the Securities Act of 1933, as amended (the "Securities Act"),
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(2)Gives effect to a three-for-two stock split effected in the form of a
dividend on the Common Stock on July 31, 1998.
<PAGE>
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and intends that the provisions of Section 11 of the Plan shall be construed so
as to achieve this result.
4. ELIGIBILITY
The individuals who shall be eligible for grant of Options and Other
Rights under the Plan shall be key employees, directors and other individuals
who render services of special importance to the management, operation, or
development of the Company or a Subsidiary, and who have contributed or may be
expected to contribute materially to the success of the Company or a Subsidiary.
Incentive stock options ("ISOs") shall not be granted to any individual who is
not an employee of the Company or a Subsidiary. The term "Optionee," as used in
the Plan, refers to any individual to whom an Option or Other Right has been
granted.
5. TERMS AND CONDITIONS OF OPTIONS
Every Option shall be evidenced by a written Stock Option Agreement
in such form as the Committee shall approve from time to time, specifying the
number of shares of Common Stock that may be purchased pursuant to the Option,
the time or times at which the Option shall become exercisable in whole or in
part, whether the Option is intended to be an ISO or a non-qualified stock
option ("NSO"), and such other terms and conditions as the Committee shall
approve, and containing or incorporating by reference the following terms and
conditions:
(a) Duration. The duration of each Option shall be as
specified by the Committee in its discretion; provided, however, that
no ISO shall expire later than ten (10) years from its date of grant,
and no ISO granted to an employee who owns (directly or under the
attribution rules of Section 424(d) of the Code) stock possessing
more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Subsidiary shall expire later
than five (5) years from its date of grant.
(b) Exercise Price. The exercise price of each Option shall
be any lawful consideration, as specified by the Committee in its
discretion; provided, however, that the price with respect to an ISO
shall be at least one hundred percent (100%) of the fair market value
of the shares on the date on which the Committee awards the Option,
which shall be considered the date of grant of the Option for
purposes of fixing the price; and provided further that the price
with respect to an ISO granted to an employee who at the time of
grant owns (directly or under the attribution rules of Section 424(d)
of the Code) stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or of any
Subsidiary shall be at least one hundred ten percent (110%) of the
fair market value of the shares on the date of grant of the ISO. For
purposes of the Plan, except as may be otherwise explicitly provided
in the Plan or in any Stock Option Agreement, Restricted Stock
Agreement, SAR Agreement or similar document, the "fair market value"
of a share of Common Stock at any particular date shall be determined
according to the following rules: (i) if the Common Stock is not at
the time listed or admitted to trading on a stock exchange or the
Nasdaq National Market, the fair market value shall be the closing
price of the Common Stock on the date in question in the over-
<PAGE>
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the-counter market, as such price is reported in a publication of
general circulation selected by the Board and regularly reporting the
price of the Common Stock in such market; provided, however, that if
the price of the Common Stock is not so reported, the fair market
value shall be determined in good faith by the Board, which may take
into consideration (1) the price paid for the Common Stock in the
most recent trade of a substantial number of shares known to the
Board to have occurred at arm's length between willing and
knowledgeable investors, or (2) an appraisal by an independent party,
or (3) any other method of valuation undertaken in good faith by the
Board, or some or all of the above as the Board shall in its
discretion elect; or (ii) if the Common Stock is at the time listed
or admitted to trading on any stock exchange or the Nasdaq National
Market, then the fair market value shall be the mean between the
lowest and highest reported sale prices (or the lowest reported bid
price and the highest reported asked price) of the Common Stock on
the date in question on the principal exchange on which the Common
Stock is then listed or admitted to trading. If no reported sale of
Common Stock takes place on the date in question on the principal
exchange or the Nasdaq National Market, as the case may be, then the
reported closing sale price (or the reported closing asked price) of
the Common Stock on such date on the principal exchange or the Nasdaq
National Market, as the case may be, shall be determinative of fair
market value.
(c) Method of Exercise. To the extent that it has become
exercisable under the terms of the Stock Option Agreement, an Option
may be exercised from time to time by written notice to the Chief
Financial Officer of the Company or his designee stating the number
of shares with respect to which the Option is being exercised and
accompanied by payment of the exercise price in cash or check payable
to the Company, or, if the Stock Option Agreement so provides, other
payment or deemed payment described in this subsection 5(c). Such
notice shall be delivered in person or by facsimile transmission to
the Chief Financial Officer of the Company or his designee or shall
be sent by registered mail, return receipt requested, to the Chief
Financial Officer of the Company or his designee, in which case
delivery shall be deemed made on the date such notice is deposited in
the mail.
Alternatively, payment of the exercise price may be made:
(1) In whole or in part, in shares of Common
Stock already owned by the Optionee or to be received upon
exercise of the Option, provided that such shares are fully
vested and free of all liens, claims, and encumbrances of
any kind; provided, further, that the Optionee may not make
payment in shares of Common Stock that he acquired upon the
earlier exercise of any ISO, unless he has held the shares
until at least two (2) years after the date the ISO was
granted and at least one (1) year after the date the ISO
was exercised. If payment is made in whole or in part in
shares of Common Stock, then the Optionee shall deliver to
the Company certificates registered in his name
representing a number of shares of Common Stock legally and
beneficially owned by him, fully vested and free of all
liens, claims, and encumbrances of every kind and having a
fair market value on the date of delivery that is not
greater than the exercise price, such certificates to be
duly endorsed, or accompanied by stock powers duly
endorsed, by the record
<PAGE>
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holder of the shares represented by such certificates. If
the exercise price exceeds the fair market value of the
shares for which certificates are delivered, the Optionee
shall also deliver cash or a check payable to the order of
the Company in an amount equal to the amount of that
excess, or, if the Stock Option Agreement so provides, his
promissory note as described in the next following
paragraph of this subsection 5(c); or
(2) In whole or in part by delivery of the
Optionee's recourse promissory note, in a form specified by
the Company, secured by the Common Stock acquired upon
exercise of the Option and such other security as the
Committee may require.
Alternatively, Options may be exercised by means of a
"cashless exercise" procedure in which a broker: (i) transmits the
option price to the Company in cash or acceptable cash equivalents,
either (1) against the Optionee's notice of exercise and the
Company's confirmation that it will deliver to the broker stock
certificates issued in the name of the broker for at least that
number of shares having a fair market value equal to the option
price, or (2) as the proceeds of a margin loan to the Optionee; or
(ii) agrees to pay the option price to the Company in cash or
acceptable cash equivalents upon the broker's receipt from the
Company of stock certificates issued in the name of the broker for at
least that number of shares having a fair market value equal to the
option price.
At the time specified in an Optionee's notice of exercise,
the Company shall, without issue or transfer tax to the Optionee,
deliver to him at the main office of the Company, or such other place
as shall be mutually acceptable, a certificate for the shares as to
which his Option is exercised. If the Optionee fails to pay for or to
accept delivery of all or any part of the number of shares specified
in his notice upon tender of delivery thereof, his right to exercise
the Option with respect to those shares shall be terminated, unless
the Company otherwise agrees.
(d) Reload Options. The Committee may, in its discretion,
provide in the terms of any Stock Option Agreement that if the
Optionee delivers shares of Common Stock already owned or to be
received upon exercise of the Option in full or partial payment of
the option price, or in full or partial payment of the tax
withholding obligations incurred on account of the exercise of the
Option, the Optionee shall, either automatically and immediately upon
such exercise, or in the discretion of the Committee upon such
exercise, be granted a new option (a "Reload Option") to purchase
that number of shares of Common Stock delivered by the Optionee to
the Company, on such terms and conditions as the Committee may
determine under the terms of the Plan. The exercise price for shares
subject to a Reload Option shall be not less than one hundred percent
(100%) of the fair market value of the shares on the date of grant of
the Reload Option, and the duration of a Reload Option shall be equal
to the unexpired term of the exercised Option on the date of
exercise.
(e) Notice of ISO Stock Disposition. The Optionee must
notify the Company promptly in the event that he sells, transfers,
exchanges or otherwise disposes of any shares of Common Stock issued
upon exercise of an ISO, before the later of (i) the
<PAGE>
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second anniversary of the date of grant of the ISO, and (ii) the
first anniversary of the date the shares were issued upon his
exercise of the ISO.
(f) Effect of Cessation of Employment. The Committee shall
determine in its discretion and specify in each Stock Option
Agreement the effect, if any, of the termination of the Optionee's
employment upon the exercisability of the Option.
(g) No Rights as Stockholder. An Optionee shall have no
rights as a stockholder with respect to any shares covered by an
Option until the date of issuance of a certificate to him for the
shares. No adjustment shall be made for dividends or other rights for
which the record date is earlier than the date the certificate is
issued, other than as required or permitted pursuant to Section 11.
(h) Substituted Option. With the consent of the Optionee,
the Committee shall have the authority at any time and from time to
time to terminate any outstanding Option and grant in substitution
for it a new Option covering the same number or a different number of
shares, provided that the option price under the new Option shall be
no less than the fair market value of the Common Stock on the date of
grant of the new Option.
6. STOCK APPRECIATION RIGHTS
The Committee may grant SARs in respect of such number of shares of
Common Stock subject to the Plan as it shall determine, in its discretion, and
may grant SARs either separately or in connection with Options, as described in
the following sentence. An SAR granted in connection with an Option may be
exercised only to the extent of the surrender of the related Option, and to the
extent of the exercise of the related Option the SAR shall terminate. Shares of
Common Stock covered by an Option that terminates upon the exercise of a related
SAR shall cease to be available under the Plan. The terms and conditions of an
SAR related to an Option shall be contained in the Stock Option Agreement, and
the terms of an SAR not related to any Option shall be contained in an SAR
Agreement.
Upon exercise of an SAR, the Optionee shall be entitled to receive
from the Company an amount equal to the excess of the fair market value, on the
exercise date, of the number of shares of Common Stock as to which the SAR is
exercised, over the exercise price for those shares under a related Option, or
if there is no related Option, over the base value stated in the SAR Agreement.
The amount payable by the Company upon exercise of an SAR shall be paid in the
form of cash or other property (including Common Stock of the Company), as
provided in the Stock Option Agreement or SAR Agreement governing the SAR.
All grants of SARs to Insiders shall be capable of being settled only
for cash and may not be granted in connection with an Option. If an SAR is
awarded to a person who is not an Insider at the time of award but subsequently
becomes an Insider, it shall be deemed to be amended to provide that it may be
settled only in cash while such person is an Insider.
<PAGE>
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7. RESTRICTED STOCK
The Committee may grant or award shares of Restricted Stock in
respect of such number of shares of Common Stock, and subject to such terms or
conditions, as it shall determine and specify in a Restricted Stock Agreement.
A holder of Restricted Stock shall have all of the rights of a
stockholder of the Company, including the right to vote the shares and the right
to receive any cash dividends, unless the Committee shall otherwise determine.
Certificates representing Restricted Stock shall be imprinted with a legend to
the effect that the shares represented may not be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of except in accordance with the
terms of the Restricted Stock Agreement, and, if the Committee so determines,
the Optionee may be required to deposit the certificates with an escrow agent
designated by the Committee, together with a stock power or other instrument of
transfer appropriately endorsed in blank.
8. SPECIAL BONUS GRANTS AND LOANS
In its discretion, the Committee may grant in connection with any NSO
or grant of Restricted Stock a special cash bonus in an amount not to exceed the
lesser of (i) the combined federal, state and local income tax liability
incurred by the Optionee as a consequence of his acquisition of stock pursuant
to the exercise of the NSO or the grant or vesting of the Restricted Stock, and
the related special bonus, or (ii) thirty percent (30%) of the imputed income
realized by the Optionee on account of such exercise or vesting and the related
special bonus. The Committee may, in its discretion, estimate the amount of the
tax liability described in clause (i) of the immediately preceding sentence,
using formulae or methods uniformly applied to Optionees in similar
circumstances, without regard to the particular circumstances of an individual
Optionee. A special bonus shall be payable solely to federal, state, and local
taxing authorities for the benefit of the Optionee at such time or times as
withholding payments of income tax may be required. A special bonus may be
granted simultaneously with a related NSO or Restricted Stock grant or
separately with respect to an outstanding NSO or Restricted Stock granted at an
earlier date. In the event that an NSO with respect to which a special bonus has
been granted becomes exercisable by the personal representative of the estate of
the Optionee, or that Restricted Stock with respect to which a special bonus has
been granted shall vest after the death of an Optionee, the bonus shall be
payable to or for the benefit of the estate in the same manner and to the same
extent as it would have been payable for the benefit of the Optionee had he
survived to the date of exercise or vesting.
In the Committee's discretion, a Stock Option Agreement or Restricted
Stock Agreement may provide that to the extent that an Optionee does not receive
a special bonus of the maximum amount permissible under this Section 8, the
Company shall lend the Optionee an amount no greater than the excess of such
maximum over the special bonus (if any) paid to the Optionee, for such term and
at such rate of interest (or no interest) and on such further terms and
conditions as the Committee determines.
<PAGE>
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9. OPTIONS AND OTHER RIGHTS VOIDABLE
If an individual to whom a grant has been made fails to execute and
deliver to the Committee a Stock Option Agreement, SAR Agreement or Restricted
Stock Agreement within thirty (30) days after it is submitted to him, the Option
or Other Rights granted under the agreement shall be voidable by the Company at
its election, without further notice to the Optionee.
10. REQUIREMENTS OF LAW
The Company shall not be required to transfer any Restricted Stock or
to sell or issue any shares upon the exercise of any Option or SAR if the
issuance of such shares will result in a violation by the Optionee or the
Company of any provisions of any law, statute or regulation of any governmental
authority. Specifically, in connection with the Securities Act, upon the
transfer of Restricted Stock or the exercise of any Option or SAR the Company
shall not be required to issue shares unless the Board has received evidence
satisfactory to it to the effect that the holder of the Option or Other Right
will not transfer such shares except pursuant to a registration statement in
effect under the Securities Act or unless an opinion of counsel satisfactory to
the Company has been received by the Company to the effect that such
registration is not required. Any determination in this connection by the Board
shall be conclusive. The Company shall not be obligated to take any other
affirmative action in order to cause the transfer of Restricted Stock or the
exercise of an Option or SAR to comply with any law or regulations of any
governmental authority, including, without limitation, the Securities Act or
applicable state securities laws.
11. CHANGES IN CAPITAL STRUCTURE
In the event that the outstanding shares of Common Stock are
hereafter changed for a different number or kind of shares or other securities
of the Company, by reason of a reorganization, recapitalization, exchange of
shares, stock split, combination of shares or dividend payable in shares or
other securities, a corresponding adjustment shall be made by the Committee in
the number and kind of shares or other securities covered by outstanding Options
and Other Rights, and for which Options or Other Rights may be granted under the
Plan. Any such adjustment in outstanding Options or Other Rights shall be made
without change in the total price applicable to the unexercised portion of the
Option, but the price per share specified in each Stock Option Agreement or
agreement as to Other Rights shall be correspondingly adjusted; provided,
however, that no adjustment shall be made with respect to an ISO that would
constitute a modification as defined in Section 424 of the Code. Any such
adjustment made by the Committee shall be conclusive and binding upon all
affected persons, including the Company and all Optionees.
If while unexercised Options or SARs remain outstanding under the
Plan the Company merges or consolidates with a wholly-owned subsidiary for the
purpose of reincorporating itself under the laws of another jurisdiction, the
Optionees will be entitled to acquire shares of Common Stock of the
reincorporated Company upon the same terms and conditions as were in
<PAGE>
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effect immediately prior to such reincorporation (unless such reincorporation
involves a change in the number of shares or the capitalization of the Company,
in which case proportional adjustments shall be made as provided above) and the
Plan, unless otherwise rescinded by the Board, will remain the Plan of the
reincorporated Company.
Except as otherwise provided in the preceding paragraph, if while
unexercised Options or SARs remain outstanding under the Plan the Company merges
or consolidates with one or more corporations (whether or not the Company is the
surviving corporation), or is liquidated or sells or otherwise disposes of
substantially all of its assets to another entity, or upon a Change of Control
(as defined herein), then, except as otherwise specifically provided to the
contrary in an Optionee's Stock Option Agreement, SAR Agreement or Restricted
Stock Agreement, the Committee, in its discretion, shall amend the terms of all
outstanding Options and SARs so that either:
(i) after the effective date of such merger, consolidation,
sale or Change of Control, as the case may be, each
Optionee shall be entitled, upon exercise of an Option or
SAR, to receive in lieu of shares of Common Stock the
number and class of shares of such stock or other
securities to which he would have been entitled pursuant to
the terms of the merger, consolidation, sale or Change of
Control if he had been the holder of record of the number
of shares of Common Stock as to which the Option or SAR is
being exercised, or shall be entitled to receive from the
successor entity a new stock option or stock appreciation
right of comparable value; or
(ii) all outstanding Options and SARs shall be cancelled as
of the effective date of any such merger, consolidation,
liquidation, sale or Change of Control, provided that each
Optionee shall have the right to exercise his Option or SAR
according to its terms during the period of twenty (20)
days ending on the day preceding the effective date of such
merger, consolidation, liquidation, sale or Change of
Control; and in addition to the foregoing, the Committee
may in its discretion amend the terms of an Option or SAR
by cancelling some or all of the restrictions on its
exercise, to permit its exercise pursuant to this paragraph
(ii) to a greater extent than that permitted on its
existing terms; or
(iii) all outstanding Options and SARs shall be cancelled
as of the effective date of any such merger, consolidation,
liquidation, sale or Change of Control in exchange for
consideration in cash or in kind, which consideration in
both cases shall be equal in value to the value of those
shares of stock or other securities the Optionee would have
received had the Option been exercised (to the extent then
exercisable) and no disposition of the shares acquired upon
such exercise had been made prior to such merger,
consolidation, liquidation, sale or Change in Control, less
the option price therefor. Upon receipt of such
consideration by the Optionee, his or her Option shall
immediately terminate and be of no further force and
effect. The value of the stock or other securities the
Optionee would have received if the Option had been
exercised shall be determined in good faith by the
Committee, and in the case of shares of the Common Stock of
the Company, in accordance with the provisions of Section
5(b).
<PAGE>
-10-
A "Change of Control" of the Company shall be deemed to have occurred
if any person (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act) other than a trust related to an employee benefit plan maintained
by the Company becomes the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of fifty percent (50%) or more of the Company's
outstanding Common Stock, and within the period of twenty-four (24) consecutive
months immediately thereafter, individuals other than (a) individuals who at the
beginning of such period constitute the entire Board of Directors or (b)
individuals whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period, become a
majority of the Board of Directors.
Notwithstanding any provision of this Section 11 to the contrary, if
while unexercised Options or SARs remain outstanding under the Plan the Company
or a wholly owned subsidiary of the Company merges or consolidates with one or
more corporations (whether or not the Company is the surviving corporation) in
any transaction or series of related transactions and there is a Limited Change
of Control (as defined herein), then the terms of all outstanding Options and
SARs shall be amended so that any vesting restrictions on the exercise of the
Option or SAR shall be cancelled as of the effective date of the merger or
consolidation and, if the Company is not the surviving corporation, after the
effective date of such merger or consolidation each Optionee shall be entitled,
upon exercise of an Option or SAR, to receive in lieu of shares of Common Stock
the number and class of shares of such stock or other securities and such other
consideration to which he would have been entitled as a result of the terms of
the merger or consolidation if he had been the holder of record of the number of
shares of Common Stock as to which the Option or SAR is being exercised. A
"Limited Change of Control" shall be deemed to have occurred if (i) following
the merger or consolidation individuals serving as members of the Board
immediately prior to the merger or consolidation no longer constitute a majority
of the individuals serving as members of the Board (or the board of directors of
the surviving corporation) and (ii) the voting securities of the Company
outstanding immediately prior to the merger or consolidation fail to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the voting power of the securities of the
Company or the surviving entity outstanding immediately after the merger or
consolidation.
Except as expressly provided to the contrary in this Section 11, the
issuance by the Company of shares of stock of any class for cash or property or
for services, either upon direct sale or upon the exercise of rights or
warrants, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect the number, class or
price of shares of Common Stock then subject to outstanding Options or SARs.
12. FORFEITURE FOR DISHONESTY
Notwithstanding anything to the contrary in the Plan, if the Board
determines, after full consideration of the facts presented on behalf of both
the Company and an Optionee, that the Optionee has been engaged in fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the course
of his employment by the Company or a Subsidiary, which damaged the Company or
Subsidiary, or has disclosed trade secrets or other proprietary information of
the
<PAGE>
-11-
Company or a Subsidiary, (a) the Optionee shall forfeit all unexercised Options
and all exercised Options under which the Company has not yet delivered the
certificates, and (b) the Company shall have the right to repurchase all or any
part of the shares of Common Stock acquired by the Optionee upon the earlier
exercise of any Option, at a price equal to the amount paid to the Company upon
such exercise, increased by an amount equal to the interest that would have
accrued in the period between the date of exercise of the Option and the date of
such repurchase upon a debt in the amount of the exercise price, at the prime
rate(s) announced from time to time during such period in the Federal Reserve
Statistical Release Selected Interest Rates. The decision of the Board as to the
cause of an Optionee's discharge and the damage done to the Company or a
Subsidiary shall be final, binding, and conclusive. No decision of the Board,
however, shall affect in any manner the finality of the discharge of an Optionee
by the Company or a Subsidiary.
13. MISCELLANEOUS
(a) Nonassignability of Other Rights. No Other Rights shall be
assignable or transferable by the Optionee except by will or the laws of descent
and distribution. During the life of the Optionee, Other Rights shall be
exercisable only by the Optionee.
(b) No Guarantee of Employment. Neither the Plan nor any Stock Option
Agreement, SAR Agreement or Restricted Stock Agreement shall give an employee
the right to continue in the employment of the Company or a Subsidiary, or give
the Company or a Subsidiary the right to require an employee to continue in
employment.
(c) Tax Withholding. To the extent required by law, the Company shall
withhold or cause to be withheld income and other taxes with respect to any
income recognized by an Optionee by reason of the exercise or vesting of an
Option or Other Right, or a cash bonus paid in connection with such exercise or
vesting, and as a condition to the receipt of any Option or Other Right or
related cash bonus the Optionee shall agree that if the amount payable to him by
the Company and any Subsidiary in the ordinary course is insufficient to pay
such taxes, then he shall upon the request of the Company pay to the Company an
amount sufficient to satisfy its tax withholding obligations.
Without limiting the foregoing, the Committee may in its discretion
permit any Optionee's withholding obligation to be paid in whole or in part in
the form of shares of Common Stock, by withholding from the shares to be issued
or by accepting delivery from the Optionee of shares already owned by him. The
fair market value of the shares for such purposes shall be determined as set
forth in Section 5(b). An Optionee may not make any such payment in the form of
shares of Common Stock acquired upon the exercise of an ISO until the shares
have been held by him for at least two (2) years after the date the ISO was
granted and at least one (1) year after the date the ISO was exercised. If
payment of withholding taxes is made in whole or in part in shares of Common
Stock, the Optionee shall deliver to the Company certificates registered in his
name representing shares of Common Stock legally and beneficially owned by him,
fully vested and free of all liens, claims, and encumbrances of every kind, duly
endorsed or accompanied by stock powers duly endorsed by the record holder of
the shares represented by such certificates. If the Optionee is subject to
Section 16(a) of the Exchange Act, his ability to
<PAGE>
-12-
pay his withholding obligation in the form of shares of Common Stock shall be
subject to such additional restrictions as may be necessary to avoid any
transaction that might give rise to liability under Section 16(b) of the
Exchange Act.
(d) Use of Proceeds. The proceeds from the sale of shares pursuant to
Options or Other Rights shall constitute general funds of the Company.
14. EFFECTIVE DATE, DURATION, AMENDMENT AND
TERMINATION OF PLAN
The Plan shall be effective as of November 30, 1995, subject to
ratification by (a) the holders of a majority of the outstanding shares of
capital stock present, or represented, and entitled to vote thereon (voting as a
single class) at a duly held meeting of the shareholders of the Company, or (b)
by the written consent of the holders of a majority (or such greater degree as
may be prescribed under the Company's charter, by-laws, and applicable state
law) of the capital stock of the issuer entitled to vote thereon (voting as a
single class) within twelve (12) months after such date. Options that are
conditioned upon such ratification of the Plan by the shareholders may be
granted prior to such ratification. The Committee may grant Options and Other
Rights under the Plan from time to time until the close of business on November
26, 2005. The Board may at any time amend the Plan, provided, however, that
without approval of the Company's stockholders there shall be no: (i) increase
in the total number of shares covered by the Plan, except by operation of the
provisions of Section 11, or the aggregate number of shares of Common Stock
which may be issued to any single employee; (ii) change in the class of
individuals eligible to receive Options or Other Rights; (iii) reduction in the
exercise price of any ISO; (iv) extension of the latest date upon which any ISO
may be exercised; (v) material increase of the obligations of the Company or
rights of any Optionee under the Plan or any Option or Other Rights granted
pursuant to the Plan; or (vi) other change in the Plan that requires stockholder
approval under applicable law. No amendment shall adversely affect outstanding
Options or Other Rights without the consent of the Optionee. The Plan may be
terminated at any time by action of the Board, but any such termination will not
terminate Options and Other Rights then outstanding, without the consent of the
Optionee.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference, in the previously filed
registration statements on Forms S-3 (File No. 333-44185), S-4 (File Nos.
333-44187 and 333-67765) and S-8 (File Nos. 333-24803, 333-33191, 333-43901,
333-60919, 333-60921 and 333-67499) of Iron Mountain Incorporated, of our report
dated April 8, 1999 with respect to the combined financial statements of Data
Base, Inc. and Affiliate as of December 31, 1996, 1997, and 1998, and for each
of the three years ended December 31, 1998, which appears in this Form 8-K of
Iron Mountain Incorporated.
/s/ Moss Adams LLP
Seattle, Washington
April 14, 1999
